Adweek recently reported that General Millsis one of the latest advertisers to be subject to the outcries of the ad industry for their poor pitch practices. (Their latest pitch process, reportedly included 120 day payment terms for an unspecified number of brands, an unspecified length of contract and the dubious treatment of agencies’ intellectual property rights.)
Of course, it’s not how The How to Buy a Gorilla Companyruns pitches for our clients, but I still fail to understand the need for an outcry. Plenty of people buy cheap products, cheap advice and cheap services every day - and they all get what they pay for - which is no more or less than they deserve, as a rule. Advertisers are no different, some will always be happy to buy less value for less money.
There are a few rotten apples
But General Mills isn’t alone. It seems to be one of a growing number of companies that appear to have become addicted to savings and have handed agency sourcing and selection to their internal marketing procurement team – most likely with a clear brief to achieve said savings. (I have yet to find more than a small handful of marketing procurement folk who are not incentivised to make savings on their investments). So I suggest we give companies like this a name, let’s call them “Bargain Junkies”.
To elaborate a little and to better define the term, let’s say that Bargain Junkies are companies for which achieving year-on-year savings is a part of their business strategy. Bargain Junkies are happy to play zero-sum games with almost any supplier and most negotiations comprise only of hard-ball games. In short, they’re the tough nuts of business – you can almost hear them growl – “grrrrrrr”.
Not all marketing savings are bad
I can temper my obvious insolence about Bargain Junkies by adding that I don’t think the pursuit of savings is unreasonable per se. So, in the interest of balance, I can suggest that there are some situations when savings can be pursued in marketing:
· Fragmented spend across multiple and duplicated suppliers.
· Buying power can be leveraged for commodity goods with clear quality measures.
· Internal change programs that reveal potential efficiencies.
· Unnecessary expenditure that doesn’t provide a direct or indirect return.
And indeed, sometimes when it is absolutely necessary, marketing might have to turn off its engines temporarily to support a bigger cash flow problem – though there is inherent long-term damage/risk, of course.
But when it comes to pitching agencies and paying agencies’ fees, if Bargain Junkies are reducing rates or extending credit terms when all else remains the same (scope of work etc), then they’re either buying lower value and will get a lower return or they’re increasing their risk of doing so.
Junkies will be junkies
The main reason I don't understand these outcries about Bargain Junkies is that they don't seem to make any difference. I suspect it's because, like any other kind of addict, it's only when the brands and businesses that behave son badly hit rock bottom that they may consider conducting themselves and their pitches differently. In the meantime, junkies will be junkies.
Better news is that Kraft Heinz has been one of the most notable addicts to rehabilitate themselves, but that was only after their company lost $16 billion of its market value.
How to appeal to the desperate
Bargain Junkies will argue that some agencies are ready to accept tough terms, play hard-ball etc and that the market will dictate what’s too much and what isn’t. To which there are three answers I can offer:
1) What kind of agencies are saying “no” vs. those that are saying “yes”? If Bargain Junkies want the best talent, the most effective and most stable agencies to deselect themselves from a sourcing process, then this is a pretty good way to do it. If they don’t want or need the best talent, then leave them to it.
2) If the deal these participating agencies accept is too good to be true for the Bargain Junkie, then it probably isn’t that good. Better-paying customers generally get better value/service/products in pretty much every walk of life, everywhere in every category. Usually it means these agencies will pitch in poetry and deliver in prose, or they just don’t have the same calibre of talent as those agencies which declined.
3) Bargain Junkies will never know that they’ve bought less for less until it’s too late, because clients don’t get alternate histories according to how they could have run their pitches and the talent they could have secured for their business. Until either their market share takes a dive or their valuation does (see Kraft Heinz above).
Don’t worry, be happy
Agencies that decline to work with Bargain Junkies shouldn’t trouble themselves about it – there’s no need for protests and outcries. Just like we decline dodgy-sounding parties, as we saw in the recent Audi pitch, multiple agencies – good agencies, too – declined to take part at all, and many withdrew from the process later because they didn’t like the look of it.
And brand owners shouldn’t care either; the advertising market will not be ruined as a result their competitors’ brands wanting to weaken their positions by running poor pitches that focus on the price of an investment (yeah, the price of an investment – go figure that one out) then why should we discourage them? If your competitors don’t know how to use advertising as a competitive advantage then, as Napoleon once observed:
“Never interfere with an enemy while he’s in the process of destroying himself.”
Great brands run pitches that agencies vie to work on, like a legendary party with limited invitations. A well-run pitch that invites the right kind of agencies can attract the best talent available from within those agencies. And they’re the people that can transform a brand’s fortunes. And you won’t find them at the Bargain Junkies’ parties.
How to Buy a Gorilla - The ultimate guide to selecting, paying and working with agencies for more powerful advertising. www.htbag.co.uk