Why do clients stick with incumbents?

If they're not planning to move the account, why do clients call pitches?

Halifax...stood by DLKW
Halifax...stood by DLKW

In the past, agencies pitching against an incumbent could generally breathe a sigh of relief, as it invariably meant one less competitor that would pose a serious threat.

But the news last week that Halifax was retaining its incumbent agency, Delaney Lund Knox Warren & Partners, despite posting a 72 per cent fall in pre-tax profits for the first six months of 2008, is proof of an emerging retention trend.

This year has already seen incumbents retain business in 34.8 per cent of pitches, compared with 21.7 per cent in the whole of 2007, according to AAR figures.

The blood, sweat and tears that go into retaining large pieces of business should not be down-played, but there are factors that make it easier for incumbents.

Tim Lindsay, the president of TBWA\UK & Ireland Group, argues that the increasing number of intermediaries is one factor. "They have to be a factor because they are a new element in the mix," he says.

Robert Senior, the UK chief executive of SSF, agrees: "Because there are more clients unsure of what marketing is, more people are feeding off that uncertainty."

However, Martin Jones, the director of advertising at the AAR, is quick to point out that intermediaries don't chase clients. "Clients come to us," he says. And although there may be some unscrupulous intermediaries, asking questions of clients and rocking what were previously stable boats, there is little evidence that this is the main cause of the trend.

The finger is also being pointed at the increasing dominance of procurement departments, keen to use pitches to drive down fees. "It can be used as a stick to beat the incumbent agency," Jones adds.

And not only will a pitch force incumbents into rethinking the financial efficiency of their work, it also generates a raft of fresh creative and strategic thinking.

"They can either use or reference the pitch to reassure themselves they're doing the right thing in the first place," Michael Pring, the joint managing director at Miles Calcraft Briginshaw Duffy, says.

But in our climate of economic uncertainty, the over-riding catalyst for pitches is increasing financial pressure from a corporate level. "Clients feel compelled to demonstrate internally that they've road-tested change, and unfortunately the whole pitch process falls under the lame title of due diligence," Senior explains.

With these pressures on clients, incumbent agencies are becoming savvy as to when there is a real chance of retention and are fighting harder to secure the business.

And because clients are driven to review by market effectiveness rather than dissatisfaction with their existing agency, the job of securing business against an incumbent is harder than ever.

Richard Morris, the European regional director at DDB, says: "You can't afford for the machine to fall over. The incumbents' machine will be a known quantity; the potential new agency's machine is not. To win, the new agency needs to be miles better, not as good as, to justify that risk."

With the economy on a knife-edge, the preference is shifting away from new agencies to current relationships, and as long as clients remain wary of the risks of shifting their business and as long as incumbents offer fresh ideas in a pitch, the continuity and security they provide will become increasingly irresistible.

AGENCY HEAD - Tim Lindsay, president, TBWA\UK & Ireland Group

"Intermediaries are a new factor that's emerged over the past five years and it may be that sometimes their involvement with the client precipitates a pitch where it otherwise wouldn't have taken place.

"It is also absolutely clear that sometimes procurement departments use the threat of a pitch or the actuality of a pitch to force agencies to reduce their fees.

"Clients also sometimes unscrupulously use a pitch to get a lot of free fresh thinking on their brands without necessarily intending to move the business. In those cases, there isn't a need or a desire to change, so, more often than not, they'll stick with the incumbent."

CLIENT - Suzanna Duke, marketing director, Waitrose

"For us, it was the need to refresh our advertising strategy and creativity which drove the pitch process and, ultimately, the re- selection of our incumbent agency.

"Our ambitious growth plans involve, in part, maintaining and flexing our position as the market leader in quality food retailing. And last year, we decided the time was right for a change of pace.

"We invited a number of agencies to pitch and our selection process was made purely on the basis of the creative ideas on the table. In our view, MCBD's campaign best met the needs of our business by retaining the brand values we cherish, while throwing our doors open to a wider audience."

INTERMEDIARY - Martin Jones, director of advertising, AAR

"There are two real drivers towards retention; the increasing role of procurement is the first. Whereas in the good old days, the decision to call a review was invariably made by marketing departments, increasingly now the decision to review is encouraged by procurement who want to look at the market place.

"Second, in the past if you were the same as the incumbent, the new agency won because it brought fresh thinking. But now you have to be exponentially better, because the conservatism of clients means they are more concerned about moving their business."

AGENCY HEAD - Farah Ramzan Golant, chief executive, Abbott Mead Vickers BBDO

"The pitch process allows clients to see their incumbents with new eyes, because they're competing for your business rather than working for your business.

"So what happens is that clients start off wanting to see something fresh and new but, as they get closer to choosing, they add in the requirement of continuity and expertise. If they can see that they can get that blue sky thinking from their current agency and the continuity of an agency that knows their business, then retaining the incumbent becomes a much more attractive opportunity."