Nicola Merrifield
Aug 9, 2023

It’s not just the pitch that’s the bitch—agency pricing is, too

Agencies give their ideas and insights for free during pitches, but the problem runs deeper.

It’s not just the pitch that’s the bitch—agency pricing is, too

“The pitch should never be a bitch.”

It would be hard to find anyone in adland who disagrees with this statement, which strategic consultant Lucy Barbor made in a recent post online. Yet it is so often the case. 

Barbor was reflecting on her time spent working in agencies and the pattern of rolling pitch processes—which can result in staff feeling drained and existing clients feeling under-served, leading to yet more pitches being called in a seemingly never-ending cycle.

There are financial costs involved for an agency in this cycle—which Campaign has explored recently—but there is another worrying impact, on people and business relationships. “The real cost of pitching? Retention. Staff and clients,” says Barbor, noting: “I’ve too often heard ‘I was wobbling, but that pitch broke me’ from exhausted colleagues who have decided to leave.”

It’s a point that resonated with me following two other issues Campaign has delved into of late; the ongoing high employee churn rates at agencies (especially at junior level) and the extent to which the industry-wide Pitch Positive Pledge initiative – aimed at both agencies and brands – has improved poor practices that affect staff wellbeing. Regarding the latter, only 62% of pitches are run in line with the pledge commitments, according to agencies.

Despite being different beasts, the human and financial costs of pitching are linked.

Analysis by Campaign found the majority of agencies reported zero brands contributed to their financial outlay—which can run into six-figure sums—in 2022. 

And what agencies are providing in return, for free, are ideas and insights to advertisers when they might not even win. 

It’s a “pretty odd” situation, Vickie Ridley, chief marketing officer and client partner at Lucky Generals told Campaign.

That odd situation—in which agencies are not compensated for the work they do – runs deeper.

Under the current pricing model, in which shops typically charge for the hours they work rather than the value they create for clients, agencies effectively continue to give away services for free.

“An agency gets paid for a certain amount of hours on a strategy that a brand might then use for years,” an agency boss tells me, reflecting on the fact a client they lost has continued the use of the brand platform the shop created.

The charging model can also lead to agencies not reaching profitability until the second year of working with a client due to the volume of ideas and strategy that are provided so early on in the relationship.

And if shops aren’t earning enough to keep margins healthy, staff can end up subsidising the costs by working extra time, for no additional pay and potentially causing burnout.

The pitching process—and its remuneration problems for agencies—is effectively a microcosm for the later commercial relationship with the client.

The way to begin to solve the issues would be for agencies to take a collective stand and change the way they price their services. A knock-on effect would then be better resourced teams and improved wellbeing among staff.

That’s easier said than done, when brands’ procurement departments will often drive down the pricing of contracts and money can end up being the deciding factor in a pitch result. Supply is also outstripping demand, with so many agencies for clients to choose from.

But until the model changes, even if an agency succeeds at pitch, there aren’t really any winners.


Nicola Merrifield is premium content editor of Campaign UK.

Source:
Campaign UK

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