PR new business pitch: what’s the cost and who really pays?

Most companies who hire marketing services firms love to assert their power by making their suppliers jump through hoops from time to time, and it’s an increasing practice. Which is why, a few times each month, suppliers of advertising, public relations and other marketing services have to participate in a time consuming and usually fruitless ‘beauty parade’ game, otherwise known as pitching for client business (other businesses use the more generally known term: selling).


I’ve been on both sides of the fence on many occasions and can tell you it isn’t pretty. Clients often draw up flaky briefs that are impossible to interpret and then refuse to be pinned down by answering perfectly reasonable questions of detail. The agency people will try to persuade the client that they’ve had their best account team giving lengthy, considered thoughts to the brief. In reality, it’s likely that most of the effort is the result of whichever individual has enough free time working into the wee hours of the night before the pitch. So it was interesting to see the results of a survey on this theme from the UK’s Public Relations Consultants Association (PRCA) reported here.

The survey, completed by 51 out of the 180 PRCA firms, found that the amount of time spent on a sales pitch varies widely but the average is 20 hours. That got me thinking about the cost of a PR new business pitch. Fortunately, the PRCA also produces another survey called the ‘inter-firm comparison’. This is an anonymous survey allowing agency management to benchmark their businesses against other PRCA member firms on various factors, including hourly rates charged. To arrive at a reasonable cost estimate for our average 20 hour sales pitch effort we have to make some assumptions about how that time breaks down. Here are my ‘best guess’ assumptions:

• Board Director: 2 hours
• Account director: 8 hours
• Account manager: 6 hours
• Account executive: 4 hours

Using the PRCA’s 2009 hourly rates for the different job levels, and the above breakdowns for time, the theoretical cost of that one sales pitch, based on unrecoverable hourly rates alone is £2,292. Over a typical 46-week working year, assuming the agency pitches once every two weeks, the theoretical annual cost amounts to £52,716 per agency.

This figure excludes any third-party costs. PRCA communications director Richard Ellis says the 20 hour average refers to ‘time spent preparing for a new business pitch’. We must therefore assume it does not include the time travelling to, from and attending the various pitch process meetings, multiplied by the number of people from the agency involved; it looks a bit on the low side otherwise. Neil Backwith* thinks so too. He tells me 50 hours is the average time investment for a new business pitch made by the groups of PR firm CEOs he works with. If we use Neil’s figure, the annual cost jumps to £142,312 per agency. But even this might well be conservative. Ellis says the survey figures “went into the ‘over 200’ at the other end of the scale”!

Who pays for all this? Clients ultimately, of course, but indirectly through the fees agencies have to charge for their services. As Backwith points out,

“By asking more agencies to pitch clients will end up paying higher rates for the privilege – quite the opposite of what they hoped for!”

Do they and their procurement colleagues realise this? Do they care? Is there a better way? Microsoft’s Peter Devery clearly thinks it’s time for a change, stating in a recent PR Week article that:

“…. the PR pitch beauty parade is a legacy of an old industry. The process is lengthy, costly, resource-hungry, inefficient and often does not result in the required level of understanding which will lead to a fruitful partnership. We have to move the industry on, for both the agencies’ and clients’ sake.”

Some in the agency world are fighting back by banding together and refusing to pitch. But sadly it’s the Belgians who are doing the rebelling, not the Brits.

Updates:

Feb 2011: I’ve just discovered www.winwithoutpitching.com, founded by Canadian Blair Enns. The resources on his site are well worth a look.

Jan 2015: Debbie Klein, CEO of communications agency Engine Group told the BBC’s Evan Davis her agency could spend up to £100,000 on a single pitch. “It’s not getting better, it’s getting worse,” she said, in a radio discussion about pitching. You can hear the whole 30 minute discussion on pricing in this episode of The Bottom Line

* Neil Backwith is a management consultant, trainer and mentor to professional services firms and their leaders. He was previously chief executive (EMEA) at PR firm Porter Novelli. He is author of the PRCA book ‘Managing professional communications agencies’.

Credit: photo courtesy Foxtongue at Flickr

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