Dipstick: "Should clients pay agencies for participating in a pitch?"

Is the concept of multi-agency pitch turning out to be a 'Godzilla' for the agency business?

Neha Saraiya | New Delhi | November 14, 2011

In a fiercely competitive environment where winning a pitch at any cost seems to be the objective, agencies are often pushed to participate in almost 'every' and 'any' pitch called for. While this means that clients get access to a vast array of 'ideas” for their brands, for agencies it often turns out to be a huge guzzler of time, money and manpower. Is this really the way forward in a rapidly changing market environment? Should it be continued, banned or modified? Industry experts presents their views.

Sam Balsara

Chairman & Managing Director

Madison World

“Yes, clients should pay for the time spent by agencies in working on a pitch. And there should be no more than three agencies invited to a pitch. Industry associations also agree with this.”

Ashish Bhasin

Chairman India & CEO South East Asia

Aegis Media

“In my view, I don't think it is realistic to expect clients to pay agencies for participating in a pitch but there should definitely be penalties on clients who call pitches just to get ideas for free. There should be severe restrictions on a client using any ideas, strategy or concept without paying for it. And should they actually use any of the strategies or ideas put up during a pitch, they must certainly be made to pay for the same. Further, agencies must realise that a pitch is an opportunity to present your credentials and your approach to work and should not be confused with doing work for free. Should a client expect an agency to actually do customised work for their brand, which they can use at a later date in case they choose to, then I feel it would be fair for the clients to be asked to pay for the same. In a competitive scenario this could be a practical via media, where agencies don't get paid just for their credentials and approach but also get paid if their ideas, concepts and strategies are used or if they are asked to do detailed, customised work as part of the pitch,  specific to the client in question.”

Gopinath Menon

Co-Founder & CEO

MelonMedia

“Agencies are responsible for the state they are in today. The erosion in equity, stature and credibility started in early 2000. That is when some captains of the ad industry divorced media and creative as two separate profit centres. This was the biggest blunder and the agency brand was the biggest sufferer. Both business initiatives were servicing the same brand and client but had different agendas. In the process some bigwigs made quick money. Some became famous and their salaries multiplied beyond logic, some fell by the wayside and were referred to as fallen heroes. The mad scramble for growth resulted in top agencies lining up for very small outlays in communications investment. This thrilled clients and they continued to apply pressure on the entitlements. The top mental faculties at the agencies seldom realised that the growth they referred to was from each other and not real growth. So, who is poor today became rich the next year and in the process the agency business has started losing its sheen. This also resulted in a lot of agency professionals becoming clients and demonstrated a vindictive  attitude towards agencies.

Now, when the wage bill has become more than half the earnings (used to be less than 30 per cent earlier), we all seem to realise that something drastic needs to be done. Sure, it needs immediate attention but the fact is that what we say is seldom what we do. This variance is the biggest enemy.

The mushrooming of TV channels in the 90s and early 2000s saw a host of channels getting into the red as clients and agencies disputed implementation and refused to pay. In the mid-decade, like-minded channels got together and set some norms and benchmarks for collections and penalties for defaulters. Today TV channels are having the last laugh and are almost making the media agency redundant with clients. Advertising and media agencies need to understand this threat and decide whether they want to stay in the business or not.

If we claim to be masters of understanding consumer behavior we need to get paid for it. Classically, in the Western markets there is a “rejection fee” if the participating agency does not get the business. We need to learn from the marketing and finance consultancies, the top surgeons, the lawyers….every minute of your time is what you need to be paid for or else you do not deserve to be in the business.

So, to ensure that this is followed by all we need to:

• form an autonomous body like IBF and get recognised by AAAI and ASCI;
• impose strong penalties for any acts of deviation. The IBF bans clients for not paying on time. Tripartiate agreements are an imperative;
• like-minded individuals minus the king-sized EGO is a must to get ahead;
• fixed rules of remuneration of business based on size and manhour logistics;
• clearcut remuneration for planning roles. Planning > Buying
• clients to be banned if found cutting price for a new partnership;
• A national debate on television or a B2B website like yours.

Vivek Srivastava

Jt. Managing Director

Innocean Worldwide India

The subject of pitch fee has for long been a controversial one. Both the ISA and AAAI have converged on this topic in theory at least. In real life the issue remains a ticklish one. It has now become more a grist that regales the media and industry observers!

Let's look at a parallel: the mating process in the animal kingdom. There are no compensations for the mating process when the plumes and the dances are in full glory. The real rewards follow later when the real deal is done. Applying this, the concept of a pitch fee seems anachronistic, especially when the mating call of a client is answered by numerous suitors from across the communication spectrum -- unlike in the past when it was a monolithic structure. The emphasis those days was on preserving the sanctity of the “idea” and its “value” from being pilfered by an ill-intentioned client preying on agencies' hunger for growth (read business). The premise was to prevent trigger-happy clients from getting agencies to perform like willing gladiators in an arena and get access to a large menu of ideas without having to pay for them! But we decided not to focus on systemic fragmentation and discounting of our services that kills our revenue, reduces farsightedness and depletes our talent. In sum, we thought down selling would upend our value proposition. How wrong we have been.

With the unbundling of the business came the unbundling of accountability and responsibility. “I will be ethical on one front but cutthroat on the other” seemed/seems to be the unspoken code. Obviously we as an industry never budgeted for the deep systemic changes that have occurred in our economy which are impacting our industry like never before.

In my view, pitch fee and similar old economy questions are irrelevant issues in an age where digital is placing the power of checking the expanse and viability of new ideas into the hands of clients, consumers and agencies alike. Agencies should be looking at their skill set and talent base which will enable a remunerative future instead of quibbling over loose change clients are jingling in the name of pitch fee. Incidentally, SNS, etc., did not emerge out of any agency or great marketer of the day.

Ideally, agencies as a consortium should be focusing on the next wave of communication opportunities and emerging consumer contact points. They should pump money, brains and effort in R&D for developing the next 'big communication molecule' the way the pharma industry does. And not argue over the legitimacy of the Rs 1 lakh or thereabouts of fee to be privy to our ideas. It is a good pointer to our quest for our eminent status and respect in the marketing matrix, but not the existentialist question as it is being made out by a few.

Neha@BestMediaInfo.com

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