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Asia's Merry-Go-Round of Costly Pitches

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Issue #4 - R3

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W
ith the current economic crisis, we generally see marketers behaving in two ways; either treading cautiously – which means calling on your existing agency partners to dig deep and provide new solutions, or a more fleeting approach which is to put the business out to pitch.

54 Agency Professionals – CEO’s and New Business Directors - from Creative, Media and Marketing Services agencies were invited to take part. The Survey was administered online between mid May – early June 2009, using both quantitative and qualitative questions. A total of 35 representatives from over 20 agencies participated ... r3-logo


With the current economic crisis, we generally see marketers behaving in two ways; either treading cautiously – which means calling on your existing agency partners to dig deep and provide new solutions, or a more fleeting approach which is to put the business out to pitch.That is, either to get a better deal, or upon the realization that when times are tough their agency is not stepping up to the mark. There seems to be more doing the latter than the former. R3:GC, a collaboration between R3 Asia and partners Grupo Consultores in Europe, conducted a survey amongst agencies across Asia to understand the effect that this increased pitch activity is having on their businesses.



The Survey invited professionals from media, creative and marketing services agencies (both independents and networks) to participate. 35 CEOs and New Business Directors took part from agencies, located in Singapore, Hong Kong and China, and both qualitative and quantitative responses were captured online.

The Survey found that Agencies are investing anywhere from an average of USD$24,885 for a local pitch (in Singapore or Hong Kong), up to an average of USD$179,663 for a global review. Within these costs, roughly two thirds, or 67% were internal agency hours, but as much as 33% were external costs, which are hard costs with a direct bottom line impact on the agency. The overall annual cost impact on agencies averaged USD$648000.

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Some clients in Asia are notorious for pitch lists that show a complete lack of alignment on what type of agency partner they need ... we’ve even seen in one instance a pitch list with 40 agencies up for initial review.

In terms of frequency, agencies in the study were involved in competitive pitching once every six weeks, contesting around 8.5 reviews a year, but many were pitching as often as every three weeks.  This indicates a certain desperation from agencies where they are going after whatever business is available – regardless about how appropriate the fit might be. It’s a bit of a situation of being between a rock and a hard place, as agencies feel the pressure of reduced clients’ budgets, but are risking more and more in their attempt to increase new business. It also can easily set up a situation where agencies over promise and under deliver - a perfect formula for early failure in the relationship -  where after winning a piece of business they are in no position to service it correctly.

Likewise, as agencies may need to attempt to be more selective in their approach to pitching, clients also need to be more sensitive to the number of agencies they involve in a review. Some clients in Asia are notorious for pitch lists that show a complete lack of alignment on what type of agency partner they need. We’ve even seen in one instance a pitch list with 40 agencies up for initial review. Not only does this create an impossible situation for the client themselves to manage, it obviously shows a lack of respect for the agencies investing their time and money in an attempt to win. In fact, 65% of respondents in the survey believed that any more than 3 agencies invited to pitch was unfair.

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With these numbers of agencies participating in a pitch, the survey found the success rate of pitches for any agency showed on average just 35%. Network agencies fared better than the independent agencies, winning at 47% of the time.


As the survey also found, there was strong support for a staggered approach, with agencies only being expected to provide strategy in the first round. 70% of agency respondents supported this view, and 90% of respondents believed ‘chemistry sessions’ or trial assignments were a good idea to have as part of the process. With the figures we see being spent by agencies on securing new business – in terms of time and money – it really is in the industry’s best interest to manage the volume and type of work required in a pitch. First step to improving this is ensuring the client team is completely aligned upfront, with very clear criteria upon which they are evaluating the agency, and that the pitch brief is crystal clear in terms of the expectations. Clients also owe the losing agencies some feedback on where they fell short on these criteria – allowing agencies to sharpen up areas and use this feedback in a positive way.

With the substantial financial risk of pitch participation, not to mention the impact it has on the existing client business, it is perhaps not surprising that the concept of mandatory payment for pitching has strong support - 90% of respondents positively responding to some form of mandatory payment for pitches.  There was an element of agency alignment indicated in some of the qualitative feedback – as without a collective approach it is likely that agencies will only continue to drive the perpetuation of unrealistic pitch cycles and frequency across the board.

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However prior to going down the conversation on payment for pitches, is really the issue of agency relationship management before pitching is required at all. There are tools and processes readily available to clients and agencies that help resolve relationship issues and create ongoing mutual alignment in order to push the relationship towards that of business partner and away from commoditized supplier. Another step to get to this point is encouraging clients to issue longer agency contracts to begin with. In general we see two year contracts with the option to renew for one or two years after that. This is not setting up a situation that allows both parties to get the best result – a new agency will require really at least 9 months to fully understand all aspects of the client business, the working processes preferred and relationship building. If the pitch is up for review at the two year mark then six months prior to that they’re in pitch mode too and in between those two times leaves very little room for a proper agency-client partnership to develop.


Best practice still sees us looking at markets like the US and UK where agency client relationships last on average 6+ years, and agency partners are afforded status as a trusted advisor, allowing them to provide the best solutions for their clients. As developing markets mature and clients increase their focus and their spend in this part of the world we will see which ones are able to engage agencies and manage them correctly to get best value, best solutions, and ultimately best business results, without the need to call frequent pitches. If you found this article interesting ...

 

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