Free Thinking Agencies
It isn’t new news that agencies are looking to move away from a commoditised approach to pricing their work. It still lingers, in agency board rooms and weekly thought leadership articles…a bit like this one. It’s a very difficult thing to change, but has the tide finally started to turn…and is the definition of 'free starting to mean something more valuable to agencies and their clients?
There are two common issues that agencies must overcome in order to finally solve the problem…
Firstly to stop giving their strategic thinking away for free in order to win the pitch. Secondly, to change how the work is priced when the pitch is won. It’s a back to front trojan horse…go in for free, with the thing that should be of real value, and when finally in there sell the stuff that’s more challenging to build margins from.
It starts with free thinking…
I meet some agencies that simply say they refuse to pitch, I’m never too sure if they manage to live by that rule or not, it’s a difficult economic climate and not grabbing every opportunity that comes your way requires nerves of steel. But I do meet agencies that say they feel more confident to ask for a pitch fee. Not only does it make it a little easier on the bottom line if you lose, but you’re making sure your strategic thinking that goes into the pitch is valued from the very beginning and not used as a free carrot to win the work.
Dan Saxby is CEO of independent agency Elephant Room and ex CEO of global agency iris, he’s built a new agency model at Elephant Room and has also had some success around asking for pitch fees. When I asked him about it here is his answer: “Our unique agency model is to work with creative people from the communities we’re trying to reach. We always ask to cover the costs of those people via a pitch fee as they are bringing value to the client whether we win or not. The pitch fee also shows there is commitment to the project and not the dreaded ghost pitch. We have been successful in demonstrating the strength of our model and the majority of pitches agreed a fee. We have turned down two pitches in 2021 where clients have been unwilling to demonstrate their commitment to a fair value exchange.”
So, although most agencies would love to move away from the pitch process it really requires a collective effort and there will always be some that cave in and enter the dog fight. Pitch fees are most likely the short-term solution to a final goal. But again, this is easier if agencies work as a collective, which isn’t always the case. So asked around again…. Lou Garrod is Managing director at brand experience agency Sense and while they aim to communicate the value of years of experience and strategic knowhow to win new client, it’s challenging if others chase the quick win. Lou told me that “In cluttered disciplines, such as Brand experience there’s an abundance of new entrants willing to enter the race without pre agreed pitch fees. They enter hungry to show off their shiniest piece of tech which can, in turn, undermine the next agency whose belief on selling years of strategic know how should surely set the bar in agreeing pitch fees.”
Free thinking part 2.
Let’s say you win the work, hurrah. The second issue is that the winning agency may have to provide a detailed breakdown of how they will execute it. Then negotiations start around how many hours you need of the team and how much you can charge for them. The obvious challenge here is that it’s commoditised, the agency ends up reducing margins and is in a race to execute it as quickly and efficiently as possible. There’s probably some cost associated to the “thinking” rather than execution in terms of a strategist or a planners time. But this presents another problem in a broken system.
The strategists may have time allocated to an account, but they are held back with developing the strategy by a pre determined plan of execution that the cost structure is built from. Things change all the time and it’s like having somebody navigate a ship and want to react to the weather but without being able to change course. Where as, if the agency could say to their client we’ll take you from a to b. And by doing so we think it’s worth X. The agency has flexibility to get to that end goal despite of the changing weather.
Will Wordsell is the strategy director and founder at Experiential agency, The Park and has also worked client side. He says: “The key is to price based on output not hours.
Ultimately the client is buying the solution you can provide, not the hours you put in, so there is a need to change the language and narrative around the pricing. The nature of strategic thinking is such that it is about applying knoweldge, experience and techniques gained from hours, days, months and years of development. The client is ultimately buying the benefit of that, not the specific hours put in on their brief, so it should be priced accordingly. It all comes down to us needing to think like a product industry not a service industry, more retail than solicitor. If I buy a jumper, I'm interested in the design, materials and fit, not the hours spent by the designer or manufacturer. Strategy needs to be thought of in the same way.”
It's this second point where we come in at Opinium. We’re a strategic partner with agencies and enable them to flex their strategy offering up and down as and when needed. It’s during this relationship with agencies that we see how many clients can more clearly see the value in research…or more accurately data, rather than a softer metric of strategy and cultural understanding built from years of experience. Its more tangible and the challenge isn’t just having the confidence to refuse to pitch, or ask for a pitch fee. It’s about being able to clearly articulate the value of strategy to a client and procurement.
I know that this isn’t the first or the last opinion piece around pitch fees or pricing work, but the conversation has to keep going if change will finally arrive. Maybe we’ll get to a place where 'free thinking agencies' really does mean freedom of thought, and not giving stuff away.
