Autumn is the time when sensible companies prepare for the new year. And, this year, many of the world’s biggest brands are getting ready to run large-scale media pitches.
Our market tracking and analysis suggests that four to six pitches will take place in 2020 involving advertisers that spend more than $1bn in paid media space.
That scale of change is unusual and overall 2020 could match the number of pitches in the previous record year in 2015, when between $20bn and $30bn in media spend – depending on which numbers you believe – was up for grabs.
It’s highly unusual to have so much business in the market at the same time or so many big, famous brand names competing to secure the talent and terms they need to make their media investment more effective.
Savings vs strategy
We predict that 2020 will be a somewhat unusual, atypical pitch market, because there will be a clear and visible distinction between two types of pitches.
There will be those that are firmly focused on securing savings and driving down costs, and then there will be pitches that will be almost entirely strategic in their ambition.
Cost-driven reviews will be easy to spot, driven by business that are struggling with challenging businesses headwinds, looking for perhaps one last hurrah in fuelling their decade-long addiction to cheaper media prices, lower agency fees and the extraction of hard savings, often to the bottom line.
Any suggestion that any part of the pitch process will be conducted via e-auction should send major signals to agency new-business directors.
Strategically designed pitches will ask smarter questions and interrogate agencies on how they can use their most important internal assets, such as the brightest, most strategic minds, enabled and facilitated by data and technology, to deliver media ideas that make a difference and drive a clear impact on a business outcome. These are the pitches that should inspire the agency community.
Four reasons driving pitch behaviour
But why are so many businesses seeking to pitch? There are a number of factors, some of which could occur in any year.
Among them is the cyclical nature of the market. Advertisers that reviewed their agency arrangements in 2015 on extended five-year contracts and those that reviewed in 2017 on three-year contracts will be looking to recalibrate their agency arrangements.
Corporate consolidation is a classic reason to seek a new agency partner, with companies seeking to leverage their new scale for a better deal. The recent Disney media pitch, which took place following the acquisition of Fox and Sky, was a good example.
Leadership changes can also be another cause for review. A new leader often comes with a new corporate strategy and that can require a different kind of agency partner, especially if that company is under pressure to reduce costs.
But, in 2020, the incentives to change go well beyond these tried-and-trusted motivations. Among the unique factors that are driving a peak in pitches in 2020 include:
- The Procter & Gamble effect: the FMCG giant is constantly highlighting its ability to cut waste from its media operations. Promises of hundreds of millions of dollars in savings get attention at other consumer packaged goods brands and, done well, pitching media is an effective way of looking at all costs and processes, and identifying improvements.
- Media Tinder: some of the pitches in 2020 will feature companies that haven’t reviewed their agency relationships for many years. Even advertisers in long-term relationships are keen to see what it feels like to swipe right, given today’s changing landscape. They want to see if there are better partners or new types of partnerships that would suit them more.
- The new operating model: advertisers have been investing in data capabilities and, as they get smarter, they will want to take more control of the media analysis, insight and strategy work. That means taking scope away from their media agency and changing the balance between what happens in-house and what’s contracted out. Many companies have been analysing their options in this area in 2019 and are ready to test their new models in the market.
- Data attraction: Everyone knows that agency holding companies have been investing heavily in data and technology. Witness Publicis Groupe’s heavy spending on Sapient and Epsilon recently. For some advertisers, this is a chance to investigate and explore these new capabilities as they seek competitive advantage.
It will be a relief for many agency leaders that not all of these pitches will be price-led, but they will still be concerned about their ability to compete for so much business. All have finite resources and limited top talent to offer around.
The risk is that they get distracted from the day job, encouraging existing clients to see if there’s a more committed partner out there.
Next year, choosing which pitch invitation to accept or which to decline may very well be the most important decision media agency chief executives will have to make.
David Indo is chief executive and co-founder of ID Comms