There was no trace of the fog now. The sky became bluer and bluer, and now there were white clouds hurrying across it from time to time. …the trees began to come fully alive. …soon the beech trees had put forth their delicate, transparent leaves. As the travelers walked under them the light also became green. A bee buzzed across their path.
‘This is no thaw,’ said the dwarf, suddenly stopping. ‘This is Spring. What are we to do? Your winter has been destroyed, I tell you!’
-C.S. Lewis, The Lion, the Witch, and the Wardrobe
Something is in the air in Agencyland. After a long, cold and seemingly endless winter, something is finally in the air. Free pitching, the addictive and destructive opioid of both client and agency is disappearing like the White Witch’s endless winter. It may not yet be summer, but spring is most definitely here.
Ditch The Pitch, Says Forrester
Earlier this year (2023) Forrester published a research report that was the first rigorous attempt to quantify the cost of free pitching. It’s conclusion: free pitching costs the US agency industry up to 17% of its $73B annual revenue. That’s $12.5B a year. Nice to finally have a number. It’s… uhhh… large.
There’s a lot of blame to go around for this large cost and the implied waste therein, claim the report’s authors, and they spare nobody, blaming:
- Procurement for prioritizing cost savings over other goals
- Marketers for being disinterested in and underprepared for their own pitches
- Agencies for giving too much away for free
- Outside consultants for unnecessarily driving up complexity and costs
I could go on about each of these four topics at length, but it’s another report that I’d like to dive deeper into.
The ANA and 4As Gang Up on Pitching
In July, the American marketing trade body the Association of National Advertisers (ANA) and their agency counterpart the American Association of Advertising Agencies (4As) published a joint research report, The Cost of The Pitch. (For the rest of this post when I refer to “the report” it is this one I mean, unless otherwise noted.)
The verdict shared by the ANA and the 4As is that pitches are expensive—for everybody—and while sometimes appropriate, clients should think twice about putting their account into review. But I’m getting ahead of myself. There are three insights from the report that I found most notable and worth discussing here:
- The cost of pitching to both parties
- The role and impact of the incumbent agency
- Clients’ motivation for putting their account into review
1. Pitches Are Expensive—For Everyone
It’s long been known that a pitch can cost an agency hundreds of thousands of dollars. The report shows that those costs are, on average, about $200k for a non-incumbent agency and more than double that—about $400k—for an incumbent. But this might be the first report that speaks to the cost of the pitch to the client: another $400k or so. All in, the average pitch has a cost to all participants of over $1m. Again, we knew this was expensive but it’s nice to have some numbers. I think they’re likely understated because they don’t factor in the costs of disruption and relationship degradation, but at least we have a big round number to approximate the starting point of the cost of the pitch.
So it’s over $1M per pitch and $12.5B per year. In more than 20 years of conversations on the subject I’ve always been struck by how little thought clients give to where those costs go. They see them being borne by the agencies, which they are initially, but they appear to be uninterested in the longer term reality that much of those costs ultimately get spread across the entire marketer landscape. How much of that $12.5B is pure waste is anyone’s guess, but it’s billions and it shows up as higher costs to the client and the best talent in the agency being allocated to winning business instead of serving existing clients.
2. The Incumbent Wins—or Declines
Perhaps most interesting to me is how the report’s findings definitively answer the question, should you participate in a pitch when the incumbent is involved? Of course the answer is no, but now we have a picture of just how skewed these agency reviews are.
The report shows that the incumbent is reappointed 66% of the time, and 25% of the time the incumbent refuses to defend the account. Let’s unpack that. Across 100 agency reviews the incumbent is selected 66 times on average. But in 25 of those reviews the incumbent agency, seeing the writing on the wall, has declined to participate. So when the incumbent chooses to participate their odds of winning the review are 88% (66/75). An agency that finds itself pitching against an incumbent in a four agency shortlist has odds of winning that are roughly 4% (12% chance a non-incumbent agency is chosen, divided by the three non-incumbent agencies). Talk about long odds.
It’s clear that when the account goes into review the incumbent agency either bets the account is safe with them and that the review is a policy-driven process that they just have to endure, or they see the relationship as over and do not try to defend the account.
From the report’s summary of key findings:
“Clients should ask themselves if the cost of an agency review is worth the potential savings, especially when one factors in that client respondents retained the incumbent agency two out of three times following an agency review. Clients also risk alienating their incumbent agency when asking them to re-pitch business. One in four incumbent agencies declined to participate in a pitch to keep their client’s business. And 54 percent of agency respondents said being put up for review had a major to moderate impact on their decision to resign the account.”
While the report did not enumerate the costs of the degradation of the relationship that an agency review engenders, it did speak to it. 42% of incumbent agencies and 38% of clients said the account review caused an erosion of trust between both parties, and 41% of both said it resulted in the incumbent agency taking fewer creative risks.
“From an incumbent agency perspective, being asked to participate to defend an account for which the agency believes it has done a good job is demoralizing. This study pointed out the negative impacts an agency review has on the existing relationship, and combined with ongoing resource constraints, these are likely explanations for why an agency may choose not to participate when asked to defend the account.”
Only 13% of incumbent agencies claimed the review process had no detrimental impact on the relationship.
3. Reviews Are Largely About Getting a Better Price
Surprise! Didn’t see that coming, did you?
Of the top factors considered when selecting an agency, “Cost/price” was number one, cited by 62% of all respondents (and by 71% of our friends in procurement). This was followed by “Creative execution” (45%) and “Strategic big idea” (36%).
While I was not surprised that price was the driving factor in hiring an agency, and I’m sure you were not either, the report’s authors claimed to be.
“It was surprising and disappointing to see cost/price as the top factor considered to select a winning agency. Agencies are not commodities and price should not be the key factor. While it is important for a client to select an agency it can afford, the discussion should more appropriately center around the value that an agency can deliver.”
The Sentiment is Thawing
So the report’s three key findings, to me, are that pitches are expensive, the incumbent wins or declines, and they’re largely about getting a better price. It’s nice to have some data to back up what most of us have long known.
The real value of this report however is the sentiment. It appears to represent the first time that the client’s marketing trade body (the ANA) and the agency trade body (the 4As) have come together to say that perhaps it’s time to rethink this archaic practice of the pitch-based account review.
“A pitch is an extremely stressful situation for agency staff. Often livelihoods are on the line, and in some cases, careers can be enhanced or severely damaged by the outcome of the pitch. Adding to this stress is the need for the agency to maintain a high level of service to its other clients, and in the case of an incumbent pitch, to that client in particular. Any type of alternative to a pitch is worth considering when the emotional toll is added to the cost and potential business disruptions a pitch entails.”
The report is worth reading in its entirety. You can download it here. I congratulate the ANA and 4As for commissioning it and making it broadly available.
“The forces of the creative profession are aligned against the artist. These forces pressure him to give his work away for free as a means of proving his worthiness of the assignment. Clients demand it. …other creative professionals resign themselves to it. Trade associations are powerless against it.”
Thus opens The Win Without Pitching Manifesto, first published in 2010. I don’t want to get too carried away just yet, but for the first time I’m wondering if there might come a day when I have to revise that opening for a future edition, one in which we look back at free pitching as a ridiculous but quaint convention.
“It’s hard to believe now, best beloved, but in my day we used to give our most valuable product—our thinking—away for free. You laugh, but it’s true! There was once a reason for it in the beginning, but the practice stayed long after the reason was forgotten. It seems silly when I tell you of it today, but it’s just the way it was. Everyone did it, and no one ever thought to ask why!”