We recently worked on an expense reduction project with a firm that employed an advertising agency to develop a sales and marketing campaign for a new product launch.The services included the design and printing of various collateral pieces for direct mail and distribution,as well as developing online advertising. The firm had only asked one agency to provide a proposal.The product marketing manager told us that they didn’t have enough time to solicit other proposals and that they had a good working relationship with the agency. The cost of this effort was approximately $350,000. We knew that even with a short lead time, it was possible to reduce costs and still meet all the quality and timeline requirements.

Finally, the product marketing team allowed us to engage other potential sources, in addition to giving us a chance to negotiate with the agency. It was apparent that the agency did not offer the company an aggressive initial proposal.In part, it could’ve been the fact that they knew there wasn’t any competition. They also knew that the firm was working on a tight schedule. We identified several areas of cost that bore further analysis: Hourly rates of designers Specifications of printed materials Printing, Direct mail, Web development. As we started to ask the agency questions, we learned that their core competency was primarily in print and promotional design.They sub-contracted the printing, distribution and the web development. As such there were pass-through expenses that also were being marked up.

The agency defended their “general contractor” role and pointed to the value of project management for a campaign with many different parts and pieces This was a reasonable perspective. However,when it became apparent that other choices could be made without impacting the schedule,we were able to focus on and realize real cost savings by: Negotiating a 8% discount on the hourly rates of the designers and production staff Reduce printing costs by 15% altering the size of the collateral and having the firm’s preferred printer do the work. Negotiated a 5% discount on the direct mail portion Reduced web development costs by 17% by utilizing another company This approach helped the client save over $50,000 on this project.