Is new business suffering a drought?
campaignlive.co.uk, Friday, 11 August 2006 12:00AM
New AAR research backs up industry concerns about a dearth of pitches, Emma Barns reports.
There's always a reason for a dearth of pitches. It's Christmas; it's half-term; bird flu is about to hit the UK; Cannes is coming up; the World Cup is on. In fact, it's a wonder agencies ever pitch at all. However, new research by the AAR suggests that agencies really do have cause to moan. Last year, the number of ad agency pitches was down a whopping 21 per cent.
The AAR puts its figures together by collating all the pitch information from the trade press with some additional agency information. Martin Jones, the director of advertising at the AAR, admits the research is not foolproof, but says it's a "comparative barometer" and that it's "as close to the right information as possible".
The pitch drought will be received with little surprise by many agencies. Networks such as Saatchi & Saatchi and Ogilvy & Mather have not had the opportunity to pitch for any domestic business this year and others, including JWT, McCann Erickson and Grey London, have only had a handful of domestic clients through their doors.
Grant Duncan, the chief executive of Publicis, says there has been a noticeable dearth of new business. "It's tough for big agencies. It's not new, there's an eternal struggle with the local independents, but it is more intense at the moment," he notes.
Jones believes that the past six months is a sign of how things will continue. "With the dotcom boom and then the semi-recession, there hasn't been a 'normal' new-business year since before 2002. I think things have now settled down into how they will continue," he says.
Duncan argues that over the past few years, agencies have realised it's better to keep existing clients instead of chasing after new ones. "Sixty to 70 per cent of reviews are down to a relationship breakdown. But as there have been fewer pitches, agencies have devoted more time to keeping existing relationships strong," he says.
But not all agencies are feeling the pinch. Shops such as WCRS, DDB London and St Luke's say they are turning pitches down. Neil Henderson, the St Luke's joint managing director, says: "We've been pitching continuously. I think clients want to work with a smaller group of people and genuinely see the difference in commitment from small independents."
Perhaps more telling than anecdotal evidence from agencies on the cause of a decline in pitches is another staggering figure in the AAR's research: digital pitches are up 243 per cent.
Have clients realised the importance of getting their digital communications in order and, as a result, put their above-the-line arrangements on the back burner?
Nicola Mendelsohn, the Grey deputy chairman, has a different theory: "An advertising pitch puts clients' business in the spotlight. In an uncertain market, they are making multimillion-pound decisions for all to see. On the other hand, they can get away with digital pitches. Getting a digital agency is necessary now and the amounts of money being talked about are relatively small."
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NEW-BUSINESS DIRECTOR - Richard Morris, business development director, DDB London
"We're actually up this year. We had a good first couple of months and this past quarter has been busy. There was definitely a drier couple of months, but I think that was to do with the World Cup. The marketing community was concentrating on its World Cup promotions rather than on appointing an agency.
"It's been a short-term problem and not a fundamental drying up of new business."
DEPUTY CHAIRMAN - Nicola Mendelsohn, deputy chairman, Grey London
"There are definitely fewer pitches and there are some agencies that haven't pitched at all in the past six months. There's a general nervousness in the market and also senior clients are moving around less. Clients are staying in their jobs for two to three years now instead of the previous 18-month average, so we've lost the merry-go-round of client moving and then reviewing their new agency. Agencies are also working harder to look after their existing business without the distraction of pitches."
MATCHMAKER - Andrew Melsom, managing director and founder, Agency Insight
"People do keep saying it's like a desert out there, but the amount of work we've been doing hasn't really changed. While the AAR research is valid, I suspect there's lots of things going on out there that it hasn't recorded. I suspect new-business pitches are overall slightly down, but business is changing hands in different ways. There are a lot more roster pitches and agencies being handed clients without a pitch.
"It sounds ridiculous but one of the reasons there's been a recent slowdown could be because it's so hot. I know various companies that haven't signed off proposals because everyone is just on holiday or they're delaying until the autumn."
AGENCY CHIEF EXECUTIVE - Mark Lund, group chief executive, Delaney Lund Knox Warren & Partners
"Subjectively, it does feel like there is less around. From our point of view, there have been fewer mid-sized pitches. We've done some big ones, but there are not anything like the number of £3 million, £4 million and £5 million pitches that there were last year.
"The IPA Bellwether Report has shown six consecutive quarters of reduced confidence in spending and there could be a case of clients sitting tighter for longer. Pitches are also more integrated, so it might be that clients are thinking longer and harder about what kind of communications they want before they start reviews."
This article was first published on campaignlive.co.uk
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