Creative and media agencies have faced slow growth in billings this year, finding themselves in a relentless race not to thrive, but just to survive. Recent findings from Deltek cast a somber shadow: 58% of agencies struggle to acquire new business, with a staggering 38% witnessing a decline in opportunities.
We need to rethink the agency new business model
Creative and media agencies across UK and EMEA have not only grappled with sluggish growth in billings but have also faced increasing pressures from clients to deliver more for less. We’re constantly hearing agencies are looking to consolidate systems, streamline processes and find efficiencies.
Clients have been leveraging their bargaining power to demand additional services and resources without commensurate increases in fees. This trend has forced agencies to reassess their value propositions and adapt their business models to remain competitive in an increasingly demanding market.
Gone are the days of relying solely on pitches and presentations to win over clients. The game has changed, and the old pitch playbook just won’t cut it anymore. It’s time to embrace innovation, creativity, and unconventional strategies if agencies want to survive. The agency new business model needs a radical overhaul, or else it’s destined to be left behind in the dust of more agile and adaptable competitors.
What agencies can do to take back control
Billing for Pitches and Cost Recovery
The question of whether to bill clients for pitches is a contentious issue in our industry. While some agencies choose to absorb the costs as part of their business development expenses, others opt to invoice clients for the time and resources invested in the pitching process.
This may be a controversial opinion, but I think well-established agencies with strong reputations and proven track records should undoubtedly charge for pitching. Their industry credibility justifies this practice, ensuring they recover costs and reinforce their value. On the flip side, newer agencies need to earn their stripes and make their mark. For them, not charging for pitches can be a strategic move, allowing them to build relationships, showcase their capabilities, and gradually gain the reputation needed to command pitch fees in the future.
For agencies considering billing clients for pitches, transparency is key. Clear communication regarding the billing, should be established upfront, outlining the scope of work, associated costs, and the potential outcomes. Additionally, agencies should strive to demonstrate the value proposition during the pitch process, thereby justifying the investment for the client.
Find Your Niche
Agencies must carve out a niche and specialise if they’re to stand out from the crowd. Agencies that focus predominantly on sectors or industries, like automotive or finance, become more efficient and effective by deeply understanding their clients’ unique needs and audience behaviors. Take brand experience agency Uniplan, for example, which works predominantly with brands in the automotive sector with the likes of Audi, BMW, Hyundai, Porsche, Mercedez-Benz on its client roster. By capturing industry insights and tailoring them across its wide range of auto clients, Uniplan has gained a strong foothold and stands out against other agencies. Specialisation not only gives agencies a competitive edge but also makes them more appealing to new business prospects, showcasing their expertise and ability to deliver targeted solutions.
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Automate to Operate
Agencies can significantly reduce the costs associated with pitching for new business by leveraging AI and modern project management tools to streamline processes and enhance efficiency.
- AI-powered tools like HubSpot CRM and Zoho CRM automate essential tasks such as data analysis, client research, and personalised outreach. This automation reduces the need for extensive manual work, allowing agency staff to focus more on developing strategic and creative pitches rather than getting bogged down by administrative tasks.
- Chorus.ai provides insights calls, helping agencies refine their pitching strategies based on data-driven feedback. This can lead to higher success rates with fewer resources spent on trial-and-error approaches.
- For web project delivery, Blutui offers a comprehensive platform that addresses inefficiencies associated with traditional outsourcing, in-house full-stack teams, and fragmented tech stacks. Blutui enables front-end developers to manage entire projects, cutting down on the need for multiple specialists and reducing long-term management costs.
By adopting these technologies, agencies can streamline their operations, reduce overheads, and make their pitching processes more cost-effective. This strategic use of AI and project management tools can transform the way agencies approach new business development, ensuring that every pitch is more efficient and impactful.
Reconsidering your commercial model
Traditional agencies will tend to follow the more orthodox commercial model of purely a “T&M” approach, and whilst this comes with certain advantages such as flexibility (adjustments along the project life cycle), transparency of hours worked and costs incurred and easy to initiate and negotiate the commercial contract terms. It’s crucial for agencies to reconsider their commercial models to stay competitive and improve new business and pitching practices.
Output-Based Models: These focus on delivering specific outcomes or milestones, tying compensation directly to the achievement of predefined goals. This can provide clearer expectations and stronger incentives for performance.
Value-Based Pricing: In some cases, pricing can be structured based on the perceived value of the solution rather than the inputs (time and materials) required to produce it.
Incentive Models – Reducing your fee proposal into an incentive pool also allows the agency the right to earn more based on agreed specified outcomes and allows both partners to enjoy joint success. During the new business and pitching process, this can be presented as a win-win scenario, emphasizing the agency’s confidence in delivering successful results and its commitment to client satisfaction. This approach also sees the relationship dynamic shift away from a supplier/ vendor relationship to a partnership.
One thing is for sure, the industry needs to see changes and agencies need to take back control of the process, or risk being caught in a cycle of escalating costs and diminishing returns in new business pitching.
About Tangram
Tangram has decades of experience providing consulting and tech solutions to improve agency processes and finance management and works closely with independents and large networks providing consulting and tech solutions to help improve agency processes and finance management.
Authored By: Sai Chu
Sai Chu is the Principal Consultant at Tangram UK, with extensive experience as the former Global Commercial Finance Director at Ogilvy for nine years across London and Singapore. He leads Tangram’s UK operations, working exclusively in the advertising agency sector with clients such as Dentsu, Ogilvy, and TBWA.
