Until a few weeks ago, we developed marketing videos the same way that most video providers do. When a client expressed interest in producing a video, we would spend several days gathering information from them, and then use that information to work up a detailed bid. Once the bid was accepted, we needed to ‘reinvent the wheel’ and develop a custom production pipeline to meet both the budget and the client’s goals. This is the same process used by most agencies and production companies, and the result is that video marketers must go through this process several times before selecting a vendor.
After a decade in business, we came to realize that this system is completely broken. Not only does it fail to meet the actual needs of most marketers, it continues the rather unfair practice of treating each client differently, usually based on how big they are and how much money they have. Our original motivation for starting Animatik was to provide small and medium-sized businesses access to high quality marketing video, so clearly this model wasn’t meeting our goals and we decided to change it.
Why the bidding process is failing marketers
Bids are simply educated guesses, and chances are very good that they won’t end up reflecting the true, final cost. To offset this, most agencies and production companies will simply pad the estimate to protect them against cost overruns and unforeseen costs such as exhaustive revisions. I’ve seen some production companies pad their bids by as much as 30%. Bear in mind that I’m not talking about profit margin here, this is just an overcharge that sits on top of the actual bid. Rest assured, it’s money you’ll never get back even if it isn’t needed for your project.
I’m not implying that these producers are dishonest, it’s merely a reflection of how broken the system is. Imagine walking into a car dealership that works under these principals. You tell the salesperson that you need a car, but aren’ exactly sure of your needs – you can only tell her that it needs four doors, four wheels and perhaps leather seats. Based on that information, the salesperson is expected to determine, on the spot, how much it will cost to produce your entire car. She doesn’t know how big the engine will need to be, how sleek or stylized the exterior will need to be to meet your expectations, or even how fast it will need to go. Nonetheless, the salesperson must hand you a bid or risk losing your business. It would be naive to assume that this salesperson nails the bid perfectly every time, especially on such a complex product, and that she never accounts for the possibility that the bid may be wrong. In a word, the bidding process automatically guarantees that you will overpay for your video every time, with no real benefit.
The bidding process also opens the door to producers gauging how much the client might be willing to pay, and charging accordingly. Again, this isn’t to say that certain clients are intentionally overcharged. The reality is that any video can be produced for a wide range of budgets, from $100-$100,000 per finished minute of video. It all depends on the quality level and complexity required to meet the client’s objectives. The problem is that, under a bidding model, agencies and production companies are incentivized to submit the highest bid they think you will accept, regardless of your individual needs.
By now it should be clear that most producers approach bids as though the only limitation is the client’s budget. As a result, the sky truly is the limit in terms of cost, even if the results don’t scale accordingly. For example, study after study has shown that most marketing videos, especially online video, lose effectiveness after the first minute of running time. By about the 1:30 mark, you’ve lost the majority of your viewers, and by the 2:30 mark viewers actually become irritated. Despite these conclusive, widespread and long running studies, production companies continue to develop videos that run well into the 3-5 minute mark or longer. The end result is that 25-75% of your budget is wasted with absolutely no benefit. We feel that it is a video producer’s job to advise clients on what works and what doesn’t – after all, our experience and advice are part of the service. But most providers are either ignorant of these best practices or they are simply content to ignore the rules because long-winded videos mean more billable hours.
Flat rate packages will become the new standard
Based on the realities listed above, we are firm believers that open-bid video production will eventually give way to flat rate billing for all but the highest end projects. It’s a logical evolution that returns control to video marketers, and allows them to make true apples-to-apples choices when selecting a vendor. Rather than waiting for others to make the leap, we decided to do what we know is best for our clients and let others follow suit if they see fit. Our flat rate packages not only offer marketers choices in terms of price, but it eliminates all of the frustration of talking to sales people, collecting bids, and trying to make sense of them all. In order to offer flat rate pricing our packages do have certain rules built in, but they are based on video best practices such as running time. We don’t constrain our client’s imagination and we don’t do cookie cutter work. We just discovered that adhering to best practices and truly respecting client’s needs has an amazing side effect – real cost savings and more effective marketing videos.