Media Forum: Is new business disappearing?
By Alasdair Reid, campaignlive.co.uk, Friday, 07 April 2006 12:00AM
Are new-business pitches becoming an endangered species?
Forget all those dreaded hosepipe bans looming in the South-East this summer - media agencies are in the midst of a far more alarming drought.
Taking Carat out of the equation (it has picked up ten new accounts this year, representing a total of £34.5 million in new billings), the other four agencies in the top five of Campaign's new-business league table have won a grand total of nine new accounts between them. There's hardly anything on the horizon either.
No wonder some new-business directors around town are looking down in the dumps. Their bosses can be excused for looking somewhat worried, too.
Yes, pitches can be a very expensive pain in the backside, with marketing and procurement people tying up truly breathtaking amounts of resource not just in the formal pitch process but in the seemingly endless months of clarification questions that accompany it. Especially when everyone in the agency knows that the account was stitched up weeks ago, because the client's marketing director used to work with a rival agency boss.
And that's before we get started on the whole business of online auctions.
But while everyone likes a good whinge about a pitch now and again, they also acknowledge that they're the lifeblood of the business. They keep everyone on their toes and, necessity being the desperate mother of invention, regularly provide the inspiration for the industry's best new ideas.
But you can easily see why we might be seeing less of them. Consolidation on the planning and buying side means it's difficult for big advertisers to find non-conflicted agencies; and in any case, the big decisions on the client side these days are taken at a regional or global level, so accounts are rarely put up for review on a whim.
So, is the recent dearth of reviews and pitches a taste of what the industry will look like in its next phase of development? Are there major, long-term structural factors at work here? Nick Manning, the chief executive of OMD, certainly thinks so. He says: "The pitch culture is changing.
There will be fewer and bigger pitches than there used to be - and when they come along they will be red in tooth and claw. That's to do with a number of factors, including the internationalisation of the business, consolidation and the rise of procurement people. What we're seeing more often these days is the advertiser going to its existing partner and trying to renegotiate the existing contract rather than putting it out to pitch."
Marco Bertozzi, the marketing director of ZenithOptimedia, isn't so sure.
He agrees that the increasing involvement of procurement people has been an important recent trend - but that's no bad thing. He explains: "I would have thought that, with the rise of outside influences (such as auditors and other consultants) and procurement people, advertisers are being encouraged to review their business on a far more regular basis. It used to be the case that media agencies could boast clients who'd been with the agency for decades - now you struggle to find many examples of long-term loyalty."
Paul Phillips, the managing director of the AAR, sees both sides of the argument. He comments: "Structural factors such as consolidation and internationalisation may be at work.
But there are also cyclical factors. Particularly where buying and effectiveness are concerned, it will be important to have agency arrangements in place for autumn when the TV trading season begins. Also, there don't seem to be as many people swapping jobs (client side) as there have been in the past. But it might just be that media agencies are doing a good job for their clients. As the market has contracted, the best agencies have made sure client service is given a high priority. Retained client income is likely to be far more profitable for an agency than new business."
But Martin Sambrook, the global account director at Media Audits, takes a far more radical view. This, he argues, is a fundamentally structural phenomenon - and agencies had better realise it: "Media agencies are starting to realise that, from a purely UK perspective, there's little they can do to affect their own profit and loss position. That's a big question for the way agency groups are structured. But from a purely new- business point of view, you have to plug into the international stream. Some agencies have been doing this brilliantly; others haven't. If they don't get organised internationally, then the future will start to look worrying."
YES - Nick Manning, chief executive, OMD
"Agencies will continue to consolidate and the number of brands there is out there may also continue to rationalise. A situation where you have too many pitches can place artificial pressures on agencies."
NO - Marco Bertozzi, marketing director, ZenithOptimedia
"New business always goes through ups and downs. I don't think the downturn is an issue either. Some advertisers might rein in but the more enlightened ones will see a downturn as an opportunity."
NO - Paul Phillips, managing director, the AAR
"I don't think agencies should be too worried. There is a sufficiently strong domestic market to keep the new-business community busy. Come December, we may look back and wonder that things could ever have been this quiet."
YES - Martin Sambrook, global account director, Media Audits
"Globalisation of the business will mean that media opportunities on a local basis will dry up. There will still be some local stuff around - but not the sorts of accounts that can transform your business."
- Got a view? E-mail us at email@example.com.
This article was first published on campaignlive.co.uk
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