January 5, 2012
Undertaking an agency review or “pitch” should only be done for the following reasons:
1. You want to appoint an agency provider for the first time. It may be a new business, new brand or growth in an existing business that now requires a specific external resource such as a media, direct marketing or advertising agency.
2. If the current relationship with the agency is damaged and beyond repair, in which case the incumbent should not be asked to pitch as it is simply a waste of everyone’s time.
3. If there is a regulatory or corporate governance requirement to go to market on regular intervals. However, if this is driven by cost concerns there are much more cost effective ways to determine how the current remuneration compares to the market, such as benchmarking, instead of the long and labor intensive pitch process.
4. If the company or business or marketing strategy is undergoing major directional changes and there is a requirement to expand or change the mix of services being supplied by your current providers.
5. To rationalise large numbers of like suppliers to achieve economies of scale and to assist in supplier management. In this case only existing suppliers on the panel would be asked to participate.
But many people use the review or pitch process for a number of other reasons, involving higher risk and higher costs including…
1. Facilitate fee negotiations – While a competitive environment provides the company with an advantage, the cost and disruption to the existing process and relationship almost never warrants this strategy. There are some advertisers known to change agencies on a regular basis to reduce their costs, but the false economy they are following does not account for the wasted resources consumed each time.
2. Wanting to test your incumbent against the market - The danger of this strategy is that while it allows the advertiser to directly compare the incumbent to others in the market, it can have the effect of damaging the existing relationship over time. Also, because of an imperfection in the review process an advertiser may make a decision to change that they may later regret.
3. To engage a pre-selected preferred supplier – This is deceptive conduct that simply wastes the time and resources of all participants. If there is a clearly preferred supplier, then they should be appointed through a due diligence process, but not under the guise of a fraudulent tender process.
4. Because the love is gone – A common reason advertisers want to change agencies is that the relationship has changed. This is where business and personal relationship counseling collide. When the relationship with a provider is under performing it is important to determine the cause and assess if this can be rectified before terminating the relationship. Only when the relationship cannot be fixed is it time to go to a pitch.
5. To keep all of the agencies on their toes – There are some marketers who take the concept of competitive tension to the extreme having their agencies pitch for every project, either within an expanded roster or the open market. While it seems sound in theory, in practice it will last a short period of time until the better agencies withdraw from the process. It is draining on the agencies and also the marketing team if managed properly.
There are easier ways to address issues and drive performance than running a pitch. But if you do decide to run a pitch make sure you do it properly.