Marketing and agency executives know that running or participating in agency reviews is costly. A single review’s collective expenses—in severe cases reaching $1.2 million—might surprise even the most tenured leaders.
Today, the 4A’s, Association of National Advertisers (ANA) and Advertiser Perceptions released a joint report that measured these costs. The research, titled The Cost of the Pitch, reveals average investments on both sides of the partnership.
To reach their conclusions, the trade organizations surveyed more than 300 marketing and agency executives. This research is the first of its kind, establishing pitching cost parameters that have until now gone unidentified.
Both parties, the research indicates, are wasting money on reviews. This money, the trade organizations argue, could be better allocated to relationship management tools. The best way to put an end to the cycle is to build a system designed to prevent missteps and mitigate the friction that often catalyzes reviews.
Review costs are exorbitant
Brands pay the highest cost. That’s an average of $408,500 to conduct an agency search, when an incumbent agency is not involved in the process. It’s higher when they are.
Agencies feel financial pressure too, especially incumbent agencies that choose to defend the business, spending an average of $406,092. This expense reveals why 25% of agencies decline to defend the business during reviews. Costs are lower, but not insignificant, for non-incumbent agencies. They spend an average of $204,461 to pitch.
The combined impact on agencies and marketers is more stark. They pay out an average of $1 million running a review, and that’s if the incumbent does not defend. If it does, the number balloons to $1.2 million.
These numbers are high, but may actually grow higher if agencies and marketers resume regular pitch travel. Survey respondents provided answers specific to 2021 and 2022, when the pandemic and remote work still impacted partners’ willingness to pitch in person.
Marketers and agencies open up
In addition to cost measurement, the report sheds light on pitching trends, including marketers’ and agencies’ motivations for participating, and common challenges they face as a result of these processes:
- Costs increase when incumbents defend: It’s more expensive for both incumbent agencies and marketers when an incumbent is involved in a pitch. Overlap costs “incurred by the client when they must transition from an incumbent agency to a new agency” contribute to the increase, the research found. Incumbent participation increases costs of several line items. For example, to run a pitch that an incumbent is not participating in, marketers allocate an average of $115,106 to their staff’s hourly fees. If an incumbent participates in the pitch, the number jumps to $125,393 for marketers.
- Clients cite different short- and long-term benefits: A whopping 50% of marketers, both small and large, said that increased motivation is the biggest short-term benefit they see from a new agency post-review. Cost savings was the next-best benefit for marketers, overall. In the long term though, marketers expect business impact, with increased revenue and improved brand perception topping the list of benefits. In terms of its long term benefits, cost savings dropped to fourth place.
- Despite this, cost tops factors that marketers consider: For procurement, agency relationship management teams and brand-side marketers, price is the most important consideration when choosing an agency. To this, the report’s authors suggest considering which contender best understands a client’s business challenges, and which champions the most actionable solutions. “These are better criteria by which to select a winning agency than cost/price. And while some of these other factors show up lower in the importance ranking, they do deserve stronger consideration,” the report states.
