The Death Throes of the Pitch

Blair weighs in on this year's Forrester report, which shows the ridiculous amount of money agencies have been wasting on pitches.

Links

"Are These the Last Days of the Pitch?" by Blair Enns for Win Without Pitching

"A New Forrester Report Urges Brands and Agencies to 'Ditch the Pitch'" by Olivia Morley for AdWeek published on 4 A's

Transcript

David C. Baker: The Death Throes of the Pitch. That's the topic.

Blair Enns: Park your cynicism at the door, Baker. Come on.

David: No. I don't know if you agree with this, but what's really interesting to me is there was nothing new in here except the numbers make it, wow, it just hits you over the head with a 2x4. We knew this stuff was going on, but there's a new report. The whole topic is the 'Death Throes of the Pitch.' Now that is my perfect introduction. Go for it. [chuckles]

Blair: There are two reports. There's a Forrester report and there's a joint ANA and 4A’s report. Both of them came out earlier this year, 2023, enumerating the costs of the pitch and the actual cost to clients and agencies and some other interesting facts. I don't think it's just about the numbers. As I say, we're referencing a post that I've written. I say in the post that I think what this represents to me, it's not just putting numbers against the cost of pitching. It really is a change in sentiment where you have all these different parties, including the trade bodies of marketers in the United States and agencies in the United States ganging up to say this pitching thing, it's not a very good idea.

David: This strikes me as like the foxes and the coyotes getting together and issuing a report and saying, we have a chicken problem.

Blair: I'm reading the commentary in the 4A's ANA report and I'm thinking, did the ANA guy or whoever, did he go get coffee and let the agency guy write the report? Because it is really sympathetic to the plight of agencies.

David: That is definitely different because some previous stuff that really both of them ought to come out and talk about, like the fact that clients are getting stolen from with their digital ad placement, neither one of them are talking too much about it. I guess I'm just so skeptical that anything will change. What do you think prompted this?

Blair: I don't know what prompted it. It looks like when you read both reports, and I have to confess, I have not read the Forrester report simply because they want $1,500 to read the report and I'm cheap.

[laughter]

Blair: There's been some pretty good reporting on the report specifically from Olivia Morley at Adweek and then the 4A's has republished her post in its entirety on their website. You can find that in a few different places. It looks like Forrester was influenced by an earlier report that the ANA and the 4A's did. They referenced that and then the new 4A's ANA report references the Forrester report. There are some heavyweights are all like building on the work that each other are doing to get a better understanding of what's really going on in the commercial aspect of how these two parties come together.

David: They're all just pointing fingers everywhere, right? [chuckles]

Blair: According to Forrester, U.S. agencies spend about $12.5 billion a year pitching. I think the way they arrived at that number is through a survey, they decided that the average percentage of revenue that the typical agency spends on pitching is 17%. Then they took the size of the agency industry in America, $73 billion, 17% of that is roughly $12.5 billion. All these numbers are rounded either up or down. Again, I've already confessed I haven't read the report. They could have come at the number a different way, but I think that's how they did it. It's a bit of an approximation.

What I'm most impressed by that report is the authors of the report really don't hold back in saying who's to blame for this egregious cost and the obvious implied waste that has to be in $12.5 billion. At the top of their list, procurement's the first to blame. As we know, procurement prioritizes cost savings over all other goals, including performance goals, the performance of marketing. Marketers are being blamed.

This one surprised me. They blame marketers for being disinterested in and unprepared for their own pitches. I think if that is in fact what's going on, and I'm sympathetic to that, it's almost certainly because these pitches are being mandated by policies that are coming out of finance or procurement. Why wouldn't they be disinterested? Here we go again. I'm busy trying to do marketing work, and now you're forcing my accounts into review. Then they blame agencies for giving too much away for free, but they say it's obvious why they do it.

The fourth party that they blame, and I'm so glad they did not spare them, outside consultants, search consultants, which, as we all know, don't have anything to do with searching, they're vetting, for unnecessarily complexifying things and driving up the cost. When I read that summary of the four parties to blame, it was like I wanted to have a cigarette.

It was just, oh my God, it feels so good to see everybody being tarred for this thing.

David: Going through these four, procurement I could see blaming them in a way because they're not really a part of marketing. They're external to that.

Blair: They're fun to blame, right? They're not real humans, they're robots. [chuckles]

David: They're all evil anyway, so it's not a big step just to put them at the top of the list. Francisco, no need to email me. [laughter]

David: Marketers, now that one took a little courage to say, and agencies, I guess a little bit, but they're not going to read this and say, "Oh, shoot, I didn't realize I was giving away too much for free. They already know that." This fourth one is pretty interesting because they have a very deep incentive to increase the complexity because that's the only reason we need the search consultants.

Blair: I think the second or third piece of thought leadership I ever wrote at Win Without Pitching back in 2002 was a post called 'Pitches, Search Consultants, and Hissing Cockroaches.' I let the search consultants have it. The agency, we've talked about this before, has devolved into basically two different markets. There's the pure old-school ad agencies that are still governed by the old rules. Then there's the entire new universe of highly specialized firms over on one side. I just don't hear about search consultants to the extent that I used to. They're still around, driving complexity and cost into the agency search process.

David: One reason you may not be hearing from them is because of that article. I don't know if that occurred to you.

Blair: In fairness, hissing cockroaches was a thing about evolution. The hissing cockroaches from Madagascar, it evolved differently. The title was meant to be provocative and in a slight way compare search consultants to cockroaches, but really it was more substantive than that.

David: The ANA is on the other side of the 4A. They represent the companies that are hiring these holding company agencies. It seems to me like pitching, as it's being talked about in these reports, the bigger the agency, the more this happens. I don't think 17% of a firm's effort is spent on pitching for a lot of the people that listen to this podcast. Do you?

Blair: No, I don't. Because again, that bifurcated market, we don't study this, but we just know anecdotally through our client bases are these specialized firms. We've done an episode on this where we've reviewed the specialist claims of the 20 most recent agencies that you and I have both worked with. Nowhere in there was the word advertising or advertising agency ever used. The ANA and the 4As, they are really talking about this other side of the market.

These are ad agencies, they're large ad agencies. When we talk about what these average costs are per agency, we have to understand that they are averages and they span like Ogilvy & Mather on one end of the spectrum and then an independent agency on the other end of the spectrum.

David Also, just to note that large PR firms are doing exactly the same stuff that large ad agency firms are. All right. Three key insights about this and we're going to dive into each one of them. You read the ANA 4As report and the three things that struck you are pretty big, right? Just start us off with this first one, which I'll just read. Pitches are expensive for everyone. Go into some of that in more depth.

Blair: Everybody's known for a long time that pitches costs are expensive. For ad agencies, pitches costs anecdotally, we hear hundreds of thousands of dollars all the time. In another podcast, 20% - The Marketing Procurement Podcast, Leah and I interviewed the former head of Grey London, and he was also the global head of Grey Consulting. He referenced how different it is to sell consulting services versus agency services. He just offhand said, in a pitch you spend for $500,000 in a pitch. That's a big number from a big agency.

It's long been known that pitches are expensive to agencies, but the average, according to this 4As ANA report, is a non-incumbent agency averages $200,000 in costs per pitch and an incumbent agency averages over double that, it's $400,000. Again, these are averages. You can look at the report, we'll provide a link in the show notes so you can get a sense of how costs are being calculated. We won't get into that here. Offhand, it looks like the average non-incumbent agency spends about $200,000 per pitch, the average incumbent agency spends about $400,000, and the average pitch costs over $1 million.

Now, the third component of that is the client cost. This is the first report I've seen that tries to enumerate the cost of a pitch to a client.

David: Me too.

Blair: Comes in at around $400,000.

David: Why does it cost more for the incumbent?

Blair: That's a great question. We're going to dive deeper into the role of the incumbent because that's a second key insight for me. I think it's loss aversion bias. You've already got the business. It's more painful to lose business than it is enjoyable to win business. You work harder to defend.

David: Ah, that's interesting.

Blair: it's interesting. The science says we value losing something, the cost of losing something roughly twice as much as we value gaining something and that math shows up in these numbers and incumbent agency who is trying not to lose something spends roughly twice as much as an agency that's trying to win it.

David: Wow, that sort of psychological insight. What a great illustration of that because when I asked you that question just now, I honestly had no idea why. I read this report just about the same time you did. I remember asking myself that question. Why the heck does it cost more for an incumbent to fight it? The big point of three that really struck you in reading this is that pitches are expensive for everyone, and this was the first time we saw some quantification of what it meant on the client side.

Do you think this surprises them if they read this report? Surely not. Surely they must know. They may not know how much it costs, but they must know that it's expensive. These people are spending other people's money, but they're spending their own time. Most of these costs are because they're attaching some value to the client's time. It's just interesting.

Blair: I don't know if this number surprises anybody on the client side. I suspect they look at it and go, it's actually a lot more than that. I think it's a lot more than that. Just like I think the cost of the agency are higher than what they're stated here because I think the cost of degradation to the relationship and the complexity and the starting over, it's acknowledged in this report, but it's not factored in. I think the costs are actually higher.

I think when a client looks at that and goes $400,000, it's like, yes, $400,000 is a lot of money in my world. You think of it, it's costing the client $400,000, it's costing the agency $400,000. You're $800,000 in the hole in a process that's really, and we'll get to this point a little bit later on, the primary goal is to drive more efficiencies into the client-agency relationship.

David: All right. The first is pitches are expensive for everyone. One of the things that struck both of us as odd is that it's more expensive for the incumbent. The second big revelation from reading through this and thinking through what it means for you was the role of the incumbent, right? It's striking how that stands out in this study.

Blair: Yes, really interesting. The incumbent wins 66% of the time. That number doesn't really surprise me. Then you add in another interesting fact from this report and that is 25% of the time, the incumbent refuses to defend the account. When we do the math here and we say, Accross 100 agency reviews, you got the incumbent being selected 66 times on average, but 25 of those, the incumbent agency-- Basically, they decided, you know what? This relationship is over. We're not going to win this business. They declined to participate. If you're the non-incumbent agency and you're competing against an incumbent, your odds of winning are really low.

When the incumbent does decide to participate, they win not 66% of the time because that doesn't account for the 25% of the time they don't participate. They win 88% of the time. If you are a non-incumbent agency, let's say, and I write about this in the post, let's say there are four agencies participating. One is the incumbent. The incumbent has decided to participate. Your odds of winning a pitch, an account review where the incumbent is participating, and there are two other non-incumbent agencies, your odds of winning are about 4%. That's the 12% odds that the client is going to hire a non-incumbent agency divided by the number of non-incumbent agencies.

David: You're saying you should do it.

Blair: [laughs]

David: You should also buy a lottery ticket too.

Blair: Yes, swing for the fences. I wonder, the agencies that are still addicted to the pitch, they're going to listen to that 4% number and they're not going to care.

David: No, they're going to say, we're better than that. We're just going to have to try harder.

Blair: The takeaway here is that if the incumbent's participating, you're not going to win.

David: You have an opportunity to pitch and you're trying to decide if you want to do it or not, and so you decide you're just going to first ask the prospective client a question, you're not the incumbent. Now one of the questions you might ask is, how many people are pitching? They might answer that. They're probably not going to tell you who they are, but if you asked, is the incumbent also pitching, I don't know that there would be any big objection on their behalf to answer that question, honestly. Would there be?

Blair: No, it's a question you absolutely should ask, is the incumbent involved, and if they say yes, your answer is why. , okay. Why haven't you just fired them? The answer is part of the third point that we're going to get to next, which is, this is really an exercise in driving cost efficiencies into our marketing budget.

David: Right, let's waste some money.

Blair: We're using your willingness to spend $200,000, and a whole bunch of other agencies' willingness to spend $200,000 to get our agency to come back to us with lower prices, that's our goal. Yes. Whether that's the stated goal, when you look at all the stats together, the picture is pretty clear, this is an exercise in driving lower costs. That's the purpose of the pitch.

David: Yes, right. I started thinking about this and wondering what the overlap is between everything we're talking about here and the fact that CMOs are changing jobs. What's the connection there? Do pitches happen more frequently when it's accompanied by a CMO job change? Then I started thinking, what are some of the longest relationships that Fortune 5000s have had with their agencies and how far back does it go? Listen to this, Nike and Apple have been with their agencies forever, right? I didn't look up how many years.

Blair: Nike and Wyden is 40 years. Apple and TBWA\Chiat\Day, I think it was interrupted.

David: It's almost 30 plus, right?

Blair: Yes, in that neighborhood. There may have been an interruption there when Steve Jobs left Apple.

David: Right.

Blair: It's decades, yes.

David: Campbell Soup, 64 years, they switched. Southwest switched after 30 years. Manulife, the insurance firm, after 32. Target after 46 years. McDonald's after 35 years. In every case, they felt like they needed something new and refreshing. What's staggering about the length of those relationships, I don't know what's staggering. That's my question. It's like, was it a longer tenure for the CMO than normal? Then somebody comes in and they set up this pitch. Are they really looking for cheaper or are they really looking for different?

Blair: I think in the first two examples, we talked about Nike and Apple, the relationships with the agency were at the CEO level. The agency CEO and the client CEO. I don't know if that was the case-- Yes, I guess it was Lee Clow. I don't think the relationship was with Jay Chiat and Steve Jobs. I think it was with Lee Clow, the chief creative officer. Regardless, and you think of David Ogilvy and Shell, it was just a different era where the agency CEO had access to the client CEO. That still happens in some worlds, but really, it's not the CEO of Ogilvy that has access. It's the CEO of WPP that has access to the client CEOs and not as often as they would like.

David: Right, and so one reason to survive the change in a CMO would be to have a higher-level relationship. There's just so much to think about. I want to be a fly on the wall in some of these rooms when they talk about entering. They have an established relationship with an agency that's doing good enough and they say, "All right, we need to have a pitch. We need to get our costs down." I wonder, is that really what they say? It must be. according to this study, it must be.

Blair: Some of these clients mandate it, so it's mandated part of the finance or procurement policy. Leah and I interviewed a woman recently who had been client and agency. She was speaking for all clients. It's a generalization. I don't think it holds true, but it's true enough. She said, "You know what? Marketing clients don't want to change agencies." Her point was in her life, the review was forced on her. When you look at that admonishment from Forrester where they're saying part of the problem of the expense and certainly the implied amount of waste in this is that marketers are disinterested and unprepared for their own pitches or account reviews.

How could that be the case? The logical explanation to me, I don't think the report speaks to it, but the logical explanation is these reviews are being forced on them by finance and procurement people.

David: Right. It's almost like term limits in the political arena.

Blair: Yes, or marriages, like a three-year term that we're going to review

the marriage.

David: You said that, not me. [chuckles]

Blair: It's ridiculous.

David: All right. What else do you want to add on this second point about the incumbent's role?

Blair: The post that I wrote has some lengthy quotes from the report. This report talks about, but it doesn't try to put a cost to it, but the harm that is done to the incumbent agency when you're asking them to pitch. I'll just read some of the quotes here, "Clients also risk alienating their incumbent agency when asking them to repitch. 54% of agency respondents said being put up for review had a major to moderate impact on their decision to resign the account. Only 3% of the incumbent agencies interviewed said that the account review did not impair the relationship." Let me say that again, "Only 13% of the incumbent agencies surveyed said that the account review did not impair the relationship." That is astounding.

David: It's also lying through their teeth. There's just no way. Those 13% are lying, yes. [chuckles]

Blair: Is my client going to see this?

David: 100 husbands asked their wives, what would happen if, and the 13 were the oblivious ones. The first of the three insights was that pitches are expensive, not just for the agency, but for the client who's asking for it. The second is that the incumbent wins or declines. There's just so much hinging on how the incumbent responds to this option. The third observation is the reason for why reviews are done in the first place. That's what?

Blair: Surprise, it's about getting a better price. What the study shows is of all the top factors considered when selecting an agency, cost/price was number one cited by 62% of all respondents, and shouldn't surprise you, that cited by 71% of all procurement people responding. Then there are other various reasons listed way down the list. 45% said creative execution, 36% said looking for a new big idea. At the end of the day, why are we doing all this? Why are we driving $12.5 billion worth of costs into the system? Because we're trying to lower the costs.

David: Even deeper than that, because we view this expense as a cost. It's not an investment. It's a cost.

Blair: Yes, it goes back to Gerry Preece, former marketing procurement person from Procter & Gamble who went on to, I don't know if he still does or if he's retired now, but he went on to advise agencies on how to deal with procurement. He had a book called Buying Less for Less, the marketing procurement problem. What Gerry Preece said is the dirty little secret in marketing procurement, and that's the world he came from, is marketing is not viewed as an investment. It's viewed as an expense to be minimized.

David: Man, if I had any sort of power here--

Blair: You would launch a second podcast on marketing procurement.

[laughter]

David: Maybe that's the second thing. The first thing I would do is I would say, "You want more for your money. Now you're looking at that as lower cost. What if we just eliminated the stupid shit that you're having your agency do that really shouldn't even be done anyway, and then they can quit charging you for that? We don't lose any effectiveness and we lower the cost. How about we do that?" See, that seems to me like a very reasonable request from the client side.

Blair: It does. In fairness to procurement and other people on the client side who are trying to drive costs down, it's a completely different world today than it was 20 years ago. It's not as straightforward as you've got your creative, you've got your production, you've got your media. There's all this technology involved. The programmatic media buying, the tech stack required, brand safety issues, like it's way more complex. There are all kinds of places in a marketing budget and a marketing agency financial relationship. There are all kinds of places for efficiency. This idea of doing an account review to try to gain more efficiencies, it's not the way to go about it. It's just not the way to do it.

David: This brings back some memories of a book written in, what was it, 2010? You know what book I'm talking about?

Blair: Is that The Win Without Pitching Manifesto?

David: Oh, yes. I thought maybe you'd remember that one.

Blair: [laughs]

David: What were you saying about this back then?

Blair: In this post, I was saying-- I wonder if I'm going to have to rewrite the introduction. You're teeing this up. Thanks for the softball. The introduction, the first paragraph or so of The Win Without Pitching Manifesto, "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." I end this post wondering out loud, am I going to have to rewrite that one day?

David: Because of the trade associations? Maybe they will make some change?

Blair: Just the inevitability. In my lifetime, I've been doing

this Win Without Pitching thing for 21, 22 years. I spent 12 years in the agency business before that. My career, I'm getting a little long in the tooth. Across my lifetime, even though my business is called Win Without Pitching, I never expected that the pitch would actually go away. It does finally feel like there's this thawing of this endless winter. All the parties are shaking the cobwebs out of their heads and waking from the slumber and seeing, "You know what? This isn't a good idea. It's possible it never was a good idea. It certainly hasn't been a good idea for a very long time. It's nice to see the industry finally starting to wake up to it.

David: You may not agree with this. I'm not sure. It feels like pitching is not in itself a bad idea if we think about it as accountability. If you think about how much pitching takes place in very highly developed nations, it's a lot. The further you go down the Banana Republic chain, no pitching at all. Work is just given to people who have relationships, who have paid somebody under the table or whatever.

Blair: Yes, and some of that's corruption, right?

David: Exactly right. We're not saying that accountability is bad. What we're saying is the way these are done and the reasons for them, and there are much better ways to have accountability, ways that actually achieve a better outcome and have much less waste. We're looking at this from a fundamental standpoint. We're not saying there shouldn't be accountability. Just this isn't it. This isn't how to do it.

Blair: It just occurs to me now as we're talking about this, starting to imagine a world without this free pitching problem, not that there won't be any of it. Then the obvious question is, what replaces the pitch? The answer is a conversation or conversations. What replaces account reviews? I think both of these reports speak to this is just better relationship management. There are a growing number of entities out there, businesses that are in the business of actually facilitating. Unlike a search consultant, facilitating existing relationships, helping these two parties talk to each other, work with each other, give feedback to each other. That's part of it. How do you find an agency? How does an agency find a client? I'm going to use a word that a lot of people are going to recoil from, but I think it's a word that we need to start to reclaim. It's called sales. Let's call it what it is. It's sales. It's not sales in the way that triggers all the negative reactions in the mind of marketers.

It's not the sleazy predator trying to talk somebody into something. It's actually one-to-one and one-to-a-few conversations where both parties are adult showing up. They're saying what they're thinking. They're putting their biases on the table. They're asking the direct questions and they're giving honest answers. That's what selling is at its best, and that's what should replace pitching.

David: I'll leave it at that. Thank you, Blair.

Blair: Thanks, David.