Efficient price determination in the sponsored film

Reverse budgeting

Reverse Budgeting as a Calculation Principle Efficient Price Determination in the Sponsored Film: Reverse Budgeting as a Calculation Principle

Within the scope of a pitch, a customer requests offers for a sponsored film or a video  from various production companies. Theoretically, that sounds simple and makes good sense. 

In practice however, the inquiring party is often very surprised by the extreme, hard-to-understand price differences between the different providers.

The classical offer inquiry

One of the causes of differing offers for traditional offer inquiries is mostly not only due to the competitive market, which is also difficult to comprehend, but often also has to do with the briefing:

  • The more questions the briefing leaves open (from the viewpoint of the supplier and not the sender!), the higher the share of assumptions and interpretations upon which the supplier bases his offer. If, for example, only a technical specification is mentioned, this would be comparable with somebody contacting a few travel agencies via E-mail and requesting a fixed price offer for a holiday destination under blue skies. The travel agency has no other option but to make assumptions. Here, tactical contemplation (loss leaders) frequently also plays a role.
  • The gap between the individual offers opens furthest when the contents of the video or film in the making cannot be communicated to the provider as a story outline, a concept, a film script or a storyboard. This may be because they don’t yet exist at this point in time of the inquiry or are still being worked on internally
  • Offers based on internally developed concepts and film scripts can also be less easy to digest for the annual budget of a communication department, especially if they have already been approved by the boss.
  • The request to the provider only to quote hourly or daily rates instead of a complete offer is only of limited use. Daily rates are ineffective for artistic services. The author’s work can contribute for illustrative purposes. A young film script author may be available at lower rates than an established scriptwriter, the work to achieve a satisfactory concept will however consume more time and therefore, when it boils down to it, become more expensive than collaboration with a professional even without inclusion of the work on the part of the customer.

Efficient price determination

Reverse budgeting has become the rule in film production, for image films, leadership videos and product films, but also increasingly for online video productions and everywhere efficient price determination is part of the key for success. If the provider cannot win the pitch via price but via quality instead, he will contemplate the contents right from the outset and introduce valuable improvement suggestions.Here, too, the principle dominates increasingly during the past years as it incorporates decisive efficiency gains:

  1. Reverse budgeting means no more and no less than naming the candidates a fixed price within the scope of the evaluation. Instead of posing the question as to how much the production of a film or video costs, the question of the package of services is in the foreground for reverse budgeting: what does the customer get from the provider for the fixed price?
  2. The fixed price (intuitive variants are also possible) can be internally determinined either on the basis of previous own projects with comparable tasks posed or by involving a film expert with usually proven experience in the sector as a producer. The work for an external consultant, depending on the tender process (multiple-step, single-step) and internal processes (number of meetings for internal coordination) will be between 2 and 5 working days.
  3. In order to make the offered services comparable, they must be reduced to success-relevant effect parameters. These include hard values such as the planned number of filming days but also soft values such as talent and the track record of the key persons involved from the provider’s side. In the event of capacity bottlenecks or missing internal know-how, an external coach can also provide strong support with little effort.
  4. The reverse budgeting mode provides an experienced producer with the freedom to be able to coordinate all project parameters perfectly like Swiss clockwork in order to achieve maximum quality. The serious producer will therefore agree to understand his offer as a binding fixed budget when given the order.
  5. Because he cannot win the pitch via price but via quality instead, the provider will also contemplate the contents right from the outset and, especially for concepts which already exist, often also introduce valuable improvement suggestions.

Conclusion

Where the customer’s expectations and reality are aeons apart, the squaring of the circle can also not succeed with reverse budgeting. However, serious comparison calculations and experience values show that offers based on reverse budgeting do not become incredible budget killers or secret quality hindrances. If you think backwards for film tenders and pitches, you can often move forwards faster.

About Videothink team
Articles by the Videothink team are collaboratively-written by more than one member of the videothink publishing team.

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