Advertisers urged to pay agencies to pitch – and don’t make it an ‘insulting’ amount

The industry body for Australia’s major advertisers has for the first time offered advice to its members accepting the principle that agencies should be paid to pitch.

In its newly updated How To Manage A Pitch Guide for members, the Australian Association of National Advertisers suggests that when a full creative pitch is called, agencies should have their costs covered. However, it does not go as far as urging that agencies should always be paid to pitch.

It also advises clients against offering a token or “insulting” amount.

The guide has been based on input from members and advice from the World Federation of Advertisers.

AANA CEO Scott McClellan said: “In some circumstances it may be appropriate for advertisers to pay the agency for the work they have done in the course of a pitch. For the first time, the Pitch Guide maps out when and how this should be done.”

The guide also suggests how to run an agency search without going toa full pitch.

McClellan said: “Most advertisers are looking for a productive, long term relationship with their agencies, and a positive pitch process is the best way to get off to a good start. This guide was developed with the aim of improving the client-agency relationship. “

Excerpt from AANA’s How to Manage a Pitch Guide:

Determining fair compensation for pitching

Advertising agencies rarely give away their best ideas, nor should they be expected to. However, pitching for business is an important component of business development and a normal cost of business. Paying agency fees for their participation in the pitch process should be considered if:

  1. The process is complex, extended and requires an investment in external, out of pocket costs for the agency eg. Multiple rounds of strategy or creative, a requirement of producing anamatics or fully finished commercials and advertisements etc.
  2. There is a requirement for agencies to assign any or all of their intellectual property rights to the advertiser as a condition of their participation in the process.

This gives good reason for consideration of who should pay for what in relation to the meeting stages of the pitch process.

In setting the level of payment it is important to consider the commercial cost of what is required of the agency. Too low and it appears tokenism and insulting.

However, from a relationship building perspective, compensating agencies for pitches is a valuable gesture of goodwill and would indicate to agencies that you are after a lasting and mutually beneficial partnership.

Paying Your Way

Agencies are generally enthusiastic to accept opportunities to present their credentials at no cost. However most agencies seek to recover development costs of strategic and creative submissions and expect that all out of pocket expenses will be covered.

While strategic advice carries a value deserving recognition if not full recompense, the full creative pitch is particularly time-consuming and costly. Both can run into tens of thousands of dollars even without inclusion of agency employee hours. In current practice, most agencies expect to negotiate cost recoveries where the pitch request extends beyond the basics of layouts or storyboards to the likes of audio tracks, original music or test Internet site work.

If the advertiser elects for a full creative pitch, the advertiser will need to decide between:

  • Advising a set budget to each agency; or
  • Requesting a budget from each agency

While the first course may appear the fairest as well as proving the most convenient, the second is less likely to inhibit the scope of the creative elements featuring in the pitch presentations. The advertiser’s consideration could be influenced by other factors, including questions of whether there is enough…

  • Time … to prepare a creative as well as strategic response to the advised requirement
  • Understanding … on which agencies can base their creative and/or strategic responses
  • Incentive … for agencies to produce their best quality work with only a chance of winning the business
  • Money … to adequately fund research into the alternative approaches flowing from the pitch process.

Comments


  1. for sale
    15 Mar 12
    4:16 pm

  2. Like agencies have enough backbone to do it! There is way too much desperation in the market place to consider pride!

  3. Bede Venerable
    15 Mar 12
    4:17 pm

  4. I asked my accountant to pitch for free and billed me $50 to say piss off.

  5. Cynical but hopeful
    15 Mar 12
    4:21 pm

  6. “…most agencies seek to recover development costs of strategic and creative submissions and expect that all out of pocket expenses will be covered”?

    Not in my lifetime and I’ve been around the block more times than many. Most agencies would LOVE to recover developmental costs and all associated 3rd party expenses (not just tangible assets) but I’ve only ever seen a token amount paid for a pitch (under 5 figures) which was desperately, gratefully received. And asking the agency to set its own pitch budget – as bad as the brief that says “Budget TBA” (i.e. you tell me how much you want and I’ll give you a third of that if you’re lucky).

    I think pitch payment is a marvellous recommendation, but don’t imagine all clients will agree. I guess it’s a long road but glad the first step’s been taken.

  7. Johnny
    15 Mar 12
    4:29 pm

  8. hear hear!

  9. paul
    15 Mar 12
    10:28 pm

  10. HUH? “The industry body for Australia’s major advertisers has for the first time offered advice to its members accepting the principle that agencies should be paid to pitch.” Come on! I hardly think it’s THE FIRST TIME! This is something that’s been talked about for at least 30 years and probably a whole lot longer. Remember also the Honda pitch in MadMen? But unlikely ever to change much. What’s the price/value of an idea?

  11. Andrew D
    16 Mar 12
    12:44 pm

  12. @Paul – priceless (apparently)

  13. parala
    16 Mar 12
    4:50 pm

  14. ” … compensating agencies for pitches is a valuable gesture of goodwill and would indicate to agencies that you are after a lasting and mutually beneficial partnership.”

    Kind of like when you pay for a hooker.