Sustained decline in new business pitches according to latest AAR Q3 figures

Data from AAR’s latest New Business Pulse show the total number of completed reviews to September 2018 were down by 8.2% compared to the same period in 2017.

This sustained decline in the volume of new business pitches confirms what the market has already been anticipating – 2018 will not go down as a vintage new business year for most agencies.

The only exception to this decline is the number of media reviews which took place; media agencies have seen a 12.8% growth in the number of pitches to the end of Q3 2018. Media’s increase is reflective of different motivations driving media pitches, with cost savings and media pricing being an ever-present focus.

Significant UK based brands that made media agency appointments in the first three quarters of the year included Betway, Government/Crown Commercial Service, LV=, Specsavers, Sky and Whitbread.

Media reviews that remain unresolved by the end of the reporting period include Co-op and Lloyds Banking Group, representing substantial prizes for the eventual winning agencies.

Data for specific disciplines is shown below:

Source: AARnewbizmoves

As the table shows, all other disciplines suffered a year on year decline, notably Integrated and CRM/Direct Marketing pitches, both which declined by around a quarter year on year.

Integrated agency appointments (involving three or more disciplines) declined by 27.4% and the few opportunities that did arise were most often Government/Crown Commercial Service reviews, or involved agency group wins e.g. Asda, P&O Ferries and Bose.

What are the contributory factors that can help explain this sustained drop in new business opportunities and can anything positive be taken out of the figures?

We believe there are four macro factors that are influencing the current downward trend:

1. More brands are investigating and investing in developing new ways of working, with in-sourcing, in-housing, and joint brand/agency teams being set up across high volume, low creative output. This also applies to some of the more technical capabilities such as SEO, PPC and Programmatic media, albeit on a small scale.
2. GDPR has understandably impacted on CRM/Direct to consumer activity as clients ensure they are fully compliant with the new regulations and have been working hard with their incumbent agencies to do this. Adjacent to this is the ongoing investment in business transformation and new tech stacks at a corporate level, which marketing is only one part of, and which has consequently stalled activity at the more executional end of the spectrum.
3. As agencies have expanded their services beyond their core capabilities, so they have made themselves ‘stickier’ to their clients’ business. The ‘integrated, co-operative, and collaborative’ approach is one that everyone subscribes to. Whilst it does not suit all circumstances or needs, for some brands and marketing teams there is the benefit of ease of delivery when one agency, or one team, delivers all the required capabilities and expertise.
4. This year’s pitch battleground has been far less in the heritage marketing communications disciplines and has focused much more in technology, innovation, data, and business infrastructure. With so much attention and interest in these business levers, marketers haven’t had the bandwidth or interest to review their marcomms agency partners, unless they have no choice due to breakdown of the relationship, unacceptable levels of performance or statutory review requirements.

As far as any positive news is concerned, there is at least this that we can take comfort from:

In the brand advertising space there has been almost a doubling in the number of £20m+ brands that went to market and selected a new agency. There were nine brands with this size of spend to the end of Q3 2018 (Asda, Betfair, Betway, Camelot, Coral, Harveys/Bensons for Beds, SimplyBe, MoneySuperMarket and Sky) compared to five brands in the same period in 2017.  All nine brands went to the open market to source the agencies they invited to pitch compared to only one (KFC) in 2017 that chose agencies from the open market, rather than from their rosters or other walled garden approaches.

Consequently, although the overall number of new business opportunities has continued to decline, at least there’s an increase in the number of scale opportunities that agencies have competed for.

Commenting on the figures, Kerry Glazer CEO of AAR said:

“There is no doubt that it is a very tough market for most agencies presently. 2018 has not been a year when new business ambitions have been easily achieved. A big factor in this is certainly the fact that business issues outside of marcomms are taking a greater share of the CMO’s attention.

We are already being asked about 2019, and, being candid, we see no reason why the new business market will change significantly from its current state over the next two quarters.

Putting the notion of an extension to Article 50 to one side, a ‘wait and see’ attitude is likely to prevail until 29 March 2019, when we are officially due to leave the EU but, following this deadline, brands’ desire to get on with it may supersede concerns about an uncertain future. Time will tell.”