Pitching Fees

Agencies everywhere are looking for ways to recoup loses from big pitches that eat up an agency's time and resources. It is a touchy subject, as reinventing the wheel isn't easy, especially when advertisers are being asked to hand over money for something they had been getting for free for a long time.

Back in 2004 Australia's AFA was attempting to put together a pitch policy, which was not received well by advertisers. At the end of last week, the The Advertising Agencies Association of India issued a roadmap for charging a pitching fee set to start in April.

In January, the executive committee of AAAI passed a resolution allowing agencies to charge a fee to clients who call for a creative pitch. In the past, the AAAI had tried to enforce a similar pitch fee, set at 1% of the total costs, but clients refused to pay that rate and agencies refused to comply. This is still going to be an issue moving forward.

As of now, the new structure will follow a sliding scale based upon the account size.

"This is a move in the right direction, as most agencies across the world charge a pitch fee to their clients,” says Nirvik Singh, chairman, South Asia, Grey Worldwide.

“A pitch fee is not meant to create a profit centre for agencies, but it is only to encourage genuine clients,” said Arvind Sharma, chairman and CEO, Leo Burnett.

“We feel this isn’t acceptable, as the terms and conditions between agencies and clients shouldn’t be decided by an industry body. The clients should voluntarily pay for the cost of pitch upto a limit, but somebody else shouldn’t decide for them,” says Bharat Patel, chairman, P&G India and chairman, Indian Society of Advertisers (ISA).

Elsewhere, Scrutiny of the pitch process is increasing as the stakes rise for agencies and their potential clients alike. And in this case, it's the clients turning to companies to help in the search of agencies to invite to the pitch.

So-called pitch consultants like AAR have taken on an increasingly prominent role in markets like the United States and Britain in recent years. Ten years ago, the use of a pitch consultant was relatively rare; now, Jones said, close to half of all pitches involve AAR or one of a handful of competitors. In continental Europe and many other markets, where personal relationships between agency executives and clients matter more, pitch consultants remain an anomaly.

Ad agencies or clients - or both, in some cases - have to pay fees to the consultants. One agency, the London unit of JWT, recently pulled out of its AAR membership, saying it wasn't getting any referrals from that consultant anyway.

But Jones said the consultants play a vital role, using their independent knowledge of ad agencies to short-list appropriate candidates for potential clients who can't do the legwork themselves, given the conflicting demands of thoroughness and confidentiality that are called for in the pitch process.

So no matter where you turn, it seems that in some way, some sort of fee, whether through an industry body or third-party consultant, is going to continue for pitches.