Keeping Control of Creative and Costs

Most P-O-P vendors have horror stories about open-bid situations. One tells of a time 26 suppliers were asked to bid a project; another talks of 10 being asked to provide creative presentations with no compensation. Almost all vendors say it's an unproductive approach; but all of them participate, because marketers find it effective."There are more wide-open bidding situations than ever," says Gary Forman, senior vice president at Henschel-Steinau Inc. in Englewood, N.J. "Marketers want to see a lot of possibilities. In the long run, good display companies walk away from those kinds of situations, but in the short run, lots of companies need the work and they want the business, so they'll keep bidding and producing the product."But many marketers say such an approach assures them of the two vital components they need: low pricing and the very best designs. They've developed the strategy in-house, they know what they need and now they need someone to find a way to present it and produce it. Keeping projects competitive offers all advantages and no disadvantages.In part, that commodity-selling attitude has developed among marketers because it's encouraged by suppliers. "It becomes a chicken-and-egg situation," says Richard Lysinger, merchandising innovation manager at Coca-Cola. "P-O-P firms pitch us on price and creative skills, and lots of companies want to buy that way. The marketers have very restrictive purchasing departments that often are at odds with marketing people as to how they can buy."And many suppliers don't dissuade marketers from taking that commodity approach, Lysinger notes. "I wish more P-O-P makers had account teams rather than salesmen. This industry needs to move to that level, and that lack is why the industry doesn't get much respect in the advertising business."The problem with open bidding on a specified design is that it takes away the supplier's creativity, notes Doug Leeds, president of Thomson-Leeds Company Inc., a P-O-P producer. "Corners end up being cut to shave the price rather than allowing the supplier to find a more cost-effective approach," he says. "Successful displays often are an evolution, and the open-bid approach shorts that out."Even worse, open bidding doesn't result in the lowest possible price, says Richard Nathan, ceo at RTC Industries, Rolling Meadows, Ill. "Doing speculative work without a commitment results in a lot of overhead in selling and creating designs," he says. "Someone has to pay for that somewhere. It leads to higher pricing overall and higher margins on each project to adjust for the failed presentations."Sargento Foods Inc., which often creates designs in-house and bids them, uses outside vendors to help it formulate what a reasonable budget should be, says Bob Peiffer, creative director. "We're not in the manufacturing business, and there are many factors that come into play when balancing creative and costs, which only the provider can determine," he explains. "We find that competitive bidding can give us an idea of what we'll need to spend for a project that we've created."The cheese and snack maker lays out marketing objectives and specific creative ideas for the merchandiser, if they've been decided. "If the firm hits the marketing objectives we lay out, the specific creative approach they use is less important. Then we look at the cost and make our decision," says Peiffer. (One example of how this system worked successfully for Sargento can be seen in the accompanying article.)Even suppliers agree that in many cases, creative and pricing competition keeps them on their toes. Many enjoy the challenge -- as long as they have a real shot at receiving the business. Some request compensation for speculative creative, even if it doesn't cover all the costs. "We always spend more than a client pays for," says Leeds. "But receiving some contribution makes us feel good, because it indicates the client appreciates and acknowledges the effort being put out."The key challenge for vendors, says RTC's Nathan, comes in convincing marketers where the true value lies when they buy a display. "There is a tendency to equate value with receiving 'free' speculative ideas and getting a lot of bids for production rights," he says. "That's one type of value, certainly. But the real value comes from how successful that display is in the marketplace, whether the company is selling more product, and whether or not it's improving its relationships with retailers. Once they become more expansive in their concept of what value is, it expands beyond free renderings and the other really inconsequential parts of the process."

Keeping Control of Creative and Costs

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