Sorrell Was Right About Zero-Based Budgets, But Brands' Revenge Will Hurt Small More Than Large

Sir Martin Sorrell named it as the biggest threat to the ad industry that he could name at Autumn's Festival of Marketing in London. The move to zero-based budgeting is the one thing that is keeping the bosses at the big holding companies awake at night. Hefty retainers -- or at least the promise of vast amounts of guaranteed work throughout the year -- are what the big names in advertising and marketing were built on. They still are. But could zero-based budgeting be on the verge of changing all that?

In case you've been lost in a cave this year, the talk of the town is what many outside advertising may consider to be common sense. Brands should not start off with a budget each year, but should instead pitch for funds on a project-by-project basis with a clear promise of what the return will be for the release of the necessary pounds or dollars. On the one hand, it means someone who is still holding budget at the end of their financial year is not such a great friend to have any more now that there is no way of taking a deposit for work that can be commissioned when next year's full budget comes in. That may hold advantages for a brand watching the pennies, but on the other hand, it means that every project is an individual piece of work.

The fallout of this can be that the need for pitches goes up, and with that, several things can happen. The main implication, however, will ironically have the opposite effect from what the brands would like. I get the feeling that many large names are a little fed up with being wooed by a massive agency whose big hitters disappear once the business has been won. They are also fed up with the deals they get signed up for where they are limited to working with that agency and its stablemates.

The number of projects I have heard recently that have ended up with a big agency instead instead of one of the smaller guys has risen astronomically. The word "politics" is rolled out, but actually the correct word is "contractual." Big London agencies are great at mission creep and ensuring that they own more and more of a client's business. "Oh, that work may be used on social, therefore it really is one for us" is a line I hear about being trotted around day in and day out.

It has always amazed me how agencies turn like this, or rather, how brands allow them to assume so much authority once they are signed up. It is not a surprise, then, to see brands curtailing this. However, the point about zero-based marketing and advertising is that the endless round of pitches that ensue only favour the big guys. They are more likely to have the people to spare to do the thinking, create the presentations, crunch the numbers and then present a slick pitch. This needs to be done not only to get in the front door, but with each project that the big-name client launches.

Therein lies the massive irony. If brands are angry about big London agencies that come in, get their feet under the table and make sure their budget is spent -- and then some -- all this will do is discourage those agencies that would usually save them money. The smaller guys cannot spend their lives pitching against the big boys they know they are unlikely to beat and then, even if they do prevail, go into a process of multiple agencies pitching for each and every project.

If brands think this is a means of changing the conversation and getting themselves a better deal with multiple players competing regularly for each project, they are likely to be disappointed as pitch bingo turns into a game played by only the big names they were hoping to supplement.

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