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RSSThe agency producer who was dining with us, slowly put down her glass of wine and looked at me for help. As if somehow I would have a better answer than she.
Seeing her perplexed look, the brand manager interjected, "Let's start with an easier question," he said. "What's the average cost of a second of production for a national 30-second TV commercial?
Looking somewhat relieved at having a question that she could answer, the agency producer started doing some quick math on the tablecloth, "The average 30-second spot costs around $380,000. So each second comes out to, twelve, wait, $12,666."
The brand manager nodded, as if he knew the answer already. "So," he continued, what if viewers just watch the first ten seconds? Could I get a discount on the twenty seconds that weren't used?"
Interesting choice of words, I thought. A discount on seconds not used. The industry has never had the ability to look at creative in this way before -- as seconds used or not used.
Digital changes the paradigm. When viewers opt-in to a commercial on a digital platform, we can now accurately measure how much of the commercial they actually watched.
Should a marketer get a refund for seconds paid for, but not used?
The answer is, of course not. The cost of producing a commercial covers the production company's direct costs, overhead and profit. Production companies couldn't sustain a business if they gambled with their direct costs and overhead.
"But what about profit?" the brand manager asked. "Would a production company be willing to put their profit into play -- payable only after the spot ran and dependent on how long the viewer was engaged in the spot?"
"Fat chance," the agency producer said, as she refilled her glass with a generous helping of wine.
Interestingly enough, I had wondered about this question myself for some time now. Which is why I recently made a trip to L.A. to talk to some production companies and directors. Not just your run-of-the-mill production companies, but those that house film directors, great storytellers, the ones who generally make movies rather than commercials for a living.
After asking the heads of these companies if they would put their profit into play -- under the auspices that they would make more than they normally would if they maintained interest in the commercial -- they all answered identically: "Yes."
What's more, after discussing the idea further, most also offered to put the director's day rate into play. Which meant that, on average, without sacrificing the quality of the production, the upfront costs were reduced by 20% to 25%.
Their only caveat? The advertiser had to relinquish creative control back to the agency.
In other words, if the advertiser wants some accountability over the costs of production, the advertiser needs to loosen the reins on trying to control the creative.
So, I asked the brand manager about it. "Would you be willing to give up creative control?" I asked.
"If I approve the strategy and the script, and the agency knows their job is to bring back that script in the most involving way possible, then yes," he said. "I'd be foolish not to, wouldn't I? After all, under this model, both the agency and I are working towards the same objective, getting the commercial watched."
The agency producer was at a bit of a loss for words. "You mean, they can measure how long people actually watch commercials?" she asked.
"Not only that," said the brand manager, but I'm going to start paying based on that measurement."
The producer looked at me and I had to smile. For I saw in her eyes that she just finally grasped what this meant.
Advertising, which is now designed to fill a length of time - 30-seconds - will soon need to be designed to fill a viewer's imagination. When it does, then those who created the commercial will be rewarded well.
When it doesn't, the opposite will be true.
For the brand manager, it meant that he finally gets to pay for actual value received.
And, since I figured that he received more than his share of value at this dinner, I felt justified in handing him the check.
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As a brand manager, seconds watched is not the main metric I would ever use to judge my return on investment and I am afraid that this new metric would cause production houses to focus on clever ways to get people to watch ads, when in fact they should be focused on clever ways to get customers to buy my product.
Also, if my product sucks, why should the production house suffer? No matter how clever the advertising is, I find it hard to believe that a viewer will watch many seconds about it, no matter how clever they get.
I think the skeptics here miss the point. There will never be a perfect, air-tight translation of production or creative quality to sales. There are too many unknowables, not just unknowns, for that ever to happen.
But we keep nipping away at the merely unknowns, and every time that happens the game changes a bit and confidence moves up. And the ways to deal will change. Why bemoan that?
Think about the brand manager. He's not going to get fired because he didn't nail down the perfect correlation and can't prove ROMI. But seconds-viewed stats can prove the converse. If the spot doesn't get watched, you know with 100% certainty that the money went down the toilet. And too much of that will get you fired.
So that's a risk he can control with this type of deal. He limits his downside, which given all of the new uncertainties that go with the opportunities in the changing advertising environment, is probably a smart thing to do, or at least consider. And if he can put a floor on the downside of his marketing investments, the average return will go up, so long as he doesn't pay too much for the insurance.
Will this type of deal have any legs whether near or long term? Who knows. But there are darned good reasons for being creative and looking at these types of economic deals.
A more risque commercial would probably get more attention than an interesting product demonstration. How would someone build a brand in this new world? Isn't most of the "boring-ness" of a commerical related to the creative contraints by the product message and the frequency in which commericals are shown.
Which products would win and which would lose? If revenues depended on seconds watched, would creative agencies take on boring products? Or would the decision be based on creative constraints? All things equal, wouldn't an agency be more inclined to take on Apple iPod over Kraft Mac and Cheese?
Haven't we already seen the conclusion to this question play out time and time again? Aren't there many examples of interesting commericals that have not increased company sales or improved brand equity.
There are many things that influence the effectiveness of a commercial that are far outside the scope a production company has control of, even if they get a larger measure of control of their particular assignment, like the quality of the product, the competitive environment the ad will be placed in, etc.
How do these variables play into this theoretical payday for the production company? If they get a pay-for-performance type of relationship, do they get a larger say in not just the project they're on, but the overall strategic development of the product the brand is developing as well?