This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
There is a trend in marketing for accounts to be put to market at the end of the contract period to test the market. One of the unforeseen consequences of this is that it is more likely for the account to move than remain with the incumbent, with the success rate for the incumbent to retain the account at just 20% but usually associated with a reduction in the agency fee.
This churn in agency relationships has seen average tenure of agency / advertiser relationships drop from a high of 7.2 years in 1984 to less than 3 years today.
Also as we have reported previously there is increasing evidence that many of the top agencies are beginning to avoid pitching for those clients who go to market and change agencies on a regular cycle.
Yet other research has shown that the top 40 agency / advertiser relationships last an average of 22 years. So if longer term relationships lead to higher performing and sustainable relationships and going to market reduces tenure to the standard 3 year duration of a typical agency contract, what is the alternative to the regular pitch cycle embraced by many advertisers?
There is a way to avoid the costs and risks associated with regularly pitching your business.
Why are you pitching?
What is it making you want to commit to the time and trouble of running an agency pitch? Because having run many pitches, it is time consuming and can be troublesome if not managed properly. So what is it?
Is your current agency taking you for granted? Or do they not have strengths in an area you need? Or is there another agency you prefer to work with and believe will get you better results? There are many tangible and intangible reasons to take your current agencies to market.
But what if you have a terrific agency relationship, one that is productive and highly functional and the only reason you are going to market is because the company or organisation you work for has a policy of going to market at the end of each contract period. Typically this is every three to four years with usual contract extensions.
But considering some of the most successful client / agency relationships average 22 years, you wonder how this happens if they are going to pitch every three? That means they would have had to pitch and win the business seven times. (One initial win and six defensive pitches.)
The logical answer is that if there is no better option of course the incumbent will defend and retain the account and the relationship will be maintained. But this logical approach does not allow for the fact that the incumbent is already in a difficult position in a review where all of the new agencies will be showing off shiny new things and making promises they may be unable to keep.
Why you should not pitch?
Okay so the reason you are going to pitch is because it is company policy. So why should you not go to pitch?
Well the average pitch can take between ten and 16 weeks and consume more than ten weeks in resources within your organisation, depending on the number of stakeholders involved and the number of agencies tendering. Or if you are going externally for help there is the cost of the pitch consultant.
In the process, while it may be fun meeting the new agencies and getting to know them, they will want more of your time to get to know you and convince you they are the one you have been looking for.
All this will be consuming your time and the resources in your team, not to mention the resources at the incumbent agency who collectively have the business as usual marketing plan to deliver.
It is still relatively common for new agencies to offer discounted fees, which may look attractive, especially to the procurement team, but could mean you end up with a substandard agency team compared to the “A-Team” that was sent to pitch your business.
If you do decide to choose a shiny new agency and dump your incumbent, who you thought were terrific, it will take around 6 to 12 months for them to get up to speed on your business, culture and ways of working, during which time your team and the new agency will be typically 20% less efficient.
Considering all of this you may ask yourself “is it worth it” considering you are already predisposed to staying with the incumbent because they are delivering?
How to review without a pitch
When you take an agency to market with a tender what you are really testing is the capabilities, the contractual arrangement and the value of the financial deal. So lets say you are very happy and satisfied with your current agency, what are you really testing?
We have had an increasing number of marketers engage us, usually to run a pitch, but then when we discuss their real needs and expected outcomes we have then provided the non-pitch review. What this includes is:
- A complete assessment of the current agency fee model and how this is applied. This means reviewing the current fee model, rate card and production estimates and invoices to determine the fairness and sustainability of the current arrangement.
- A agency contract review ensuring the suitability of the term and condition, the agency performance KPIs and all the schedules.
- Undertake a qualitative and quantitative review of the agency performance across all of the stakeholders within the client organisation and the other agencies in the roster.
All of this comes together with a detailed report of how the current agency arrangement compares to the market place, which is shared with the marketing team and often the procurement team.
We also prepare an abridged report for the CEO, CFO and the Board. Out of 20 reviews we have undertaken recently, only one was required to go to market based on our report and the agency unwillingness to negotiate a new agreement.
Why review without a pitch
So why would you undertake an agency review without a pitch? This is ideal for those marketers who are very happy with their agency and are being required to enter into a tender process by the company policy.
The advantage is that you avoid the huge disruption that occurs during a agency tender and it takes less than four weeks. For the marketing team it requires a tenth of the time that a pitch would take.
It also provides management and the board with an independent assessment of the value of the current arrangement from a performance and cost perspective and ensures the contract is updated to reflect the ongoing relationship.
For the incumbent agency it allows them to be independently reviewed in regard to the market without actually having to compete with a list of competitors desperate to win the business and willing to do anything to take it away.
Of course if you want to get rid of your incumbent agency and are desperate for a new agency, this is not for you. In that case, good luck with your search and selection tender. If not, we would like to hear from you.
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