Australian creative agencies need more than 2 years to recover pitching cost: Ouch Factor
Compared to its media agency peers, it takes more than ten times longer for Australian creative agencies to recover the cost of pitching, according to newly released data from the Ouch Factor report.
The survey, conducted by consultancy New Business Methodology in partnership with SI Partners, released new data today on pitching practices with regard to agency categories. It is an extension of its 2022 report, where 94 agency CEOs, CFOs and MDs were interviewed on their pitch performance in 2021.
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The latest results revealed that the average creative agency needed 32 months to recover the pitching costs, compared to 3 months for the average media agency respondent.
To put a number on that, the average creative agency respondent would need to earn $8.7 million in additional revenue to recoup the cost of their annual pitch hours, versus $826,000 for the average media agency respondent.
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Meanwhile, digital/tech agencies in Australia invested the most per-pitch in non-billed hours and had the lowest average win rate. But they are more likely than creative agencies to recover their costs by taking on large revenue projects, taking 22 months on average.
Director Australia, SI Partners and founder and managing director of New Business Methodology, Julia Vargiu, said: “The way creative agencies pitch has stayed the same since the 1950s. But pitch costs and agency salaries have increased while project sizes have shrunk and client tenure has shortened, so the scale of projects and the margins are lower.
“It is made more difficult by the fact that many agencies do not track the hours invested in pitching. They are unaware of the work they need to win simply to recover this investment and the fact that their wins must also pay for the time they spend losing.
Julia Vargiu
“This is an industry where 25% plus margins are achievable, but not when you’re pitching unprofitably.”
Networked agencies are likely to spend more time on a pitch than independent agencies, as the latter invest only 50% of the hours to win a pitch compared to the former. As a result, the average independent respondent needs to earn $5.4 million in additional revenue to recoup the pitching, versus $14.7 million for the average network respondent.
The smallest agencies (under 20 full-time employees) were often the most efficient at pitching, investing only 10% of the revenue value of their pitches to win.
Mid-size agencies (50-99 full-time employees) were the least efficient, often investing over 50% of the revenue value of all pitches on pitching and having the lowest pitch win rate at 32%.
The survey was backed by the following industry associations, which invited their members to participate: Advertising Council Australia (ACA), Australian Association of National Advertisers (AANA), Media Federation of Australia (MFA), Independent Media Agencies of Australia (IMAA) and the Public Relations Institute of Australia (PRIA).
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Darcy Song was a reporter at Mumbrella, covering media owners, adtech and social platforms. She left in October 2023.
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Maybe it’s time to end the culture of free pitching.
Clients should choose on “point of view”, process and credentials.
And surely the purpose of all those awards that agencies feverishly collect have no value is to assure prospective clients of quality and capability.
Then, once chosen, work with the partner to solve the problem collaboratively. Paying for the time of the talented people they work with.
Rather than get multiple smart people to shoot in the dark and pick a winner.
Seriously, how did the industry get itself into this state?
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Just imagine what it’s like for the production companies and directors that Creative Agencies rely on to polish their ideas and present back to them!
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