By Andy Pearch | Autumn 2008

The pitch season is once more upon us. It has been a relatively quiet year for media account reviews so far, despite the declining global economic backdrop.

But things are about to change, fast, for three reasons. Wilting margins : The credit crunch is putting pressure on most consumer markets, particularly the retail and travel sectors, and attention in these companies will inevitably turn to stripping cost out of the marketing budget as margins come under pressure. Corporate Mergers : The financial services sector’s ongoing consolidation activity will inevitably lead to an upsurge in winner-takes-all account reviews in 2009. The Domino Effect : Account moves tend to have a knock-on effect, especially where account conflicts cannot be resolved, so the outcome of the Renault Nissan agency review could propel the automotive sector into another round of media consolidation.

There are also particularly keen Competitive Effects playing out within the media sector. Acquisition activity is drying up due to the lack of loan cash, and the media agency groups are seeing zero revenue growth in the G5. This means little or no organic or acquisitional growth, which all points to more aggressive competition between them as they battle for market share to find growth. And, with business lending drying up, there will also be pressure on a number of highly leveraged marketing services companies, to find new partners or even to keep trading, prompting customers to vote with their feet.

All this points to a very busy 2009 in prospect.

So, if you are considering an agency review in the near future, we thought you might like to get our view on the big issues and the key trends you need to consider before you embark upon your next International media pitch. Your specific requirements as a client will clearly vary depending on which end of the organisational spectrum you fall: more localised or more centralised. But whatever your structure, whatever the geographical extant of your review, you should find some relevant take-outs in this paper.

There are 5 Big Issues you need to nail in your pitch process:

1.

Network Consistency and Quality is still the number one client concern when it comes to agency selection and short-listing. Cut through the creds, and there is still much work to be done by all the agency groups before they are the finished article. Across Europe truly centralised account co-ordination is still a relatively new discipline for several agency Groups. Meanwhile, the reality in local markets is that pan-regional Group trading has not yet achieved ubiquity, and has certainly not delivered demonstrable competitive advantage to the largest volume players.

Conflict management continues to be a huge issue for media centralisations, as local exclusivity in contracts still restricts the wholehearted participation of many strong media agency brands. The painkiller to this agency headache is a “virtual” operational solution, but although imaginative, these proposals lack track record, introduce new p&l complexity and can also be short on management commitment. A pick ‘n mix approach to operational structures is easy to spot (corporate-speak such as “integrated teams inside Group assets” starts to kick in) and is doomed to fail.  Agencies will need to grasp the nettle and take exclusivity out of contracts going forwards, as the market consolidates.

Even the more established agency networks have their own set of problems: the fast-growing Eastern European markets have proven difficult in building critical mass, and the variations in internet penetration across Europe inevitably mean patchy digital credentials in several markets. The agency groups appear to be digitally disjointed – many more digital specialists are employed in London and Paris other markets; there are very scant digital resources outside the G5 markets (particularly in Eastern Europe). There is a genuine leadership positions for Aegis and Publicis here, but they are not capitalising on them, instead describing their capability as “a portfolio of best in breed agencies”. The fact of the matter is that many digital companies have been only recently acquired and are therefore still on earn-out (Aegis now owns 30 brands in the digital space in EMEA), and we are still a long way off the one-stop shop digital capability that these portfolios promise.

For all media agencies, the “Network” is still therefore a work in progress, encumbered by management structures, market structures and local client contracts. Moreover, every client of course has their own European footprint, which may amplify specific countries or specialisations.

Key takeout 1 : The RFI is not simply an information collecting exercise. Use it to identify whether the long-listed agencies can indeed fulfil your geographical and structural needs. Follow this with a Q&A session to tease out issues raised by the RFI. Don’t invite an agency to short-listing if they have not cleared these hurdles satisfactorily – it is a waste of your time and theirs to push them through the pitch process just to make up the numbers.

2.

Next up is Strategic Capabilities. For many years the core competence of international account management has been in co-ordination and administration. This is clearly a critical building block of any network, but too often this focus has overshadowed the quality of thinking and thought leadership at the centre. Global media owners jumped into this strategic vacuum and generated campaign ideas for agencies, behaving like outsourced media planners. In parallel to this, agencies built sophisticated Decision Support Tools (for media mix, budget allocation, campaign flighting) but these only confirmed to clients that central teams lack confidence in their powers of judgement. Tools are easy to demo, to replicate but much less easy to impose on local markets and certainly less adaptable to local market structures. The result is formulaic thinking and planning by numbers.

Now, there is a real move away from planning by numbers, towards a much greater investment in strategic planning at the centre, supported by talented local adaptation. Agencies have now woken up to the facts that the key to bringing great strategy to bear is consumer insight, a big campaign-able idea, a compact and inter-linked media mix, and relevant local implementation.  The local activation of strong central communications platforms can be genuinely exciting, and show the importance of key urban centres for establishing and transmitting messages. Out of home and experiential media can be used very powerfully in this context

Key takeout 2 : It is essential to set planning exercises which will test an agency’s ability to develop a core idea and apply it locally. Feed in as much real data as you can into your Case Studies and challenge the agencies to justify their media choices and allocations. Make it clear that you expect to see campaignable ideas activated locally, brought to life by in-market planners, with planning tools playing a supporting role.

3.

The human factor is key to your choice of Agency. Without doubt, there is a Senior Talent Shortage in the account management and media strategy functions. Agency pitch teams tend to operate like locusts, devouring your brief and committing swathes of time on your business initially, but then moving off to the next big pitch as soon as they possibly can. So it really is hard to get good people on your business for a lengthy period, as the adrenalin (and rewards) of the next pitch process tend to take precedent.

Agency talent is also very anglo-centric, and the challenge for networks is to raise the level of media craft in local markets to nurture and expose strong local talent and put them on display. Clients after all want to see that an international network is truly international.

Agencies also tend to confuse experience with seniority, providing a thin slice of a country or BU manager’s time as a key account leader. In these cases, it is valid for clients to be concerned that the “day job” will get in the way of the account management cameos, leading to dissatisfaction further down the track.

Key takeout 3: Your Operational and FTE Analysis will help you to identify potential servicing issues before they erupt. Account team structures should mirror your own, organisationally and culturally. Quantify and compare the experience levels, seniority levels and costs per head of your teams centrally and locally. Taking a rigorous approach to people will make servicing risks evident, and puts you in a stronger position to secure more transient talents for the long-term.

4.

Buying efficiencies are central to any media agency review. But the savings assessment can also be highly contentious. It is a painstaking and highly detailed task for an agency to assess in 25 markets or more their deal-away position and savings capabilities. Spend volumes are key to improving performance in many markets, so budget projections need to be put into the mix. All clients look to make savings, and all clients go into a media pitch with a figure in mind, but in the very mature media markets (for example, TV in the UK), or in highly competitive advertising segments (for example, automotive and FMCG), the reality is that step-changes in price/value are no longer credible, without the support of internal broking.

But even internal broking can only go so far, and with the changes in media consumption habits together with the surge in media proliferation agencies are concluding that strategic partnerships hold the key to extracting value in the future. Why? Because as individual spending volumes to discrete media channels are diminishing and, as the traditional media owners lose audience share, the leverage is being drained out of volume benefits and share deals. This is driving buyers to seek competitive advantage elsewhere, namely in over-committing with strategically important channel owners in return for competitive advantages. With downward pressure on media budgets in the G5, we expect more and more of the weaker media owners to be isolated as funds are drawn towards the media owners with broader sets of commercial assets.

When is a saving not a saving ? Odd question, perhaps, but it will cause consternation if you do not place an emphasis at the start of the pitch process on establishing the Ground rules for directly comparing agency savings commitments. Agencies have become highly creative about the definition of a saving, and have invested in permanent resource to justify or to caveat these savings achievements. After the pitch, all agencies know that a media plan will change, and will use change to justify the exclusion of a savings line, so these occasions must also be anticipated and nailed.

There is a world of difference between bankable savings and cost avoidance : one way to test an agency’s mettle is to ask them how much of the savings can be banked the day after they win the business – if the answer is not 100% of their cost commitment, then you have more questions to ask. Think through what you will or won’t allow as a saving: re-seasonalising? moving money out of expensive media into cheap media? lower cost per reach ? a change of buying audience ? Remember that the more types of saving you allow, the greater the risk that they will influence your media planning.

Key takeout 4: Prepare your Savings analysis carefully and define what you will/will not accept as a saving, so that you can unlock maximum value but also to limit wriggle-room after the event. Make sure you have considered fully the degree of risk inherent in an agency’s offer.

5.

For many involved, the work only just starts after the appointment has been made. Transition planning is very important in minimising the risk of transferring business from one agency to another. Some agencies have dedicated transition teams for such purposes, others bring in interims to do the legwork. Transitions for international or global accounts are very labour intensive, the benchmark being 100 days from appointment to completion, and the detailed transition plan needs to be part of every pitch. Governance is also a hot topic after appointment, and here again a client’s definition of what governance means is well worth comparing and contrasting to an agency’s view. An agency will tend to see governance as “overseeing and quality-controlling work activity at a higher level than direct managerial control”. A client will tend to see governance as “the measures, processes and structures implemented by the board in order to inform, direct, manage and monitor the activities of an organization, and to reinforce the importance of transparency of information”.

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Posted Thursday 27th November 2008