WHY 12.5% IS THE MAGIC NUMBER
Article first published in Campaign.
Brands should think more holistically when it comes to production costs and media spend, says the WCRS chief executive.
I recently met with the chief executives of two very different businesses. Different cultures, different markets, different business models. Yet they do have one thing in common – both spend a huge amount of money on media but only a tiny proportion of that on production.
In both meetings, I was introducing them to WCRS and so I shared a couple of our most famous and effective campaigns. These were “big” campaigns featuring celebrities and high production values and while both CEOs were impressed with the results, both also remarked: “I bet that was expensive to make.”
I pointed out that they too could easily be making advertising as big, famous, and talked about as this, if they only looked at their media and production spend as a single pot, rather than media being regarded as a must-have necessity and production being a cost to be minimised at, well, all costs.
To illustrate this, consider the hypothetical example of a brand spending £50m on TV but just £2m on production. Doubling the production budget to £4m is a very difficult argument to make in isolation, but what happens if you consider the entire pot as £52m for media AND production and then consider the optimum allocations?
Think about the problem this way and you soon realise that just a 4% reduction in the number of TV spots would deliver a transformative doubling of the production budget. Might it be better to show our advertising 4% fewer times if Tom Cruise is now starring in it?
Bigger production budgets aren’t only about celebrities, of course, they can mean better directors, voiceovers, set-builds, locations or licensing a hit song that will delight the target audience the minute they hear it.
Maybe they were just being polite, but both CEOs said they hadn’t looked at the problem this way before. I’m certainly not arguing that every brand out there should double their production budget, but I am proposing that thinking of media and production spend as one pot, and running some different budget-split scenarios, can be helpful when it next comes to budget setting.
What’s the optimum ratio? It differs, but based on experience, the magic number is somewhere in the region of 12.5%. If nothing else, it’s critical to at least know what the number is for your business, and to have chosen it deliberately in full knowledge of the impact it’ll have on both the media plan and the production possibilities.