A recent, novel benchmark study of advertising costs demonstrates the hidden costs of content creation. Whereas distributional costs are, generally, hard numbers, these latter costs are not so obvious—and require extrapolation to see the whole financial picture.
In what author brand Percolate calls the first study of marketing creation costs, 305 enterprise marketing executives at the upper levels of management (i.e., vice presidents of marketing, marketing directors, and CMOs) were surveyed at the end of 2015 on their “working” and “non-working” marketing spends.
Percolate’s biggest discovery on these costs? That for every dollar spent on promoting and distributing advertisements and other marketing content, about 67 cents is spent on the combined uber-line items of creating that content and measuring its effectiveness. These creational costs include the cost of creative and design teams, technology teams, and legal teams—whether in-house or outsourced. They also include to some extent (Percolate’s methodology is not entirely clear on his point) the indirect costs of employing those relevant in-house employees, as well as related company assets required to create content.
“These are necessary costs,” notes Percolate on the results of its study, “but the more spent here, the more you could have spent on placing ads.”
Still, spending more and more on marketing content creation, assessment, and maintenance—and (ratio-wise, at least) less on distribution—is a trend that is expected to continue. 61 percent of those marketing execs surveyed reported that non-working ad spend increased from 2014 to 2015; 56 percent said that they expected their non-working ad spend to rise yet higher in 2016.
Percolate concedes that this inefficiency is an inevitability of brand growth. “When [non-working ad spend]’s too high, it’s a sign of lost opportunity,” blogged Victor Gamez, an integrated marketer at Percolate. “However, those costs grow with your annual marketing budget. The more you try to stretch your brand, the higher the share of content creation spend.”
Indeed, Percolate found that as marketing budgets grow, advertising costs—and non-working spends in particular—begin to consume larger pieces of the pie. On average, a company with a $10 million marketing budget will spend $1.8 million (18 percent) on advertising production costs—whereas a company with a $1 billion marketing budget
will spend $270 million (27 percent) on the same.
Another suspected contributing outside factor, according to Percolate, is technology. More advanced media and technologies mean more money spent to make ads using those media and technologies. Percolate’s study results are curious in this light, however. Survey respondents indicated that half of all of their dollars on traditional advertising were non-working spends. Digital non-working spend ratios, on the other hand, tended to be notably lower. Regardless, inefficiency seems to be largely to blame—especially at large scale.
According to Percolate, to cut unnecessarily high ad production costs, companies need to institute easy, efficient, and standardized processes—including, but not limited to, creating standardized briefs for their creative teams, improving ease of sharing and editing assets digitally, and generally improve workflows.
“At a large scale, … avoidable inefficiencies can cost an organization millions. A multinational may be working with dozens of internal and external marketers per brand to execute millions of dollars’ worth of ads all over the globe,” writes Gamez. “There’s too much friction in marketing activities that are routine; the entire process must improve
and accelerate to reach as many people as you can without campaign delays and duplication of effort [because] marketing inefficiencies have become a serious hindrance to sustained growth.”