Welcome to the latest Agency Wire, where we follow major trends in the communications and marketing industry.
Learning To Play Procurement's Game
Often times, dealing with procurement can seem tedious and draining. According to recent article from Tim Williams at Ignition, that is completely by design. According to Williams, procurement professionals will often make the buying process long and complex with the end goal of making the participants as invested as possible so they will be less likely to walk away - a behavioral phenomenon called "loss aversion." As the saying goes, you can't play the game if you don't know that you're playing. It is crucial that agencies become familiar with procurement professionals' negotiation tactics in order to avoid the common pitfalls that that come along with this process. Buyers use many different strategies to get agencies to drive their prices down, including the "misplaced deck," the "stray flip chart," and the classic "good cop, bad cop." Learning what type of response these tactics are supposed to illicit can help agencies keep and cool head when approaching the price negotiation portion of a pitch.
According to our latest Global New Business League, new business revenue is up 36% over the same time last year. The report tallied an increase from $691 million in the first half of 2017 to $1.09 billion in the first half of this year, which is due to a total of 3,401 agency new business wins from over 700 agencies globally. There are several major drivers behind these numbers, including a strong performance by creative agencies in the new business space, a massive spike in activity in the US market, and CMOs moving larger pieces of business than they were last year. Some of the trends did vary across different markets. In APAC, media revenue was down 17% YoY, which offset some of the increase seen on the creative side. The result was an 18% overall increase in new business revenue in the region. Because marketers are moving larger pieces of business, revenue was up significantly on a global scale, but the overall number of wins remained relatively steady YoY.
An explosion of M&A activity in the marketing space from new and unconventional buyers has led to an 88% increase in activity when compared to the same time last year, according to our H1 M&A League Report. Based on our analysis, while the total number of deals remained steady YoY (198 in 1H 2017 vs. 199 in 1H 2018), the total deal value increased from $4.9b to $9.3b. According to R3's Principal, Greg Paull, “It’s clear that the consulting firms aren’t slowing down, Accenture invested more in M&A than the top two holding companies – Dentsu and Omnicom – combined. The real story in the first half of this year has been the unconventional buyers. We are seeing brands like L’Oreal, Cars.com and AT&T becoming active in the marketing M&A space to invest in and build up internal capabilities."
To see the full report and global trend analysis, click here.
R3 is a global marketing consultancy focused on improving the effectiveness and efficiency of marketers and their agencies. Founded in 2002, we work with eight of the world's top twenty global marketers.
Through our regular "AgencyScope" research, now covering more than 1,000 marketers in China, India and other markets, we are learning about true client preferences for the best local agencies in each market and helping agency holding groups form strategic partnerships with the best local agencies.