On average, a small to mid-sized advertising agency receives 10-12 requests for proposals (RFPs) a year, according to marketing research consultant Cubeyou. The average amount of work that goes into each proposal is 150 hours, with each costing between $15,000 and $20,000. Creativity and strategic planning represent more than half of the total cost.
Most of these efforts fail to win new business. The average closing rate in the U.S. is 43%, though the best U.S. agencies close on average 85% of the pitches they participated in.
What separates the winners from the losers? There are several key factors why agencies most commonly don't hire an agency after the pitch, according to an analysis by Cubeyou. They analysis is based on interviews the firm conducted with 250 Agencies in the U.S. in the fourth quarter of 2015.
Agencies tend to be too focused on selling themselves rather than understanding and solving the client's problem. Also agencies often don’t appear to understand the target audience or bring the right insights.
Differentiation or lack of it is another factor. Also, agencies that lose a pitch frequently aren’t able to convince clients of their ability to deliver. And there’s the chemistry factor—sometimes an agency-client pairing just doesn’t “click.”
When mulling whether to participate in a pitch, agencies ought to consider several issues before engaging, per the Cubeyou rundown. If the client is entertaining more than five other agencies, it’s a sign that the client either doesn’t have much experience working with agencies, or doesn’t know what they want. Also, the longer the list of agencies participating, the less chance you have of winning the pitch, and the more time your team will need to put in to be competitive. The optimum number of agencies is three to four.
Clients get the best results from the pitch process when they give agencies the information they need to produce relevant ideas. If the client doesn’t have time to discuss the pitch beforehand, they clearly don’t consider it a priority, and agencies shouldn’t waste their time on it either. An unknown budget is also a symptom of lack of trust, or a total lack of awareness about the industry.
Another potential problem is an overly demanding or vague brief. The brief needs to be proportionate to the account fees.
The average client-agency relationship has shrunk from 7.2 to 2.8 years while the average CMO tenure has doubled from 2 to 4 years, but if the account has a history of short relationships, agencies may lose money even if they win the business, says Cubeyou. Consider the time and money you sink into your pitch process and how long it will take you to make that money back and turn a profit, they advise.
Lastly, agencies should show caution when clients treat creativity like a commodity. Reverse auctions - when sellers are asked to bid against each other - are likely to drive the price down, and if the client opts to go this route, it’s a sign that they are motivated more by price than the quality of your work, says Cubeyou. "You’ll also likely shoot yourself in the foot if you do win since you’ll have to undercut your competitors’ prices."