Global Initiative boss urges industry to ditch the ‘dog and pony show’ pitch process

The global boss of Initiative has urged the industry to ditch the pitch process, describing it as a “dog and pony show” that’s a culture-killing, unsustainable model leading to the industry’s burn out and churn rate.

Mat Baxter estimated it takes a year for an agency to break even after a global pitch

>Mat Baxter revealed that he’s registered the domain to hopefully – should Initiative’s holding group IPG Mediabrands allow him – set up the Glassdoor equivalent for pitches, where agencies can hold bad clients to account.

Speaking at the Mumbrella 360 conference in Australia this morning, Baxter said: “There is a concern in our industry, and I’m talking for both creative and media agencies here, that, when you speak out publicly about what goes on in the pitch, well, there could be some form of retaliation from the client and the pitch consultant community.

“I really hope that isn’t the case today. I really hope that we can have this kind of discussion in a grown-up way and that the kind of concern about retaliation is unfounded. So fingers crossed, otherwise, I might be in some trouble.”

He noted that industry peers could also retaliate, and throw figurative tomatoes in comments sections. Placing a literal basket of tomatoes in the centre of the stage, Baxter challenged a room filled with colleagues and competitors to ask him tough questions.

He called on them to say no to pitches, and more radically, to scrap a process that he said it costing adland time, money and people.

The pitch is the only “enduring relic” of the Mad Men era, he said, suggesting that it made sense at the time when there was less competition, and it was cheaper.

“You know when you pitched 30, 40 years ago, there may be two or three competitors in a pitch,” he said. “Now we have hundreds of agencies competing. So back then, the economics of a pitch, you can argue, made a little bit of sense. Today though, it doesn’t.”

To prove the point, Baxter assembled a team to dig through 13 years of Initiative and RECMA data.

The results? What Baxter called the “degradation of what I believe to be just fair play”, to the point where it now takes “about a year for an agency to break even after a [global] pitch” that costs, on average, $300,000.

“Now, often, these clients are much bigger than the agencies that they asked for this relief from. So, at the big end of town, 12- day payment terms has become an expectation that agencies are going to accept,” Baxter said.

“Just in this market, right now, there is a pitch going on for a CPG [consumer packed goods] client. The mandatory requirement to participate in that pitch you’ve got to agree to 120-day payment terms and if you don’t, you’re out. And I want to call out publicly Omnicom, PHD, who took a stand with us on not participating in that pitch.

“The really good agencies have got to start saying no.”

He turned then to overheads – “spicy”, but not talked about often. The travel bill alone on a recent global pitch, he explained, was US$1m.

“To convert a really competitive global pitch, you’ve got to be willing to take an overhead recovery of 70%,” he said.

“Even though your real overhead might be 110, 120, 130 and you’re probably going to have to agree to take the business on at a zero to 10 margin.

“And as I said, on the really competitive pitches, clients might just say: ‘You’ve got to earn in your entire margin, you don’t get any, you’ve got to recover it all through performance.’ So you can see how, financially, it gets really hard to sustain this long-term.”

And the biggest victim of the pitch process, he claimed, is clients.

“Senior people tend to have to work on pitches because pitches are complicated and there’s a lot of top to top interaction,” he said.

“The number one problem that clients have is, ‘We don’t get enough senior resource on our account’. Well, the reason is, increasingly, because they’re constantly having to pitch to either retain your business or go for other business because the lifecycle of a client’s tenure has reduced so much that we’re in a perpetual state of pitching.”

And clients lose out when they demand pitches are run over holiday periods too.

“That adds to the culture-killing nature of working the agencies and increases the churn rate because people get burned out and feel that they don’t get the time to rest and recharge,” Baxter argued.

“So again, It impacts clients negatively because clients constantly have staff churn on their accounts because the culture of the agency is getting impacted.”

He explained the volume and cost of pitches is “a lot of money that’s getting taken off the table” for investment in existing clients.

The reason for putting an account up to pitch so often, Baxter hypothesised, is cost pressure; in the last 10 global pitches Initiative was involved in, six clients expected a cost reduction of 21-25%.

“And this kind of high-speed cycle we’re in, where the minute something goes wrong in your agency relationship, you leap straight to divorce not to marriage counselling, that feels like it’s contributing to the short term-ism and to some of the marketing challenges that we all face in building brands over the long term,” he said.

Baxter split his proposed solutions into two buckets: simple, and radical.

The simple solutions include: agencies saying no and having a “backbone” when terms are unfair, clients dealing with costs in the first round if it matters most to them (rather than forcing agencies to spend time and money through multiple rounds first, with price as a “surprise” at the end), clients flying to agencies and bearing some of the cost for the free work they get, and procurement incentives that prioritise the tenure of agency relationships.

As for the radical “ditch the pitch.” Baxter wants clients to choose agencies like they would a law firm, on reputation, portfolio, client references, and a financial proposal.

He wants agencies to share pitching horror stories with the hashtag #ditchthepitch. And if IPG Mediabrands gives the green light, he wants to become a place of accountability.


Get the latest media and marketing industry news (and views) direct to your inbox.

Sign up to the free Mumbrella Asia newsletter now.



Sign up to our free daily update to get the latest in media and marketing