The time taken to complete RFPs (request for pitch) documents and prepare and deliver a pitch is one of the biggest hidden costs to an agency.
Agencies often fail to ask any meaningful probing questions regarding the legitimacy of the request let alone evaluate the potential profitability vs risk (neglecting existing business) and yet pitching remains the industry-wide accepted way to gain new business.
Many agencies go into the pitch process with desperate open arms, grateful for the morsels of opportunity bestowed upon them. Rarely is the opportunity qualified sufficiently to ensure it’s bona fide and that the agency stands a reasonable chance of winning it.
So why can pitching be bad for business? Here are 5 reasons for you to ponder:
1. High unmeasured cost to the agency
Many agencies will track the time spent preparing and delivering a pitch. However, rarely is this time evaluated at the end of the year to see whether the overall cost in total man-hours to get the new business was worth the investment. Questions rarely asked;
1. What was your total spend on pitching last year?
2. Could that time have been invested in growing existing business?
3. Did the agency jeopardise existing business by taking part?
4. Has the new business win made financial sense?
How often do you quantify how much a pitch costs the agency? How do you track?
2. Puts existing business at risk
How often do you weigh up the fact you are putting the agency under additional pressure and taking resources away from key current clients to be able to work on a pitch?
Has this ever lead to client complaints? When the new prospect says ‘I want to see the team I’ll be working with’, how much thought goes into taking the account manager away from the existing client to be able to service the need?
How often do you decline to participate in a pitch?
3. Some RFPs are bogus
How often do you feel you’ve just taken part in procurement’s fishing trip rather than spending your time completing an RFP that actually leads to some work?
It’s usual for procurement to invite many more agencies to take part in the selection process before narrowing down the field to a select few agencies.
It’s an excellent way for the prospect to see what’s out there, how many staff you have, your turnover, profit and any other question they care to throw at you. Fantastic market data for the prospect but hugely time consuming and costly for agencies.
Often the prospect already knows who they would prefer to work with and therefore it’s more of a ‘jumping through hoops’ or ‘making up the numbers’ exercise. But you probably know that already.
So before you take part in the RFP process what kinds of questions do you ask to check its validity?
4. Prospects give away your ideas to the competition
Pitching is an excellent way for clients to get free consulting.
If you’re a prospect there is a good chance some insightful gems will emerge from a good group of agencies pitching for your business.
It’s depressingly common for clients to share those ideas with the final appointed agency. Agencies try to mitigate against this by placing ‘copyright’ stickers on the work but these restrictions on usage are frequently flouted and rarely enforced anyway.
How do you ensure your work isn’t shared?
5. The business doesn’t make financial sense
If you’re a large agency pitching for clients with small budgets, no potential to grow and end up reducing your normal fees to win the business, you may find yourself in a tricky financial position.
As your account managers continue to over-service at the usually acceptable rate of 30%, this will quickly suck up their valuable time and your profit.
What kind of financial analysis do you undertake before you accept a request for pitch?
While pitching for business can be extremely lucrative when approached in a commercially savvy way, the phrase ‘buyer beware’ is very relevant for agencies who want to grow but don’t want to end up with unprofitable business.
If you’ve decided to consider participating in the RFP process, aim to qualify the opportunity thoroughly before jumping in with both feet.
So how do you currently qualify your new business opportunities? Please leave a comment in the box below.
