TVLowCost has been taking on the “advertising establishment” around the globe for the last 4+ years. Now in the U.S. the radically new business model is making fast inroads. The reality is that in today’s economy each organization must “get more for less” especially as it relates to marketing. In today’s economy those that rely upon “it is the way we have always done it” will find themselves paralyzed by costs and a lack of return - or worse. I am sure that if you are reading this you know what I mean. For leaders that embrace change, TVLowCost has been an exciting alternative as our radically efficent business model addresses the need of “more for less” in way that traditional agencies will not and in fact can not – seriously has your agency blown up its cost structure, processes and systems to give their clients a better value. Of course not, it’s not in their interest to make less money. But it is marketer’s powers to create positive change for their organization and in today’s economic climate there is great value in change for the better. In fact, in just the last month we have found there are many smart organizations out there that have drastically changed there marketing methods.
One of the parts of my job that I most enjoy is speaking with leaders who embrace change, it is most refreshing. And that does not mean we work with all these companies, but the sharing of information and talking about each others outlook on marketing in today’s enviornment is enjoyable. One can only become better and more efficent with new and different perspectives.
The article below, written by Renee Hopkins Callahan appears on Forbes.com and is a great overview of TVLowCost, the value and process. Please take a read and contact me at 646-839-6239 or lurie@tvlowcostusa.com if you would like to hear how we may be able to work together or if you would just like to hear more.
Creative Disruption
A New Model For Television Advertising?
Renee Hopkins Callahan 10.03.08, 5:00 PM ET
Jim Lurie, president of TVLowCost USA, has worked more than 20 years in marketing and advertising on both the client and agency sides. He is one of the founders of the agency Owens, Kopilak, Klein, Lurie, LLC (o2kl). Lurie spoke with Strategy & Innovation editor Renee Hopkins Callahan about TVLowCost USA’s disruptive approach to television advertising.
Q. What is TVLowCost USA, and how did it start?
A. TVLowCost was started in France by John Paul Tréguer in 2004 after he sold his own advertising agency to EURO RSCG. He’s always looking for better ways to do things, and he developed a process to get brands on TV that could not afford it before. Now, for the first time, midsize and smaller brands could afford to advertise on TV.
Since then, Tréguer has taken the model to 11 other countries. In each country the TVLowCost business is a partnership with a local owner and the various businesses function as a network. Internationally, TVLowCost has created advertising campaigns for such companies as Heinz (nyse: HNZ – news - people ), Wrangler, Bose, Bayer (nyse: BAY – news - people ), Bristol-Myers Squibb (nyse: BMY – news - people ) and Unilever.
We have a simple, far less expensive way of developing and running TV campaigns. We just focus on TV. We create the spot, shoot it, edit it, produce it and place it. In the U.S., we provide a complete initial package with a two- to three-spot campaign and the first 150 Gross Ratings Points (GRPs) of media–which provides good impact–all for a low, flat rate that’s about one-third of what high-cost agencies charge. No surprises. Our flat-rate pricing model is very disruptive.
Essentially we’ve changed the traditional relationship ad agencies have with their clients. We don’t work on a retainer basis; we work on a project basis. So we require a volume of spots to make this work. We get projects in and out quickly, taking clients from briefing to air in eight weeks. That’s a lot less time than high-cost agencies that tend to charge their clients by the hour. This is how we are able to offer high-quality spots for one-third the cost.
We opened the doors of the U.S. business in August and already we’ve had not just acceptance, but great interest, even by the big name brands. In today’s economy everyone is being squeezed, so TVLowCost makes a lot of sense for those who have to cut their marketing budgets. For secondary brands it’s an opportunity to get the attention they deserve.
Q. How does TVLowCost USA work?
A. A traditional advertising agency will make an agreement with a company that will involve either a long-term retainer or project compensation to develop and produce TV spots. Then the agency comes back to their client with concepts and budgets.
High-cost agencies often bring an “anything goes” mentality to creating spots, mistaking extravagant production for creativity and impact. So they’ll often recommend far-away location shoots, untried production techniques and A-list directors–all of which cost time and money. Plus these add uncertainty, because you never know how much the extras really cost until you get the last post-production bill.
In contrast, our model is to provide certainty for our clients. Our initial package price of $500,000 for a campaign includes everything–creative, production, editing, focus group research and the first 150 GRPs of media. Clients don’t have to spend a penny more. It’s up to us to figure out how to deliver on the price.
So we streamline the process in all sorts of ways. For example, we do not take the time and money to present storyboards during the concept phase. TVLowCost has produced hundreds of spots using concept statements and scripts. And you won’t see us shoot a spot in Argentina or Australia when it is not needed to sell the product or service. This is the type of focus and clarity that is being asked for by every client.
Finally, a lot of clients tell us they suspect agencies push certain creative ideas on them, not out of a desire to sell the client’s product but, rather, to make their creative reel look more creative and win awards. Awards look pretty in the showcase, but the main job of a spot is always to sell, sell, sell. We only make a profit after the client decides our spots are effective enough to run again. This really forces us to focus on creating ads that get results for our clients.
Q. What is the business model? Who is the customer? What makes it disruptive?
A. Unfortunately for most clients, their “high-cost” agencies are not feeling their pain and budget constraints. The high-cost agencies don’t feel the need to do more with less. They are not changing their business models to address this need. The reality is that they cannot change their business model. One cannot become “low-cost.” You must be born “low-cost.”
An example of this is Southwest Airlines (nyse: LUV – news - people ), which created a disruptive business model and changed the airline business from the ground up. The travel experience is pretty much the same. You get to the same places safely and securely, but you don’t pay for all the “extras” you don’t really want or need, such as bad airline food, overhead in the form of deluxe headquarters, out-of-date employee compensation structure, retiree benefits and the like.
On the other hand, United (nasdaq: UAUA – news - people ) tried to launch Ted as a low-cost airline but it could not change its culture. United is not low-cost and therefore United could not become a low-cost airline. It just shows that “low-cost” must be in your DNA.
Overall, the experience and the process will be different when low-cost is in your blood. However, the destination will be very similar to that served by the high-cost models. It’s the way you look at money, the way you do business, your overhead costs.
We have very little overhead. Our offices are nice but not beautiful. We manage cost expectations and processes. We can also keep our costs low because we’ve pre-negotiated with production facilities and editing facilities. And we’ve committed to certain placement volumes.
In terms of customers, our services are probably best-suited for certain kinds of brands:
–New-to-TV brands that sorely need TV, but previous cost appraisals have scared them away, so they’ve made do with print advertising and other lesser-impact media.
–Lapsed TV brands that have a previous TV-ad heritage and strong residual brand values, but who have found themselves priced out of TV in recent years.
–Smaller brands in larger company portfolios, those brands that struggle in the shadow of priority brands that enjoy larger marketing budgets.
And in general, our customers are leaders. TVLowCost USA is not for everyone. It takes a person with a vision to see how this new process can benefit their company by expanding their resources and actionable marketing budgets. Our clients are not paralyzed by lack of confidence or a propensity to resist change for the better.
And frankly, our model is right for clients who want to try us without needing to commit to long-term change. Our process will be different–there will be fewer people involved on both sides and decision-makers will have a more active role. But the results will be there.
Q. What has the competitive response been?
A. We’ve had a number of calls from agencies wanting to find out more about what we do because they can’t figure out how we do it. Our processes were built from the ground up to deliver a low-cost solution, so our pricing structure and overall business model can’t be replicated by traditional agencies without blowing themselves up and starting over.
However, we are not like SpotRunner or similar services. SpotRunner sells pre-shot spots on a generic topic like real estate and gives their clients limited personalization–their name and such. Then there are local cable companies that offer advertising services appropriate for, say, a local restaurant.
We do custom work. We have real shoots. We use real actors. And our customers are regional and national brands. So on a continuum of price and customization, there’s SpotRunner and the locals–who can only provide very limited quality and media impact–then us, then big traditional agencies, who are our main competition.
Big traditional agencies do have their place–sometimes you want an extravagant campaign for getting attention on, say, the Super Bowl or the Olympics or you need to develop a big branding campaign.
But how many companies need to do that consistently? Why pay Hollywood budgets when you need to get a message across in order to sell your product? Our creative also tends to utilize calculated repetition and humor in order to quickly grab the viewer’s attention. We have found these two attributes are critical in turning viewers into customers.
Q. What is your growth strategy going forward, and how do you plan to compete against the incumbents?
A. We’ve only been open for a few weeks, but my partners and I come from Madison Avenue agencies. We’ve done this before. Right now our task is to get the message out about our service and the value it brings. And as far this message, it is resonating with people who understand the advertising business. They see there is clearly a need.
We don’t pitch business in the traditional way. What we charge clients for 150 GRPs on-air is about what some traditional agencies might spend on developing the pitch and creating animatics that look like finished spots. If they win the pitch–typically a one in five chance–then they have to recoup the costs for that pitch, as well as the four others they lost. It’s an incredible waste of resources.
Instead, we make it clear that we don’t give away our services and, in the end, our clients come out ahead. For example, once we get an assignment, we efficiently over-deliver against the client’s expectations. While a big agency might present just two to three concepts on expensive, hand-drawn storyboards, we come back with 10 to 12 ideas–but in script form. Then we put every single one into consumer testing to give clients a read on what works best before we shoot.
The task right now is to get the message across that there is a quality alternative to expensive, traditional TV advertising. And the initial interest is amazing. I think the industry may be a little surprised with the quality of brands that we will be working with. And if the experience of TVLowCost in other countries holds true, once clients see the value and results they get, they’ll keep coming back.
Q. What do you say to people who feel that TV ads are on their way out and that they’ll be replaced by other forms of advertising and marketing?
A. TV’s not going away … It’s the media that every brand aspires to. It’s still the best way to get real marketplace impact and awareness. Try getting your name on people’s tongues using the Internet–it’s possible, but extremely expensive because Internet advertising is still more about inquiry fulfillment than awareness.
Of course, that doesn’t make TV right for every product or service. But packaged goods, autos, food, services, nonprofits, associations, financial services and even online services that want to increase traffic … those categories need to be advertising on TV. Being on TV gives those products a measurable spike in their sales. We have also helped increase retail distribution for a few clients by being on TV.
Just getting an additional product to retailers more than pays for the effort. And for brand managers who aren’t sure if TV works for their product, we give them a low-cost way to find out. We’re democratizing television advertising for everyone and giving brands that aren’t on TV yet the opportunity to get in the big game.
Written by Renee Hopkins Callahan, editor of Strategy & Innovation. This article was excerpted from a recent online issue of Strategy & Innovation by Innosight, a consulting firm co-founded by Clayton Christensen and Mark Johnson specializing in innovation and disruptive strategy.
For more articles on innovation and disruption based on Clayton Christensen’s research, please click here.
.jpg "No surprises with TVLowCost")
