The Agency Pitching Process – Understanding The Financial Costs
Pitching for new business is a process that requires various levels of investment from different quarters. In many industries, any significant strategic work needed in order to find creative business ideas and solutions – and create a detailed and structured plan to execute it - would be commissioned and paid for. Businesses agree a scope and the client pays a fee or non-refundable deposit to secure the time and expertise of the company they are dealing with.
In the agency world, however, this is not usually the case. Agencies will undertake intensive, time-consuming, and costly strategic work without any guarantee they will ever see a penny in return. The average cost of a pitch, according to research by Campaign UK in 2023, was over £50,000, an increase at the time of 26% year on year.
Pitch presentations are more than the sum of their parts
Pitch presentations will – if they are done properly – be slick, smooth, and perfectly aligned with their vision of what the client needs to achieve their aims. To get to this point, however, there’s a huge amount of work to undertake. Few people outside the agency world truly understand what’s involved in creating a compelling pitch.
And without understanding the pitching process, it’s difficult to understand the true financial costs behind them.
What the pitch process really involves
A pitch is not simply ‘a presentation’. To get to the stage where an agency can create the presentation, a lot has to happen. Even before being officially invited to pitch, an agency will need to supply a significant amount of information as part of the discovery process.
The pitching timeline tends to look like this:
Request for information (RFI)
The request for information collects background information about a supplier. Company credentials, case studies, financial disclosures, and capabilities are assessed. This is a filtering process whereby enough satisfactory information will need to be delivered in the required format before agencies are invited to the next stage.
Chemistry or tissue meetings
These are early-stage conversations that often involve senior leadership and can consume valuable time.Brief development
The formal brief documentation is given to invited agencies. They have the opportunity to ask for clarifying information, or they may identify issues and challenges that help the client reshape the brief.Strategic and creative development
Agencies will need to undertake research to understand and report on market analysis, audience segmentation, channel modelling, budget forecasting, and so on. They will create a concept along with messaging and campaign frameworks and commercial considerations.Production and presentation
Agencies pitch to the client why and how they will execute the concepts and strategies the have come up with, using deck design, data visualisation, and other collateral. This can include staging and print production.
What companies get as a final pitch presentation is informed by each of these stages. They all require internal teams and resources.
Pitching as competitors or incumbents
Pitching may be a purely competitive exercise. In this case, all the agencies invited are competing against each other for a piece of business that, all things being equal, one of them should get.
However, in some cases, companies are asked to pitch against an incumbent agency. The incumbent agency may therefore have lower costs and may only need to defend their current strategy. On the other hand, they also have a lot more to lose than the others. This process also means that unscrupulous companies could put their business up for pitch, ‘steal’ all the ideas, and then decide they will stick with the agency they currently have.
Alternatively, they can ask another company to carry out another agency’s pitch for less. While probably less common than in years gone by, it still happens. Marketing-Interactive references a case in 2023 of alleged idea theft. The founder of design agency Dxclusive had bowed out at the procurement stage of a pitch process due to pricing pressure. But ‘not long after another vendor simply recreated their idea at the request of the client’.
The real cost of allocating resources for large accounts
In bigger agencies, the larger the potential account, the more the percentage of this potential business will be allocated to spending on internal resources.
Allocating costs according to business potential
For example, if an account is valued at £200 million, agencies might allocate up to 10% of the projected revenue as a business-development investment.
Even within the pitch phase itself, budgets are often internally assigned across departments or outputs. So, if 1% of the overall investment is attributed to presentation design and production, that represents £20,000 of costs before a contract has been secured.
This might just be one component of the process. You may also have to factor in:
Billable hours redirected from existing clients
Senior leadership time
Specialist expertise
External production or staging costs
Other resources
And remember, all the agencies pitching will make these investments, but only one of them will win the business.
Pitching without compensation has always been seen as a ‘necessary’ filter
Competitive pitching has been normalised as a necessary filter for clients looking to find the best strategic partner for their needs.
In a crowded market, agencies declining to pitch will miss out on opportunities. Often the process is overseen by auditors, who build relationships with clients and agencies and then put the agencies forward for work. An agency that attempts to renegotiate the commercial structure of pitching risks being perceived as difficult or uncooperative.
Unpaid pitching has been normalised – which doesn’t mean it’s the right thing for the industry.
Justifying the cost of investing in the pitching process
Agencies will justify the investment required to pitch with the returns available when they win it. In a long-term relationship, the upfront pitch cost can be put against the long-term revenue. But that only works for pitches that you win, and when the resulting relationship is a longstanding, lucrative one.
To justify the investment in pitching, agencies need to
Keep winning ‘enough’ business
Keep their margins high enough to absorb the costs of lost pitches
Allocate internal capacity without impacting other client work
Ensure creative and strategic quality remains high despite the constant pressure to perform and succeed.
It also assumes that financial cost is the only cost that matters. And in a high-pressure, high-stakes environment, it’s not the only one paid.
Seeing pitching for what it is
Seen from the outside, the pitching process can often seem like a competitive exercise in presentation skills. To an agency, however, it’s a sustained, expensive, resource-intensive process. It redirects time, energy, and expertise away from revenue-generating client work.
The financial cost of pitching is not the whole story
The financial costs of pitching can be high and they can be quantified. You can allocate a number to it. But it’s not the whole story. There’s also a human cost to the traditional agency pitching process, and we explore that in our next blog.
Do you pitch for business? How do you allocate financial resources? It’s a subject we’re passionate about – get in touch in you have any comments or questions, we’d love to hear from you.