Advertisers are grappling with a new reality for 2020, leading to a cut in budgets and delay in any major marketing decisions. It’s having a knock-on effect to agencies and many are now rethinking their approach to new business and the clients they’re open to working with.
Marketing consultancy Ebiquity recently surveyed the outlook of 44 major global advertisers with a combined media spend of over $15bn. Almost all were rethinking budgets for the year, with 80% planning to cut spend altogether. The consultancy’s managing director for continental Europe, Laetitia Zinetti, said that while it’s not expecting a major “uptick” in brands reviewing their agencies for the next couple of quarters – though there have been a handful – it suspects there will be considerably more in Q3 and potentially a surge in 2021.
“As the crisis evolves, marketers will increasingly need to ensure efficiency, especially from a cost perspective. Given the time and investment required to run an agency selection process, we expect that some brands may opt instead to revisit their existing relationship and establish a revised contract,” Zinetti added.
“While brands aren’t formally starting pitches yet, we have received two pitch RFPs for global brands who want to use the current period to prepare the process and write the brief. They plan to put out the RFP once the situation has stabilised.”
Richard Robinson, managing director at Oystercatchers, said he's noticed the level of discussion among brands about their agency set-ups has gone up in the past three weeks. "However, the discussion has switched from long term brand-growth to the real-time focus of the here and now, and in some cases this is the here and now of business survival for brands," he said.
It seems that discussion is yet to turn into action. Separate research from ID Comms into the state-of-play within agencies has found that the majority (69%) have reported that pitches they have been working on have been delayed, postponed or cancelled because of Covid-19.
“For us, new business calls have almost completely stopped,” said Neil Henderson, chief executive at independent ad agency St Luke’s.
“It’s not surprising. All clients have been hit with massive change which requires their focus to be on operational issues and their employees. We have had one pitch start since lockdown but this was for a business that is responding rapidly to the crisis. All the other pitches that we are involved with have been delayed. 60% until we can have a face to face meeting, 30% delayed by two months. We were really busy until Covid hit.”
Others are finding that clients are opting to forgo a formal pitch process in the current climate and are instead appointing agencies to new briefs following referrals. Stephen Corlett, managing director at 180 Kingsday, a creative agency based in Amsterdam, said he has won more new business without a pitch in the past few weeks while Tanya Brookfield, chief executive at Elvis, said that since lockdown the London agency has won two new contracts without going through the usual pitch rigmarole.
“So that, for me, feels like a great catalyst to totally fuck with the way we’re expected to pitch in this industry,” Brookfield said.
Agencies are willing and able – but want to see change
ID Comms found that despite many agencies facing the prospect of cuts, layoffs and putting employees on furlough, some 57% of leaders are “confident” of responding to pitch requests over the coming months. And there have been briefs to be won - Mini, Simba, Man City, Finlandia and O2 have all pressed ahead with reviews since prime minister Boris Johnson asked non-essential businesses to implement work from home practices.
The consultancy’s chief executive for North America Tom Denford said it’s “not surprising” that many agency bosses are still eager to meet the demands of new clients. But he stressed the present situation has brought a “new realism” about where it’s sensible to compete since agencies are under strain from current client projects as well as remote working.
“Many leaders say they will be more selective about what they compete for,” he explained. “Instead, what’s likely to appeal to stretched new business leaders are pitches designed to tackle business issues in both the short and medium-term – long after the coronavirus lockdown has passed.”
In ID Comms’ research, agency CEOs said they expect more streamlined processes to make sure that time and effort isn’t wasted, such as limiting the scope of the RFPs. But they also have concerns over how processes such as chemistry meetings work.
“This is one area where agencies are keen to see advertisers invest additional time and energy to try and build the chemistry that’s needed for a successful partnership," Denford added. "Client values such as tolerance, empathy and fairness matter now, more than ever. Agency CEOs say that the humanity of advertisers in times like this will influence which pitches they compete for and which they reject.”
St Luke’s Henderson said he is still willing and able to respond to requests despite being forced to furlough some agency staffers. “However, clients need to consider that agencies across the industry are dealing with a sudden cut in income from their current clients, so may not be in a position to invest so heavily in a full pitch with all the bell and whistles. Everyone is streamlining operations right now, the pitch process should be also.”
In Amsterdam, which is under a similar lockdown to the UK, Corlett is also considering the cost of investing in pitches and “questioning” the practicalities of being involved without a fee, a position echoed by Elvis’ Brookfield.
“If an agency is in trouble, marketing budgets have been cut, and you’re asking them to pitch for free it’s totally unfair," she said.
"We had a competitive pitch come through and, given the climate, our business director asked for a pitch fee. The client got it and was fine. So again, there are no more rules and that’s what I’m learning. And that’s a massive opportunity for agencies to go ‘if they really want me on that list they won’t mind payment’.
“It all comes down to the fact we’re all suffering. So, let’s just try to get to a positive outcome without killing people. And that means ripping up the rule book. And if, as a client, you genuinely want an agency to pitch then you have to give them a fighting chance and be flexible. And if you’re not and don’t have a damn good reason for it then agencies shouldn’t pitch. It’s a red flag. Smaller agencies are shit at recognising red flags and thinking they have to pitch for everything, but we don’t.”
Ebiquity urged advertisers considering a pitch in the coming months to find solutions that work for all parties. If they can, the first port of call should be to review the current set up and realign any current agency relationships. If they still press ahead, it should not be with the aim of making short-term savings.
“We are in unprecedented times, with a significant crisis on our hands. Behaviour has never mattered more, and while changing agencies may bring cost savings, the market perception will likely be quite negative,” Zinetti said.
Efficiencies are already being enjoyed
For pitches that have taken place over the past few weeks, video tech like Zoom has played a critical role in ensuring the selection process can be run remotely and smoothly.
Agency bosses have bemoaned challenges like the lack of camaraderie that comes with a remote pitch, the time taken to test equipment and the additional preparation needed for inevitable technology glitches that come with presenting from home. But, the positives have far outweighed the negatives and many have come to the realisation that processes they thought were crucial can easily be forgone without a detrimental effect on the final presentation.
“We’re not paying to travel, to lay on a spread for clients or to make boards. There’s a handful of pitch related costs which have just gone,” said Brookfield on the immediate savings she’s been able to make when every penny in the agency is being counted.
And by simply stripping out the time taken to travel to various, often unnecessary, face-to-face meetings St Luke’s Henderson said his agency has been able to spend more time solving the pitch challenge.
“When this whole thing clears it's definitely going to make people consider how they need not be tied to a 'workplace' in the same way they may have been before – and it might make agencies consider the advantages of a 'remote' workforce,” added 180 Kingsday’s Corlett.
“For the agency CFOs it might mean they question the need for three days' travel to New York for a meeting and maybe you can do it on a video call – which is going to be good for travel costs and 'efficiencies'. But who's to say that those more human interactions – the coffee machine chats or the ability to go see a client and shake their hands don't deliver far greater benefits in the long run.”