Study: Pitching for the price of a mid-range car

The study’s findings show that agencies invest an average of 10 percent of their revenue in new business. Most of the money goes toward pitches and initial meetings, while the least goes toward participating in awards. At the same time, the majority of respondents report increasing competition among the various disciplines.

One-quarter of the agencies surveyed invest an average of over 25,000 euros in preparing for and conducting a pitch—that’s as much as a good mid-range car costs. Generally speaking, the larger the agency, the higher the cost per pitch. Agencies in German-speaking countries handle an average of 41 new business inquiries per year. Of these, 24 inquiries are brought directly to the agencies by clients. On average, agencies actively reach out to potential clients 17 times.
The ratio of new business leads to acquired customers is 19.9 percent. Design agencies are particularly successful, with a conversion rate of 22.0 percent. Digital agencies bring up the rear, converting only 11.8 percent of new business leads into customers.

Last but not least, Cherrypicker wanted to know who is in charge of new business at the agencies. The picture that emerges is clear: At nearly all of the agencies surveyed, senior management is in charge. Additionally, 35 percent of the agencies have their own new business manager.

According to Cherrypicker, two key conclusions can be drawn from the results: First, the blurring of the lines between individual agency disciplines is leading to increasing opacity in the agency market. Second, an unprecedented wave of cutthroat financial competition is on the horizon in the battle for new clients.

Oliver Klein, owner of Cherrypicker, commented: «There is a risk that, in the future, an agency’s financial strength will play a greater role in a client’s decision to award a budget than the agency’s creative performance. All market participants must work to counteract this trend if the creative diversity of the agency market in Germany is to be preserved.» Given that smaller agencies cannot always afford to participate in a pitch, clients should carefully consider whether a pitch is truly the right approach. At the same time, agencies must ask themselves whether other new business strategies might lead to greater success. Oliver Klein sums it up: «Ultimately, with a success rate of 20 percent, agencies» investment in new business is and remains a speculative venture.”

About the Cherrypicker Industry Monitor

The Cherrypicker Industry Monitor «New Business Investment» is based on the results of an online survey conducted from April through May 2012. A total of 108 representatives from German-speaking agencies in the fields of full-service, dialogue, online/digital, PR, design, and events participated in this unprecedented study. The results thus reflect a cross-section of the entire communications landscape.