I’ve been working in agencies, in-house situations and freelancing for, um, since just before Lincoln was assassinated, so I have personal experience from multiple angles.
Start-ups, mom-and-pop operations, smaller non-profits and small businesses hire creative talent in an entirely different way from big companies. Bigger companies tend to have various kinds of in-house marketing people, and any freelance work hired out usually originates from them. Typically, like I mentioned in an earlier post, it’s usually spillover design work that they can’t do themselves for various reasons. Just as an aside, it’s a bit different for freelancing photographers and illustrators who are quite often hired per project specifically for their style, which is, unfortunately, not usually the case with designers.
When bigger companies do farm out larger projects, those projects are typically awarded through a competitive bidding process or given to a long-term contractor that likely was originally hired through one of those bidding processes. They’re also typically marketing projects in which design is just one component.
Given that these bidding competitions involve hundreds of thousands, or even, millions of potential dollars, agencies often spend thousands of dollars on what freelancers call spec work. It’s a sales pitch, and if the agency you’re competing against comes in with a great idea that they’ve worked up and thought through, but your agency shows up with nothing but a reputation, lots of talk and a portfolio of past work, guess which agency has the best chance of getting the $500,000 contract and being first in line for even more work that comes down the road in the future.
I’d not often recommend freelancers doing spec work for small businesses since, on average, it just doesn’t pay off for various reasons. When a million dollars hangs in the balance, though, a pricey sales pitch becomes a worthwhile business investment.