Digital Transformation: The Total Cost of Ownership

It’s pretty frustrating when expectations don’t meet reality. You save and you save finally collecting enough money to buy the dream house. At long last, you get through the funding process only to realize that it takes a lot more money to furnish, insure and outfit it… not to mention start repairing it – almost immediately. Or you go into the car dealership excited to finally buy that 7 series, only to discover that the recommended premium fuel is a lot more costly than the regular stuff, and there’s a 4X cost difference when it comes to the oil, tire and maintenance needs of your high-performance machine.

The truth is: marketing transformations carry similar frustrations. While perhaps not completely known, future costs must be considered.

Uncovering the real cost over an extended period of time is a concept known in accounting as total cost of ownership (TCO). In recent years, TCO has been more broadly discussed by analyst firms like Gartner as it relates to cloud, compute and server levels. In those realms, organizations are attempting to make it easier to understand with calculators and checklists.

While understanding total cost of ownership isn’t common marketing practice, it should be.

Perhaps you’ve heard the old adage about the company that built an amazing car but didn’t put any gas in it. How far will that car ever get? Far too often, marketing organizations look at the short-term investment without counting and preparing for the implications of those transformative upgrades over time. That’s why Rogue began including in its proposals and SOWs a section dedicated to TCO. The intent was to have a candid, upfront conversation about the long-term success and viability of the digital transformation solution(s) should other “maintenance” and “fueling” efforts not be earmarked. In some cases, that conversation led to no deal. In others, it’s led to a stronger partnership where everyone moves forward in confidence knowing the investment is there to be successful over the long haul. We predict that other agencies may soon follow suit. 

Marketing TCO Today

Digital transformations are complex. Successfully delivering on a transformative outcome often requires allocation in other areas beyond the stack, system or methodology proposed. (Think: How will those initiatives be “fueled and maintained”?) It’s critical that leaders consider those additional costs before signing on the dotted line, because purchase price and ownership cost are not the same thing.

To help illustrate what TCO today looks like, let’s consider a less transformative, more streamlined example. While this project example could be considered more simple, you’ll still see there are many facets to consider when looking at the real cost.

A recent client was considering a social strategy and the relevant technology needed to implement. Daily operation and software licensing costs were reasonable. A healthy paid media promotion budget was earmarked. Sounds great, right?

In this scenario, we helped the client consider other costs that would be determinative in the overall success of the initiative. In the TCO portion of their proposal we laid out investment buckets assigned to:

* Video Development
* Ongoing Content Creation
* Original Photography Needed to Capture Brand Tone
* Social Listening Costs

Is it possible to run a social media campaign without video, original photography or regularly updated content? Sure. But would the client be satisfied with the ride or have a high confidence of achieving their intended outcome? Would they be delighted in the investment they made in social? Our experience says, “nope.”

Thinking About Today and Tomorrow

Across the entire marketing ecosystem, technologies and initiatives have TCO costs to consider. In the example above those costs were still relatively near-term. But there are multiple TCO costs associated with “tomorrow” as well. When consulting with clients on the true cost of ownership, Rogue often discusses:

  • Ongoing maintenance – There’s a cost for 24×7 availability versus checking once a week or once a month. How might your needs change over time?
  • Coverage Levels – There’s a cost for 20% (media) coverage versus 100% coverage. What is most right today? Tomorrow?
  • Infinite Scroll – Have you noticed that today’s apps and digital channels never end? There’s always more to scroll. There’s a cost for having your media display within the first 30 seconds of a session and then 4 minutes later. What are the implications of being thumbed over?
  • Future Attention – Odds are that more entrants into your market will cause your share to decrease. What should you do to prepare for the cost of acquisition 36 months from now?

What to Look For

As a strategy led agency, Rogue considers the outcome more important than the tactic. Achieving your outcome is what drives us to consult and advise on TCO at all. There are direct and indirect costs that are always associated with a technology, system or initiative proposed. Listen for a partner that will encourage you to look beyond the short-term immediate price, guiding you to the more complete cost over the long term. You’ll know you’ve found a good one when you hear them talking about:

  1. Time allocation – Has your proposed provider discussed the time and talent you’ll need to contribute to make the initiative successful? Do you know what the upcharge is if you have an agency do it?
  2. Preparing for “unexpected” surprises – It’s impossible to know the future, but Murphy’s Law should be expected when it comes to transformative efforts. It’s worth noting though, when you’re prepared and proactively planning/investing to meet those “surprises,” the unknowns hurt a lot less. Is your proposed provider setting you up to be prepared?
  3. Growth implications – It’s easy to underestimate the cost required to create attention, acquire and retain customers. Has your proposed provider addressed those costs in an ever-expanding market?

Rogue would rather a company walk away early on having identified that they’re not able to make the resource or infrastructure investment needed to be successful, than ink a deal and have them leave some time later unsatisfied with the achieved results. It’s time for the purchasers of marketing services to consider the total cost of ownership ahead of time.

Because it costs what it costs to be successful, you’ll pay one way or another. And more likely than not, feel misled and surprised in the process. The only question is when, and will you be prepared? If you’re ready to work with a group that thinks holistically, works to minimize risk and advocates for your desired outcome, maybe it’s time to Go Rogue.