Opinion

Life’s a pitch

In this outtake from the Weekend Mumbo, Calum Jaspan asks why so many brands are reviewing their media agency setups.

The RBA’s decision to pause rate hikes was met with a collective sigh of momentary relief this week.

We’re not over the hill though, and with wallets still tightening, marketers are being forced to get creative with their ad dollars. 

How can a marketer shake things up? Here’s an original idea – call a pitch.

Adobe Firefly prompt: Scales with money on one side and a lightbulb on the other

So how can they shake things up? Here’s an original idea – call a pitch.

The first few months of 2023 have seen Catch, Reece, Australian Retirement Trust, and Craveable brands all shift media agencies, while Nestle, Mitsubishi, Priceline, BMW, Victoria University, SBS, Forty Winks, Momentum Energy, and Unilever are all still open, with more expected to come. That is hundreds of millions in billings.

“I haven’t seen anything like this,” said GroupM’s Aimee Buchanan this week, looking back to the ‘mediapaloozas’ and ‘pitchapaloozas’ of the past.

“A lot of the agencies I talk to are either defending or going for new stuff,” Steve Sinha, chief media officer at Media Operations Transparency and MD at Analytic Edge said.

“And a lot of the media owners are seeing the pitches happening and probably ducking for cover and certainly staying out the way.”

The consensus appears to be clients put trust in their partnerships across the pandemic, with three to four years of pent up pitches coming all at once.

“We were certainly not encouraging people to move last year because there was no staff,” Jen Davidson, managing partner at Tableturn Media says.. “So it was tricky to say to clients, yeah, now’s a good time because there was such a staff shortage everywhere that the market wasn’t ready for big moves. But it’s a bit different now cause that’s all stabilized.”

Cutting or cautious?

“Generally, advertising spend decreases at a rate of 40 per cent higher than the economy. To date we have seen advertising decrease 7x the level of goods and services sales for the same period,” Dentsu Media’s Danny Bass told trade site Mi-3 last week in a relatively bleak assessment of the market.

Bass said brands were succumbing to “group think” in cutting budgets, aiming to get ahead of the consumer spending curve.

Following his comments, SMI released February datathis week, which showed spending was down 8.6% on 2022.

The election, Winter Olympics and government spend contrbuted in 2022, but beneath all that there was still underlying decline of 5.5%. 

“I’m not necessarily seeing that,” says Davidson, in regards to Bass’ comments, “yes, SMI numbers are slightly back, but as I said, I’m not necessarily seeing it.” 

In 2023 so far, the three largest product categories are reporting higher ad spend, with retail (+6.6%), Auto brand (+16.9%) and Insurance (+7%), while Travel (+80%) is also giving things a serious shake. From a lower base, of course, thanks to the pandemic.

“I think clients are cautious and holding back, but they’re not cutting.

“I think the biggest driver is TV ratings, and the decline in broadcast reach. I mean, that’s massive and I think that’s really biting now.”

No matter how you shake it, “the numbers are down,” says Davidson, “so if your default is TV, which for many marketers it is, all of a sudden you’ve got to rethink your mix, so there is extra pressure on the agencies, because they need to think differently, they need to look at things differently, and I think clients are evaluating their agencies based on that, I really do”.

In fact, TV/video spend is sitting at around only 80% of what it was five years ago, according to numbers crunched by Unmade this week. Of the calendar year to date, this includes Nine taking a 42% commercial share on linear, with its powerhouse MAFS, which finished up on Monday helping it to a 55.5% commercial BVOD share. I doubt we’ll see many other programs breach the one million overnight mark this year.

If you caught this week’s interview with Meta’s Carolyn Bollaci and Naomi Shepherd, you’d have heard them argue why their platforms are increasingly a cheaper option than TV too, where the price of ads continues to inflate. 

Davidson says there is “definitely a desire for fresh ideas,” now that we’ve had a few quiet years, and “we can’t rely on TV like we used to, so there has to be new ways of connecting with customers”. 

So is pitching the answer? And why now?

There isn’t one obvious reason for all of this, says Sinha, who adds he wouldn’t have predicted this back in October.

“Often, in these situations, clients might say ‘let’s go to pitch and see if we can get our partnership cheaper,’ and with the market softening, agencies might feel they can get better deals out of the media too,” says Sinha. 

“Or rather than just assuming our agency is or can get a better deal, do we need to get a second or third opinion, just to make sure we’re getting the best deal possible?”

Woolley says he assumes the reason the market is flooded at the moment is that everyone is looking and hoping for a better deal, but “the truth of the matter is, you never get a better deal going to pitch”.

“You get better promises, but then how do you ever know if they deliver on them?”

If you’re looking for some extra long-weekend content, Woolley was part of a Mumbrellacast panel last year on pitching, alongside IAG’s Zara Curtis, and Katie Dally, now at Endeavour Drinks Group (then-Thinkerbell). 

Pitching is great for selecting a new agency he said on the podcast, “but it is the worst possible way of actually reviewing your current agency, if they’re already performing well.”

“It’s not about cheaper, it’s about smarter,” he says a year on, with the notion that a client might believe its new agency can buy media at 50% of the rate of its competitors “bullshit” he says. “How long until that leaks to other agencies?”

“We’ve always viewed pitching as a terrible way to pick a strategic partner,” adds Peter Horgan, CEO of Omnicom Media Group. “But if someone’s just looking to squeeze on price, that’s obviously not an attractive partnership.”

He adds it’s “one-dimensional and so disruptive”, not only for agencies, but clients too. 

“If you’re happy with your agency, and they’re delivering, you’re going to risk and disrupt a lot more by just throwing a price squeeze pitch into the mix, especially when hanging on to experienced talent is at a premium.”

“Particularly price based pitches, it usually just turns into a lying competition of who’s manipulated the spreadsheet best, or who’s willing to put a claim out, and then in all probability, not deliver it.”

“So much IP is jeopardized in the process.”

Woolley says the moment’s flurry is just a rush before the end of the financial year, angling for new deals before budgets are handed down.

Where do the next six months lie, and how will it be decided?

Is the scope changing for indies? They’re certainly being invited to some of the bigger pitches. Right now, if they aren’t, the choice for some larger brands could be few and far between. Take Nestle or Unilever for example, who could handle it, and who isn’t conflicted out? It isn’t a large list. 

Match & Wood pried Catch.com.au away from Hearts & Science, while Atomic 212 have landed three sizeable accounts from holdco agencies in the past six months, and the majority of brands mentioned at the top currently sit in groups.

“I think people are more confident to make bolder moves now the market has settled,” says Davidson. “I think there was a sort of keep your feet under the desk and play safe for a couple of years, but people are making bigger, bolder moves now.” 

Though being a big fish in a little pond isn’t always perfect, says one agency CEO, who offered the opinion that clients can sometimes hold the narrow view that they might think simply because they’re with a smaller agency, they will get more attention from their partner. 

Clients want attention

We’re back on more solid ground, talent-wise. The MFA reported in its most recent census that vacancy rates are now down to 8.5%, with staffing up 6.5% year-on-year. 

But who has filled the vacancies? The MFA also reported tenure dropped from 3.6 years to 2.5 years in one year across 2021 to 2022. That is a massive shift. 

It said this is “symptomatic of the global talent shortage and people being promoted too early”. 

Industry headhunters told Mumbrella in November about the ‘overpromotion’ of staff that took hold across the pandemic years.

“Obviously I talk to a lot of clients,” Sinha says, “continually when you boil it all down, one of the biggest points of disatisfaction is a lack of senior leadership on their business.” 

“At the heart of it, all clients want more than anything else, is one really senior business leader, who understands their business, is an expert in their field, and irrespective of how the agency is structured, that one person can marshall all the resources behind the scenes.”

“Agencies went through a huge round of cost-cutting, sacking a lot of senior people, and replacing them with, or overpromoting juniors, and I see that spilling out everywhere.”

“This is easily framed as a holding company issue. It’s just as prevalent in smaller independent agencies.”

Those that are getting it right at the moment, he says, ask their clients and they’d say their business lead is doing all these things. 

“They’d probably feel like they’ve got access to the MDs and the other really senior people whenever they need them, and part of that is driven by the senior business leader.” 

I’d suspect more are to come across the rest of the year. But no doubt some won’t work and soon be going through the same exercise again, particularly those that were price driven.

Let’s remember, while everyone is feeling the economic squeeze, it’s time to be smarter, not cheaper.

Calum Jaspan is news editor at Mumbrella

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