How are they adjusting? This iteration of the BtoB Web Price Index examines the hourly rate cards Web site developers use to bill their projects. We set out to determine what factors are influencing Web developersâ pricing and to probe how they keep costs down without seriously compromising their rate cards.
Surprisingly, despite the belt-tightening on the part of marketersâwhich could conceivably drive developersâ prices downâwe find only slight variances in most categories since our last look at the rate cards in 2000.
Data on how much marketers spend on Web development is tough to come by, but other marketing expenditures may provide some insight. According to the Interactive Advertising Bureau, revenues for online advertising totaled $1.55 billion for the first quarter of 2002, down 18% from the first quarter of 2001.
Results from other media were mixed. CMR reported that many media (including magazines, newspapers and cable TV) were down for the quarter, while network TV and spot radio were up. Paul Gunning, managing director of Tribal DDB, Chicago, the interactive division of DDB Worldwide, is hopeful. âBlue-chip brands are starting to come on board,â he said. âWhen you have the mainstream ad groups as advocates, you tend to have more strength.â
Gunning believes that online advertising is still under-represented in marketersâ budgets, and he hopes that will continue to change. âEleven percent of media consumption is digital, so [online spending] should be more than [its current] 1%,â he said.
He added that he has seen much more activity in the industry in recent months than in the past year or so.
What kind of work is picking up, and what are the agencies and developers doing? For one thing, they are trying to forge better relationships with, and to tap more business from, existing clients.
There hasnât been a lot of effort toward attracting new business. âThere donât seem to be many large-scale pitches,â said Jonathan Greene, VP-interactive marketing of Euro RSCG Devon Direct and general manager of its interactive division, Devon Digital. âMost of what weâre seeing is project-oriented business, not agency of record-type pitches.â
But new-business development requires staff that may be more effectively deployed to client work, some agencies believe.
âWe would like to be out pitching more new business, but our resources are more limited than we would like,â Gunning said.
Another factor is the way marketers are using their Web sites, and therefore what kinds of work they are seeking from their agencies and developers. In the past, many marketers tried to offer too much information through their Web sitesâtrying to be a âdestination siteâ like Yahoo!, offering news, directories and search capabilities.
Now theyâre looking at their Web sites as a way to complement their brand and build relationships with their customers.
âTo be a brand site, you are not going to be the destination site of your entire audience,â Gunning said. âMarketers are keeping the sites up to date, but recognizing that the site is an accessory to the consumerâs life.â
Greene pointed to the experience of one of his clients, Nextel Communications Inc. Rather than trying to generate new customers or create a destination Web site, the company is focusing its efforts on communications with existing customers.
However, Nextel was in an odd position for a cell-phone marketer. It didnât really know who its customers were. While a large client corporation might have 1,000 employees using Nextel phones, Nextelâs relationship was with someone at the COO or CIO level. Selling that person new add-on services or phone accessories, or interesting them in a newsletter, was not going to tap the full target market.
Working with Devon Digital, Nextel was able to create online resources for the end-users, an effort that is proving to have a âphenomenalâ return on investment for a low cost per lead, Greene said.
How does this all affect the rate card? âItâs hard to just lower rates,â Green said. âWe still have the same overhead. Price is a key point for clients, but we havenât really adjusted the card.â
Thereâs no magic answer, Gunning said. âWeâre forced to hold our margins to a level where we can still stay in business.â
Greene added, âTighter margins are dangerous because itâs hard to maintain profitability. â¦ Weâre trying to provide value, not just service.â
Greene and Gunning agreed that customers get what they pay for. Both recognize that price is a factor for their clients, especially these days. But, Gunning pointed out: âYou canât deliver excellence by asking âwhoâs the cheapest?ââ