The changing dynamics of the new business marketplace for creative agencies

Traditionally (aka pre lockdown), approximately 70% of appointments made by clients in the creative agency space involved the direct replacement of an existing agency relationship, with many pitch processes being brought about by “dissatisfaction”. The causes of these breakdowns in relationship were often quite subjective and emotional, with phrases such as “they don’t care about me as much as they used to”, “they keep changing my team” and “they are always going above my head to my MD” being reasons cited privately by brand owners for calling a review. These factors were often in contrast to the publicly quoted rationales expressed, including “needing a fresh set of eyes” or “changes in market dynamics”.

The remaining 30% of creative agency appointments could be put down to a number of factors including the arrival of a new client, the requirement of a statutory supplier review even if the existing relationship was a positive one and, finally, a new requirement where there was no existing agency relationship.

For several years, this meant that the creative agency new business market has either remained static or declined in terms of volume. The last two years (mostly spent in lockdown) have, however, seen a seismic change in the dynamics of the creative agency new business market, with a staggering 47% of appointments since the beginning of 2021 having no incumbent agency.

These appointments principally fell into three categories:

1. Start-ups entering a market with established competitors who had been investing in brands over a number of years
2. Scale up businesses at various levels of development who had never invested in “brand” communications and had relied on a combination of performance marketing and word of mouth
3. Established brands who had stopped advertising over the years and/or taken their external communications in-house

Examples of start-up and scale up brands seeking their first appointment included Bumble, Busuu, Getir, Motorway and Waze, while those brands returning to market included the likes of Esure, Hofmeister, Sekonda and Thomas Cook.

This change in the make-up of the new business market is clearly a double-edged sword as it is both good and potentially bad news for agencies.

On the plus side, a greater volume of opportunities coming fresh to market could be interpreted as a positive trend as it should increase the chances of new business success for agencies. Simultaneously, in terms of behaviour during the pitch process, we suspect that for the first-time advertisers there will be a greater focus on finding the immediate creative and strategic answer rather than “falling in love” in order to find a long-term partner, which has undoubtedly been the emphasis in recent years.

There are, however, potential negatives brought by the increased volume of opportunities. These new arrivals to the market may cause fresh headaches for agencies as they struggle to evaluate the wheat from the chaff and work out how to make a commercial return in both the short or long-term. This will take up time and effort, and often require more gut feeling than scientific methodology.

Arguably more importantly, the launch of the IPA/ISBA Positive Pitch Pledge highlighted the stress and impact on mental wellbeing that poorly managed pitches can cause. Until a pledge is in place, supported by both agencies and brands, agencies will need to be more selective about the pitches with which they engage. More pitches and more clients in the market doesn’t make that choice an easy one.

Whether there will be fewer new entrants and opportunities post lockdown, and the new business market will return to its original modus operandi, remains to be seen. But if it doesn’t, and the market becomes flooded with even more new entrants seeking to appoint agencies, we will need to be aware, as an industry and community, that less really is more!