This post is by Nathan Hodges, TrinityP3‘s General Manager. Nathan applies his knowledge and creativity to the specific challenges of marketing management, with a particular focus on team dynamics and behavioural change.
The ‘race to the bottom’ accelerates
We’ve all heard of the pitches where price is the overriding factor.
You’d think they’re the kinds of pitches most right-thinking marketers and agencies would try hard to avoid, work hard to call out, and fight to prevent.
As we all know, when the game is simply ‘lowest price wins’, the glory of new business success for an agency soon turns into the dull grind of servicing turnover with no profit. Incumbent agencies, if successful, face two to three years of resource reduction and reassignment in a desperate and usually unsuccessful effort to recover their numbers.
Client teams, once the glow of the new deal has faded, soon wake up to the reality of a disengaged, overworked and demotivated agency team being progressively replaced by ever more junior people, until finally something gives and the grim pitching cycle is repeated.
This is every bit as bad as it sounds. It’s the opposite of marketing innovation and creativity. It strips the marketing industry of the skills and talents and resources it needs to compete. It accelerates the ‘race to the bottom’ so bemoaned by agency heads throughout 2014.
So why is there still a deafening silence from marketers and agencies when they’re actually involved in pitches that are, indeed, all about the money?
Could it possibly be the money?
Managing the pitch process
TrinityP3 managed a large pitch process last year where the client requirements were especially complex: several brands at various stages of development, a full spread of media and communications specialisms, and an organically-formed roster model with little matching of capabilities to roles. Marketing and procurement teams worked closely with us and each other from the outset.
The result was the kind we always strive to produce – a powerful match in chemistry, capability, strategic direction and creative outlook between each of the brand teams and their potential new agencies.
Scope of work, rates, resource levels and mix, agency multiples and PBR were all agreed and negotiated to provide improved value for the client team and sustainable profit levels for the agencies. In other words, remuneration became a hygiene factor, and the pitch was to be decided on more important matters.
All good so far, the pitch ended and TrinityP3’s formal involvement also ended at that point.
Sometimes it is just about the money
Then things changed. A little global pressure was suddenly applied to the procurement process. Local procurement opened new discussions, and immediately all the agencies started to bid against each other – even though they had previously agreed on a properly benchmarked, sustainable and fair model.
And then (of course) one agency offered to service the entire business for one very low multiple – a multiple so low that the marketing teams forgot all their strongly-held preferences, forgot all the careful choices and passionate arguments they had made throughout a long, rigorous process, and simply went with the cheapest.
So evidently it was, after all, just about the money. Sometimes it is. We can understand that. Projects that are just about the money are not usually the kinds of projects we undertake at TrinityP3, as we always find there is far more to solving any marketing problem than merely changing the prices.
When we heard what had happened, we immediately made our views very plain to the client team.
If only they’d known that price was the deciding factor
But the interesting thing was how the agencies and marketing teams behaved in the aftermath. The PR story from each of the marketing teams was about how well the winning agency had performed across all dimensions – except price, which was never mentioned – and how exciting the future now looked with this agency on board.
The personal messages to the agencies were all around how close it was at the end, but how the winning agency just edged it. Just edged it? The number they tabled destroyed the process there and then.
The losing agencies complained loudly to the TrinityP3 team about the unfairness of it all, and how they would never have competed if they’d known that price was the deciding factor, and how appallingly the winning agency had behaved.
Yet they said not a single word of this to the marketers – the tone of their conversations with them was simply understanding and sympathetic. And of course, they had each long before dropped their proverbial trousers at the slightest request of the procurement team – without even checking back with TrinityP3 – in an effort to win the shootout quickly at almost any cost.
Running a pitch is not the best solution to this problem
Two things. Firstly: if price is the most important thing, then clients, procurement and agencies need to be honest about it. Upfront, and during the process too. Not running away and burying their collective heads in the sand. Or glossing over the issue like it wasn’t even a factor. Then we can address it like grown-ups, as an industry, and solve the problem. (Big hint – running a pitch is not the best solution to this problem.)
Secondly: clients and agencies – don’t complain about the ‘race to the bottom’ if you’re still going to compete in it. Winning isn’t always right. Sometimes, like Jerry Seinfeld, you might want to ‘choose not to race’.
They say a principle isn’t a principle until it costs money. In this process, money became the principle. And no-one spoke out, or stood up, or did anything material to prevent it from happening.
When money talks, it doesn’t mean everyone has to shut up.
To find our how TrinityP3 Marketing Management Consultants can help you further with this, click here.