Week_02
Business models, Studios, Estimating, Invoicing and Budget management.
Lecture notes
Workshop Challenge
Map a resourcing model for budget and staff allocation to deliver a project or creative initiative of your choice.
If you are thinking about a generic project budgeting exercise, the example below gives an indication of the parameters for consideration. As the last week of this project brief requires you to write a more substantive strategic plan, please ensure you choose a topic or client that is most suited to your own practice interests.
Research
What is a Resourcing model?
A Resourcing model allows you to structure a project or initiative, in order to micro-manage each stage of the process. The model can be applied in order to identify the specific requirements, within the separate areas of a project. This will allow the user to establish, what is required to make the project a success, and how to go about achieving those objectives. Resourcing models are used extensively, by contemporary organisations, and can be employed to great effect.
What is a costing model?
A costing model is a mathematical algorithm or equation, that estimates the cost of a product, service, or initiative. The most common outcome is a numerical estimation of the overall cost, of the relevant item. This model provides both the user and the recipient with the necessary information that they will require, when assessing the considerations for a commercial undertaking. The method also allows the user to break-down their process and to identify areas of greater and lesser importance, thereby providing insight and value, to the project manager. By using a costing model, the project lead will be in a position to adapt to the on-going changes, that are a part of every commercial project.
Pricing strategy
This is an area that most designers have difficulty with, and all too often fall into the trap of underpricing their services. Of course, not all practitioners are in the position to pick and choose their income, and the decision to underprice a job is born out of necessity. There have been many discussions on this point, and the debate continues to provoke opposing views from the myriad of sectors, within the industry-With some sectors, such as Digital design, now becoming more prominent due to a shift towards more specialised disciplines and digital formats. However, does this then make those working within that sector more valuable to the industry, then those working in less popular or less valuable markets? And should this be reflected in the price point?
When starting a new business, it is important to consider the following: At which entry point do you intend to position your business? In answering this question, you will have to consider the business objectives. There are four key Pricing strategies, that are commonly used by contemporary businesses, which are: Penetration; Economy; Skimming; and Premium.
Pricing strategy models:
Hourly Rate pricing
Pricing your work based on an hourly rate allows you to estimate a comprehensive fee, for the completion of the project, over a set period of time. In order to do so accurately, you will need to have a good understanding of how your capacity as a practitioner relates to the hourly rate you are charging. If the rate is too low, then this may not reflect the true value of your time. Whereas if the rate is set too high, the client may expect more in the way of output. Some Designers argue, that the hourly rate is the enemy of efficiency, and others would argue that it can allow for the acquisition of larger fees, in certain cases.
Cost plus pricing
This model allows for the application of a strategy known as, Skimming. This is commonly used by many contemporary practitioners, and sees the Designer acting as a broker, alongside their own duties. Working with external contractors, the Designer will provide the client with a fee, that also includes estimates of the perceived production costs. The benefit to using this model, is that you are able to micro-manage all aspects of the project and provide your client will all of the necessary information, at the commencing of a project. The Designer then applies a percentage on top of the established fee, this may be 10%-15%, and this will then allow the Designer to make a sustainable profit, per job.
Competitor Base pricing
Also referred to Economy pricing, and often deployed by Junior practitioners, this strategy is build on identifying your competitors price-point, and either matching that point or undercutting them. The model may also be deployed in the service of penetrating a new market, allowing the user to compete with existing operators. The method should not be perceived as a long-term strategy, and should be abandoned once the initial objectives have been achieved.
Project based pricing
Best suited to short-term, one-off projects, this model allows the designer to take a staggered approach to pricing; The benefit of which will allow the designer to moderate the hours worked in relation to the hours billed; Ensuring that the client does not have the opportunity to prolong the process, through the addition of last minute revisions. The model is underpinned by establishing clarity in phase one, and then the mapping of each subsequent stage of the project, in order to establish an overview of the entire project.
Value based pricing
Value based pricing, is most commonly practiced by those companies that operate in the high-end, sector. This model allows an agency to set their own fees based on the perceived financial value of the parties involved, and may also consider factors such as prestige and exposure. The fee will reflect the market value of both the project and the company backing it. This formula can be adapted in order to accommodate different markets and companies, in order to serve a broader range of clients, whilst also guaranteeing the highest possible profit margin, for your agency.
The task:
This week, I would like to explore an area in which I have long held an interest. For me, the world of fashion offers a great deal of potential for the designer to fully embrace the exploration of visual-narrative. And perhaps, the most comprehensive manifestation of this within that sector, is the product launch event. Therefore, for this week’s task, I shall be providing a Resource model, to be applied to the launching of a new line of trainers/sneakers. For this task, I will be using a theoretical brief of my own creation, along with insights from existing case studies, into to compile a Resource Model.
Case Study: Nike
Insights
Founded by Phil Knight and Bill Bowerman 55 years ago, Nike is now the world’s most valuable apparel brand in the world.
Nike’s brand name is not just a senseless sequence of letters. It is named after the Greek goddess of victory, speed and strength, also known as Winged Goddess. Nike’s swoosh resembles a wing.
Nike has the largest market share in the athletic apparel industry in North America (around 27.4% and, until recently, had a whopping 96% of the market for basketball footwear), and continues to outpace the competition when it comes to sales:
1.15K stores globally, 76.7K employees, and $39.12 billion in yearly revenue
Nike’s Air Jordan brand of basketball sneakers generated over $3.14 billion in the fiscal year ending May 2019, up 10% from the previous year.
Nike’s designers are not afraid of being bold – as evidenced by their “green grass” golf shoes that hit the market in January 2019:
Their SEO strategy is also up to the mark. SEMRush shows that close to 60M users land on Nike’s site monthly, spending around 7 minutes there and browsing almost 5 pages.
Nike’s annual revenue keeps growing year after year. Some analysts predict that Nike’s revenue will grow by nearly 25% through the fiscal year 2021 to $45.4 billion:
Factors to consider, when planning for the launching of a new product event:
- Venue
- Staffing
- Logistics
- Vehicle rental
- Transport costs
- Health and Safety requirements
- Cleaners
- Marketing and Promotion
- Branding
- Merchandising
- Production costs
- Paramedics
- Announcer
- Host
- Stall holders
- Sponsors
- Crew
- Licenses/permits
- Give-away packages/gifts
- Security
- Insurance
- Catering
- The provision of amenities
- The hiring and maintenance of relevant equipment, to include: The hiring of staff, with specialised skillsets.
- Lighting Tech
- Audio Tech
- DJ
- Production staff
- Models
- Make-up team
- Hair stylists
- Dressers
- Ticket takers
- VIP packages
- Broadcasting
- Licensing deals
- Photographers
Brief: Proposal
Nike are launching a new trainer and have asked you to create a pitch, for the launch event. The new product is a collaboration between Nike and contemporary artist, KAWS. Therefore, your proposal will have to reflect the tone and personality of the artist’s work, and the formats that you select, should be reflective of both Nike’s brand values and KAWS’s origin, as a New York based Graffiti artist.
- Stage one concept proposals, for a unique ident.
- First round iterations of designs for Six, large posters.
- The provision of Three digital banners, to be used across Social Media.
- Four separate designs, for early access press-packs.
Resource model
Project Overview:
Objectives:
Consult with Nike to identify the challenges, within the Brief.
Research and Analysis
Consult with Nike and receive feedback, on the Brief-Strategy.
Identify the desired outcomes.
Implement the Brief-Strategy.
Develop a concept.
Refine and Develop
Design and Test
Implement and Review
Duration:
Eight Months
Deliverables:
Stage one concept proposals, for a unique ident.
First round iterations of designs for Six, large posters.
The provision of Three digital banners, to be used across Social Media.
Four separate designs, for early access press-packs.
Expenditure:
Salaries:
Project Lead: £70.000
Creative Director: £70.000
Art Director: £50.000
Senior Graphic Designer: £40.000
Visual Designer: £30.000
Junior Graphic Designer: £24.000
Product Designer: £30.000
Architect: £80.000 (Retainer)
Accountant: £60.000 (Retainer)
Total Salaries, for a Twelve month period: £454.000.00
Total Salaries, for an Eight month period: £302.640.00
Overheads:
Total Overheads, for an Eight month period: £94.000.00
Expenses:
*Expenses to be calculated at the end of each phase, and paid in full within five working days.
Total running-costs: £396.640 * Plus expenses.
Project Total:
Total Amount to be paid: £495.800
*Plus the total expenses. (+VAT)
*30% payment required, prior to work commencing on Phase One.
*50% Kill-fee.
Phase One
Objectives:
Consult with Nike to identify the challenges, within the Brief.
Research and Analysis
Consult with Nike and receive feedback, on the Brief-Strategy.
Identify the desired outcomes.
Deliverables:
Preliminary stage: A Brief-Strategy.
Two week stage: Initial proposals/concepts, detailing possible Art Direction and routes, forward. Consult, with client.
Four week stage: Final proposals/concepts, to be presented to the client, with a final decision to be made, in regards to Art Direction and the implementation of strategy, moving forward.
Six weeks stage: Consult with client, upon the delivery of first round proposals.
Phase Two
Objectives:
Develop a concept.
Refine and Develop
Design and Test
Deliverables:
One Month: Initial Designs for all deliverables to be presented to the client, to include: The Ident; Six Posters; Three Banners; And early access, press-packs. Consult with client, review feedback and respond.
Six Weeks: Final proposals for the Ident and the Six Social Media banners to be presented to the client. Consult with client, review feedback and respond.
Ten Weeks: Initial designs for the Six large posters and the first round of designs for the Early release press-packs, to be presented to the client. Consult with client, review feedback and respond.
Three Months: Initial designs for the Six large posters and the first round of designs for the Early release press-packs, to be presented to the client. Consult with client, review feedback and respond.
Four Months: Final Designs for the Early access press-packs, to be presented to the client. Consult with client, review feedback and respond. Also, last opportunity to amend all proposals, prior to all deliverable moving in to production.
Five Months: All Design work for this phase to be completed.
Phase Three
Objectives:
Refine and Develop
Design and Test
Implement
Consult and Respond
Deliverables:
Week One: Consult with client, in a presentation of all final artwork and agree on production schedule.
Week Two: Production begins.
Week Three: Consult with external partners, pertaining to the progress of the production schedule. Respond and review.
Week Four: Production ends. Consult and review. Test.
Week Five: Final presentations to be made, to the client. Consult, review, and respond.
Bibliography
Golubeva, H (2019). Just Do It: What We Can Learn from Nike’s $39B Marketing Strategy. [online] Singlegrain.com. Available at: https://www.singlegrain.com/marketing-strategy/nikes-39-billion-marketing-strategy-just-do-it-like-nike-does/ [Accessed 10 June. 2020].
O’Connel, L (2019). Nike’s Advertising and Promotion costs from 2014 to 2019. [online] Statista.com. Available at: https://www.statista.com/statistics/685734/nike-ad-spend/ [Accessed 9 June. 2020].
Gibbons, S (2019). How To Be The Nike Of Product Launches. [online] Forbes.com. Available at: https://www.forbes.com/sites/serenitygibbons/2019/02/12/how-to-be-the-nike-of-product-launches/#3ff31f59918e [Accessed 8 June. 2020].
May, T (2019). The 5 best product launches, and what they teach us. [online] CreativeBloq.com. Available at: https://www.creativebloq.com/features/the-5-best-product-launches-and-what-they-teach-us [Accessed 10 June. 2020].
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