Australian creatives on the hidden costs of pitching

By Ruby Derrick | 16 June 2023
Credit: Mathieu Stern via Unsplash.

Australian creatives say the rising cost of pitches is forcing many large agencies to pull out of the running for the business of some brands.

The latest OUCH! Factor report, by growth consultancy New Business Methodology (NBM) in partnership with SI Partners, a global M&A advisory firm, outlines over investment in pitching, with agencies carrying most of the burden. 

It gives a detailed analysis of the findings from a national survey into the pitching behaviours of Australian agencies across digital, media, PR, full service and creative.  

It reveals that while media agencies are winning new business by pitching efficiently, many creative agencies are pitching for projects that will never see profitability.   

The results also highlighted that it would take almost 32 months for the average creative agency respondent to recover the costs of pitching, compared to three months for the average media agency. 

The average creative agency respondent would need to earn $8.7 million in additional revenue to recoup the cost of their annual pitch hours, versus $826,000 for the average media agency respondent. 

Creative agencies have shared their insights on whether they agree with the results or not.

Is it true that many creative agencies are pitching for projects that will never see profitability? Adam Ferrier

Adam Ferrier, founder of Thinkerbell 

"I'm glad this kind of data is out in the world as unfortunately I tend to agree with it. The end result is that many of the top agencies are saying no to pitches, leaving a second or third tier of agencies willing to pitch.

"This means good clients are missing out on good agencies because their processes for choosing an agency are too convoluted. All things being equal the more efficient the agency selection process, the better quality agency you'll end up with."

Gavin Bain, CEO of Wunderman Thompson Australia

"There can be a lot of pitches out there that will never see profitability for the agency. We need to assess the potential return and reject these sorts of pitches for the commercial benefit of the business."

Adam Wise, co-founder and ECD of Jack Nimble 

"I’ve definitely noticed that the budgets clients are putting out to pitch are becoming smaller, but I’ve also noticed that many clients are offering pitch fees as well. These fees never cover the cost of the time we invest into a pitch, but it is definitely a step in the right direction in the pitch process.

"At the end of the day, profitability is in the agency’s hands. As Jack Nimble is a creative agency and production company hybrid, we have a pretty good grip on the costs associated with making any of our ideas a reality, including whether or not we can make them profitable. This model puts us in a good position to take calculated risks on what ideas we put forward, and what we pitch for and what we don’t. Ultimately, it also means we can deliver more from client budgets.

"Whilst the worst thing for profitability is losing a pitch, the second worst thing is winning a pitch and the relationship ending after only one project. We can deliver far more impact when we’re able to work closely with a client on an ongoing basis. Digital-first businesses really get that and want to partner with us long-term, so that’s something we factor into what we decide to pitch for as well."

Does it take almost 32 months for a creative agency to recover the costs of pitching?

Adam Wise, co-founder and ECD of Jack Nimble Adam Wise

"We often pitch with Sparro, our partner agency, so we understand how unique the two pitch processes are. A lot of time and care goes into both, but where media draws on experience and learnings, creative agencies draw more on bespoke ideas - which takes more time.

"Whilst the numbers in the report don’t add up for us (or for Sparro for that matter), I do believe creative agencies invest more time in pitching. At the end of the day, creative agencies are judged on the ideas they put forward, and oftentimes winning ideas take time to get right."

Adam Ferrier, founder of Thinkerbell 

"Overall creative agencies are not as financially intelligent as media agencies, especially those within holding companies.  The independents are probably somewhat different in that there are people who are accountable for the profitability of the business in the business. 

"We say no to a lot of pitches that have an absurd ask compared to what's on offer, but I think some people must be saying yes to them. When deciding to pitch there are three variables we look at, in no particular order are; the opportunity to do amazing things, a strong cultural alignment, and financial return (in short fame, fun, finance). In terms of the finance variable, these are the questions we ask ourselves:

a) How many agencies are being asked to pitch?
b) What's the ask? What's the return?
c) How long will that return last for?
d) Does the client fit our agency?
e) Is there a pitch fee (ie a pitch fee (doesn't really matter what it is) goes a long way to demonstrate good intentions and it's great to see they are coming back in vogue).
"I'd also make a case for involving pitch consultants to run pitches. The most efficient and best pitches we are involved in nearly always use pitch consultants. The more interesting pitches are now often merging various services together such as creative and media."
Gavin Bain, CEO of Wunderman Thompson AustraliaGavin Bain
"Yes, it can take a significant period of time to recover pitch costs, so if you proceed because you see the longer-term benefit, make sure you price to minimise this impact. Not all growth is good, not all revenue is good. And as an industry we should remember that we can always say no to pitches that won’t be good for business."

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