- Marketers spend, on average, $408,500 to conduct an agency search and review when an incumbent agency isn’t involved and only barely less when an incumbent participates, according to recent research from the Association of National Advertisers (ANA), American Association of Advertising Agencies (4A’s) and Advertiser Perceptions.
- Incumbent agencies spend roughly the identical amount — $406,092 — defending business, while agencies vying for the business spend $203,461. The cost of the typical review process, assuming three agencies are involved, is greater than $1 million across parties and rises to greater than $1.2 million with an incumbent in the combo.
- Potentially due to the resources needed, one in 4 agencies declined to defend an existing account up to now two years (though two-thirds of marketers indicated they retained their incumbent agency after a review). Given the findings, researchers urged marketers to more fastidiously consider whether a formal review is totally needed.
The recent “Cost of the Pitch” study provides further evidence that the promoting industry’s way of assessing agency-client relationships may need retooling, especially as brands and marketing services providers fall under increased budgetary pressures. The report is the fruit of a joint effort between the 4A’s, a trade group for agencies, and the ANA, which represents brand marketers, and was assembled with help from market intelligence firm Advertiser Perceptions. The research relies on survey results from greater than 300 marketing and promoting executives.
Beyond monetary considerations, changing agencies could be a time-intensive and taxing undertaking, the report indicated. The average agency review process runs longer than three months and still takes a minimum of two months with an incumbent involved. In each cases, the method leads to decreased productivity for agencies and marketers. Roughly one-third of marketers reported reviews created disruptions of their day by day tasks and a quarter pointed to delays in rolling out campaigns and recent products.
“Agency reviews are an expensive, time-consuming process, on average taking on a whole business quarter,” said Matt Kasindorf, senior vp of business intelligence and insight on the 4A’s, in a statement. “Given the price implications for each clients and agencies, the work disruptions and delays attributable to an agency review, and the potential to damage the present client/agency relationship, it’s critical to assess whether the necessity is absolutely there, or whether there are other options.”
Kasindorf and other executives really helpful marketers and agencies look for methods to repair their relationships to cut down on costs and avoid the lost productivity that typically comes with reviews. The organizations suggested instituting a relationship management program or engaging a consultant to help work out their differences. For what it’s value, 33% of marketers and 38% of agency executives agreed that a commitment to developing long-term relationships was a very powerful consider reducing agency review.
“While there actually may be times when an agency review is suitable, it should really be considered a last resort,” said Kasindorf.
Other findings of the study included:
- 45% of procurement respondents and 35% of brand name marketers said an agency’s repute played a leading role in the ultimate selection during a competitive pitch.
- Half of marketers said the most important short-term good thing about an account review was to motivate the incumbent agency, while 44% said the most important long-term profit was a recent strategic direction.
- Half of brand name marketers said an incumbent agency’s performance was a key factor contributing to a review, though only one-third of procurement respondents felt the identical way.
- 46% of marketers use external consultants to conduct reviews, while 39% of agencies use consultants to defend accounts in review.
Other researchers have emphasized the high costs of chasing accounts on the agency end of things. Earlier this yr, Forrester released a report that exposed U.S. agencies spend up to 17% of their annual revenues — about $12 billion a yr — going after recent business.
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