Harbour Collective LTD
Wed, 13 May 2020 10:22:27 GMT
As more agencies chase every new client review, now more than ever we must resist the trap of the traditional pitch explains Harbour’s Paul Hammersley.
The issue of agencies getting paid fairly for their advice and creativity was raised once again this week in our trade press, ironically by one of the intermediaries responsible for managing client reviews and agency pitches.
I say ‘ironically’ because the issue of how agencies get fairly paid and the pitch process are fundamentally connected in a way that is constantly overlooked. Actually, the agency pitch in its current form is the root cause of the problem.
Everyone knows that the pitch process is imperfect and there’s little value in reiterating all the issues here in detail; but most of the discussion is about how to tweak what has become accepted as the norm.
But ‘tweaks’ won’t ever solve the real issue with the pitch and the negative effect it has on the broader relationship between clients and agencies.
The real issue, whether for creative, media or other disciplines, is that most pitches now demand that agencies give away their high value-add work on a speculative basis.
As competition has grown and agencies have got ever more desperate, the scale of the pitching task has grown exponentially like some sort of arms race; in the 2020 downturn, I fear the desperation will get even worse.
In literally NO other professional services business, or for that matter any other services business at all, is this the case. Accountants, lawyers, investment bankers? Photographers, designers, architects? Plumbers, fitness instructors, picture framers? None of them, not one.
This video from Canadian agency Zulu Alpha Kilo makes the point better than any words can
You know who else doesn’t do it - the management consultancies parking their tanks on our lawn. The same intermediary referred to above said in a report last year that ‘the strategic consultancies appear to have it right; they’ll show work done for others, their methodology and approach as the basis on which the brand has to make a decision’.
I understand the apparent attraction of pitches to clients but there are wider consequences of all this for clients as well as agencies which aren’t well understood.
The waste of time and resource and distraction from attending to paying clients is obvious enough – especially for the losing agencies.
But critically, even if an agency wins a pitch, the only way to make up for giving away all that high value thinking for free is to charge as much as possible, for as long as possible for the low value-add executional work that comes with winning the assignment.
While this used to be the unwritten rule of the game, it’s the cause of a growing misalignment of interests and friction between clients and agencies.
As Tim Williams of Ignition Consulting says, in an hours-based cost-plus remuneration system there will always be an underlying conflict between how agencies justify their fees (with the executional work) and where clients see value (the strategy, insight and concept work).
This is why clients are increasingly finding ways to get that low value-add executional work at a better price. Where once they negotiated on charge out rates, chargeable hours, overhead mark-ups and profit margins, they are now unbundling that work or taking it in house. Some are finding ways to automate much of it and many more will follow. All developments which the pressures of the Covid-19 crisis will only accelerate.
So yes, agencies have to stop being reliant on the executional work to pay the bills and make sure that they get paid properly, on an output or outcome basis, for their high value-add work.
And this requires more than just having a different conversation with their clients (if it were that easy we’d all have done it long ago). Agencies need to organise themselves differently to disconnect the strategic, insight and conceptual work from the executional work; something that the big legacy agencies will find very difficult to do with their huge standing armies to feed, revenue streams to protect and shareholders to fend off.
But critically, despite all the short-term pressures that will lead to more agencies chasing business harder than ever, they must also stop giving away their true value for free in a pitch process.
We can’t blame clients for asking for it but we can blame ourselves for agreeing to it and for facilitating it.
view more - Trends and InsightHarbour Collective LTD, Wed, 13 May 2020 10:22:27 GMT