We have more pitches going in the industry than ever before, undermining the brand-agency relationship, even as the process of pitching itself continues to be as unregulated as it was 5-6 years ago
BY DIPALI BANKA
As agencies sit at the crossroads of data, content, technology and analytics and as brands recalibrate their strategy in the light of today’s complex and often bewildering media environment, the traditional process of an agency winning a client and maintaining that erstwhile solid relationship has become a lot more promiscuous, less tolerant, open for shorter stints, with shrinking value - resulting in a huge increase in the number of pitches we see in the industry today.
No doubt the process of pitching has also become a lot more specific and sharp, with emphasis on rates and savings for advertisers and increased transparency from both sides. But are too many specifications and more data actually killing the relationship? How do advertisers and agencies have a long term view of the brand and the relationship despite the pull of rates, commission and review every now and then? Are advertisers expecting too much or are agencies not delivering value for the lower rates that they signed in to get the account? It’s a chicken and egg situation, says a marketer. Here’s our attempt to try and explore further...
THE SHIFT: FOR BETTER OR WORSE?
No doubt the process of pitching has also become a lot more specific and sharp, with emphasis on rates and savings for advertisers and increased transparency from both sides. But are too many specifications and more data actually killing the relationship? How do advertisers and agencies have a long term view of the brand and the relationship despite the pull of rates, commission and review every now and then? Are advertisers expecting too much or are agencies not delivering value for the lower rates that they signed in to get the account? It’s a chicken and egg situation, says a marketer. Here’s our attempt to try and explore further...
“A few clients are amenable to paying a few agencies a pitch fee. A rare few are being truly professional and methodical in their search for a new agency—going from chemistry meetings to briefing, backing up the brief with research and insights, and providing enough time for each stage of the pitch, from strategy to solution. But for the most part, things really haven’t changed much. You still see a lot of idea-shopping, you still see pitches being called on the whim of a new CMO or brand head, and you still see pitches that are about getting a new agency on for lesser money,” says Narayan Devanathan, Group Executive & Strategy Officer, Dentsu Brand Agencies, South Asia.
In most markets, either an industry body (like the 4As in Malaysia) sets the ground rules, or pitch consultants manage the process. “In India, you don’t see much of either and that is odd,” says Vikas Mehta, CEO, PointNine Lintas, the omnichannel agency of MullenLowe Lintas Group. “Over the past few years, I’ve seen a bit of deterioration in the pitching game with more pitches being called for shorter term assignments and shrinking value; pitch processes being managed by young members of the marketing team who have gaps in skill and experience, and little transparency about the rules of the game in areas like steps involved, marketing tasks, total investments, information on competing agencies,” he adds.
MORE PITCHES - FOR THE RIGHT REASONS?
‘Mediapalooza’ was the moniker given to the year 201516 which saw a lot of global brands review the work of their agencies. According to a report issued by the Association of National Advertisers, USA, the activity was attributed to transparency issues of media agencies. Other reasons that were cited in the report included fast pace of change in the media environment and to check whether the current agency was keeping up to the change or not. Today, international advertising experts are wondering if 2018 is going to be a similar year, as the pitching activity globally has seen an unusually strong start and even in India, quite a few accounts have gone in for review or new pitches.
“Pitching has increased primarily because A&M is the second largest cost in most P&Ls and clients are looking for media savings. I believe that is a short-sighted way of approaching business. Reviewing an existing agency relationship and selecting a new agency are two different decisions. It is critical to ask why you are reviewing your current agency relationship. Is something fundamentally broken, or is it a fishing expedition to see what is available? Alas, in most cases, it is the latter and that is a mistake,” says Vikram Sakhuja, Group CEO Media & OOH, Madison World.
“Outside of the savings committed, the hidden costs of a departure never factored is the value of an existing team who understands your brands, markets, people and marketing processes. The impact is seen in strategy, implementation and media relationships. Would clients totally restructure their marketing departments overnight unless things were broken? Then why disrupt the fulfilment arm of your operation that is done by the agency, unless something is broken?” asks Sakhuja.
Pitches are for a fresh approach, higher mandate, new businesses, new technology platforms, etc. “From the client side, the briefs must be precise and have clear objectives – not trying to solve all ailments. Agencies should pitch only where their expertise will deliver strong results. Even now, pitches are called for to warn the current partner. It’s big cost and time spent on both sides,” says Virat Khullar, Head - Marketing, Renault India Pvt Ltd. “Modern day pitches essentially should be focused on innovation, technology, capability with a base line of low costhigh impact. It’s about the full consumer journey (online and offline). It must be long-term relations with key KPI impact over medium and long-term,” Khullar adds.
SOME BIG PITCHES AND MOVES
The year 2018 got off to a dazzling start for the advertising and media industry as not less than 50 new accounts (based on news reports) have seen new assignments to agencies or have changed hands. Some of these include creative mandates of Dainik Bhaskar being assigned to Triton Communications, JWT India bagging the Reebok creative mandate from McCann India, Mullen Lintas bagging Bajaj Discover and so on.
Earlier, JWT also won the Sintex account; and Triton Communications took on the creative and digital mandate of Ambuja Cements. Dish TV and Pearl Academy gave their creative mandate to Enormous Brands and Publicis India, respectively.
The Rs 200 crore media mandate of Ola was assigned to Starcom from the incumbent agency Motivator; while Bisleri changed its media agency to Wavemaker. Havmor Ice-creams moved from MediaCom to Purnima Advertising and Unibic biscuits handed over its media duties to Mindshare. While Vistara and Air Asia called in for creative and digital pitches.
On the digital front, many clients assigned responsibilities to new agencies recently - Aditya Birla Capital chose FoxyMoron while Tata Motors Passenger Vehicles took on the Omnicom Media Group. Even PepsiCo called for a pitch of the digital mandate for five of its brands in 2017.
The year 2017 was big for media agencies as some big industry spenders changed hands or retained their earlier agencies following pitches. Brands such as Xiaomi and Kraft Heinz assigned their media duties to Madison and Starcom respectively, while five big advertisers- ITC, Maruti Suzuki, Perfetti Van Melle, Marico and Nestle India - called in for media pitches. Out of these, Perfetti Van Melle and Nestle India (Rs 650 crore) retained their agencies Wavemaker and Zenith respectively. ITC shifted its Rs 500 crore media account to Wavemaker from Madison, while Maruti Suzuki moved to Dentsu Media from Initiative Media of IPG Mediabrands. Marico assigned its Rs 500 crore media duties to Lodestar, moving from Madison after a multiagency pitch. Madison Media, meanwhile, won the media and planning duties for Viacom18.
ALL IN THE RING
The increased frequency at which advertisers are calling for pitches is in a way levelling the playing field between smaller and bigger agencies. It’s also blurring the lines between agency types. It’s common to see a creative/mainline agency, a PR firm, a digital agency, a media agency, a tech company and a consulting firm, all going head-to-head on the same brief. “While this convergence leads to better solutions at times, it often makes the evaluation process vague, which can be frustrating for an agency,” says Mehta.
“Also, today the co-ordination and alignment between these agencies is crucial. Marketing budgets get split between different agencies and that reduces the efficiencies in scale of operation. Agency fees, production fees and media costs are spiralling and the client has to manage it within the ever shrinking marketing budgets. This puts pressure on both the client and agencies,” says Rajesh Mehta, Founder & CEO, Agora Marketing Advisory.
NEED FOR ‘IMMEDIATE’ RESULTS
The longevity of campaigns is also in question, with the way customers consume content. This leads to frequent changes and adaptations of the creatives. Results are required almost ‘immediately’ by the advertisers and that creates dissonance in their relationship with the agency. A lot of agencies feel the pinch of this changing scenario and are trying to realign their services portfolio.
“For us, creative is very person-specific. Brands tend to become comfortable with a certain kind of creative language that people in that particular agency execute. If that creative person shifts to another agency or if that language takes a break, the creative mandate needs to be re-looked at,” says Anirudh Pandharkar, Head of Marketing, VIP Industries Limited.
Moreover, brands seek fresher perspectives and hence tend to look out for other agencies that can redefine the language of the brand. “It’s not necessary that the same agency will have innovative ideas all the time. So, as a brand, you are always looking at thoughts which match with your insight and your objective for the campaign. And it’s better to have newer, younger, more versatile agencies to be on board rather than being stuck with just one because you are on a retainer with them. It’s far better to be able to have the freedom to look at agencies which have certain strength in certain areas. All agencies are not equal in all areas,” says Toranj Mehta, Director Marketing, Forevermark Diamonds Pvt. Ltd.
However, most agencies have a separate pitch team which would not be working on the account directly. “One of the big issues we face during the pitch is that we see the best talent during the pitch and post that, we see a huge drop in quality since the team is different. It makes us review the relationship right in the beginning,” says Elizabeth Venkataraman, EVPMarketing, Kotak Mahindra Bank.
Agencies, on their part, make the pitch on the basis of certain revenue expectations but by the time the negotiations happen, the fee is reduced to half of that. And so the agency is also not able to allocate the team showcased during the pitch.
DESPERATE AND UNDER-CUTTING
“Today, the fact is that agencies have multiple clients, and not all clients are profitable clients. Therefore, agencies seek newer clients without parting with the existing clients. That means clients do not get the attention, the ownership, the passion or the stewardship they were used to. It’s a chicken and egg situation—the client can tell the agencies that you don’t love me anymore; the agencies can say that you don’t remunerate me well enough anymore! The client will say that I am not getting value therefore I don’t give value. And agencies will say I am not getting value therefore I cannot give value,” says Ajay Kakar, Chief Marketing Officer, Aditya Birla Capital.
Agencies are guilty of under-pricing themselves. They often don’t realize how much value they bring to the table and therefore rush to bottom discount their own product. “In a pitch, to win a business, agencies make ambitious commitments, and almost always cut costs even though it doesn’t make economic sense. This is a folly. If agencies only recover people costs and not the overheads who will bear the overheads? I believe in accountability and I would like clients to pay for cost of services, and then add a generous incentive for demonstrating delivery of brand outcomes,” says Sakhuja.
PROCUREMENT CALLS THE SHOTS
For the last few years, the marketing emphasis has been on ‘more digital/social’ and ‘more cost reductions’ which has given more importance to the role of procurement managers. They are designating specialists focused on the money and processes their companies dedicate to the marketing of their products or services. However, for a number of agencies, their perceived function is to drive agency fee reductions, increasing the number and rate of agency reviews, eliminating AOR relationships and increasing explosively the number of agencies serving brands. “Because the quantum of expenses on advertising has increased over the years, the role of procurement is getting bigger, which is good and bad. It is good because it has brought in some sense of comparative pricing, but what is terrible is that many of the procurement managers at the client’s end treat agencies as if they are buying some commodity and therefore very often can’t see the wood for the trees. As this is a very people-oriented business, it is not necessary that what is the cheapest is the best,” says Ashish Bhasin, Chairman & CEO, South Asia, Dentsu Aegis Network.
DIGITAL DISRUPTION AND PITCHING
Clients often grapple between the choice of multiple specialized agency partners or a ‘full service’ partner that can cover all the flanks. Then there is the question of who should carry the digital can, the toss-up being between the primary ‘offline’ agency (with extended digital services), or digital specialist shops, or increasingly media and publisher partners who often offer through-the-line capabilities across the communication spectrum.
“The fast-changing digital landscape is getting most clients into a flutter to keep up, and so they end up seeking partners for shorter term engagements rather than committing to a longer, more durable relationship,” says Ashok Lalla, independent digital business advisor.
Bigger issues that need to be addressed in digital are not just strategic initiatives but also operational specifically pointing to brand safety/ad fraud/ viewability. “Because of digital, the path to purchase is no longer linear and hence the same platform can fulfil multiple roles in the value chain offering. A clear understanding and approach needs to be defined,” says Vineet Sodhani, Chief Executive Officer, Spatial Access.
ONLY DIGITAL MAKING MONEY FOR AGENCIES?
Today, all agencies go in for pitches along with their digital partners. The primary reason being, because of the complexity and newness of the digital medium, it gives them higher commission. The digital business generally gives an agency 5% commission, while Television commission stands at around 1.5%. And that’s one of the reasons why digital spends are going up; as agencies are encouraging clients to spend more and more on digital. Digital media started with a commission of 10-15%, coming down to 7.5-8%, and is now at 5%. Another year down the line, it might go to 2-3% as more agencies get into digital and competition gets tough.
Secondly, agencies make a lot of money when they buy inventory on digital. They have deals with Google, Facebook and similar digital platforms and collectively buy inventory for 10 different clients. These platforms pay around 5-7% to agencies as commission. In traditional media, some channels and publication houses give commissions to media buying agencies but not all do that. But in digital it’s quite open and persistent. Thirdly, agencies also make money by the BAV (Brand Asset Valuator) model on viewability and safety issues.
ROLE OF PITCH CONSULTANTS
Pitch consultants in our country are gradually becoming a significant part of the pitch ecosystem as they unclutter the process right from logistics to compensation structure to even handover from the old agency to the new one. However, they are not very well courted amongst the agencies. “Some consultants are getting into the unscrupulous zone and take on clients on the promise that they will drive x% value from price savings and hence their fee should easily come out of the saving. They charge hefty fees just to get some price-saving, which even if achievable, is only going to compromise the clients’ media quality. And then in any case they have no accountability on the delivery! It’s left to the poor client and agency,” says Anupriya Acharya, Chief Executive Officer, Publicis Media India.
HOW TO BREAK THE CHAIN
Two things. “One, from an agency’s perspective if a client is not profitable, it is better to give up the client and if a client is profitable, give him all the love, attention, passion and custodianship that the agency is capable of,” says Ajay Kakar. Secondly, “Agencies need to value their work and bring in that value for the brand and then charge for it and not compromise on fair agency remuneration,” says Ashish Bhasin. Finally, as Vikas Mehta puts it, “There is an urgent need for agencies to come together and set some ground rules, so that the occasion of winning a pitch can remain worthy of popping some champagne!”
(With inputs from Christina Moniz)
@ FEEDBACK
dipali.banka@exchange4media.com
