Promo agencies call for clients to pay towards pitches
Clients who call a creative pitch for promotional agencies should contribute $5000 to each participating agency, new guidelines from the Australasian Promotional Marketing Association suggest.
According to the best practice guidelines, an agency should not expect any remuneration for presenting its credentials, while a strategy submission deserves a $2000 contribution.
APMA says that a full creative pitch can cost an agency $25,000 to $50,000.
APMA – which represents promotional and experiential marketing agencies – also surveyed its members about the process of pitching.
Wow APMA.. such a poor understanding of what a “cost” actually is. If as you say it costs $50k to pitch, and a manager is paid an annual salary of $100k, are you saying it takes 6 solid months of a manager’s time to prepare a pitch, where he/she does nothing else? I didnt think so..
I think what you mean, is it costs $50k worth of TIME to do a pitch.. based on chargeout rates. ie this is an “opportunity cost” argument, not a “cash cost”.
The flaw in your argument, is chargeout rates are always set to include a profit margin.. they do not merely cover salaries and operating costs, they are set higher than that to deliver a profit to the agency.
Hence by definition, the chargeout rates set by an agency should already take into account the cost of doing business – salaries, rent, and unbillable time – ie time spent on admin, new business pitches, etc. So you cant use chargeout rates to define what something costs. Its an erorneous argument.
Putting the flawed cost argument aside, why should clients pay for an agency’s salaries and marketing efforts at the pitch stage anyway? Every business has to spend money to market its products and services. And hope to get a return from that. Its called marketing.
Why should any agency have a god-given right to be able to ignore the market forces at play and be remunerated for turning up and pitching for work, whether they have good ideas or not? We are in a competitive market based economy, pitching for work is like advertising your product in a crowded marketplace. Its a cost of doing business, nothing else.
No pitch is ever handled by one manager, Jim.
You would at least have an account director, a creative director and strategy director (we’ll even take a low salary of 120k average across 3 directors), so that’s already a $30K cost for one month. The CD will usually have a team working under them (2 x creative at 60K per year), that’s another $10k. Then not to mention the graphic designers, the studio time, any materials used to mock up, research, etc. Qual research of just 4 focus groups can already cost $10K. So it’s not’s hard for an agency to rack up $50K, especially if they want to do a quality pitch.
I agree it’s the market, but when you build a house do you ask 5 architects to design your house for free? And only pay him/her if you build your home? Do you ask 5 accountants to do you taxes and then say you would only pay the one that saves you the most money? Do you ask 5 tailors to design you a suit and then only pay the one you choose?
No – the most you should expect for free is a quote. You judge their work based on their credentials. Marketers should consider themselves lucky and extremely grateful that some excellent agencies (and people) are willing to work for free on your brand…
@Ad hack – thanks for educating me on how much time & money people actually spend on a pitch. Wow.. graphic designers, studios, 4 focus groups.. unless you’re pitching for something like Woolies or Telstra with the carrot of a couple of million in fees, I didn’t think such efforts were commonplace. If people really are spending $50k in actual costs to win business.. wow..
But to your question of if I asked 5 accountants to do my taxes and only offered to pay the one who saved me the most, I’m sure I would get all 5 accountants saying “bugger off, I don’t work for free”. So it wouldn’t happen.
So why then do agencies prostitute themselves? Why do many agencies collectively believe there’s nothing they can do about it? The blame the clients, the market, other competitors.. but never stand up for themselves.
Fact is agencies are willing participants in the game. There’s nothing stopping an agency saying “here’s our credentials, here’s an example of work we have done elsewhere, here’s what we think about your brands and the sorts of things we would consider, and here is our fee structure”.
When I was in agency land, I have pushed back on excessive client pitch requirements many times, and sometimes I’m told I’m no longer part of the pitch (which is a blessing as i don’t want to work on clients that treat agencies like unpaid slaves), and sometimes I have called their bluff and they come back saying they still want us to pitch – minus the detailed brand recommendations that would require a lot of unpaid work.
I believe excessive and costly pitch efforts are an agency’s own decision. And also that there are plenty of good clients out there – I used to work for several of them.
Nice idea in theory but $2k for a ‘strategic submission’ and $5k for ideas … these seem low enough to not really bother. Unless they’re token payments for agencies that lose pitches.
Pitching costs should be factored into operating expenses and multiples … problem is, clients don’t want to pay for that either (no client wants to pay to subsidise an agency winning other business and now many clients want full disclosure over how an agency business is structured/operated in an attempt to drive down HH costs.
Jim Ward is right. No one is forcing agencies to pitch. We make the decision ourselves.
Listen, people, this is a tired conversation and I can tell you all what the future will be right now: Clients will never pay for pitches (as a matter of course), and this discussion will be had at least four times a year, every year (as the various industry bodies release their annual papers discussing payment-for-pitch merits).
Ad hack: so all staff you mentioned work on nothing but the pitch for an entire month straight? Really?
I’d have thought that a reasonable part of an account handler/planner/MD’s role is to work on pitches/new business, and therefore any costs in doing so would already be budgeted for as that’s what they are (partly) being paid to do.
@ Jim, i can’t argue the fact that the ultimate decision on costs lies with agencies. Agreed it would be unfair to completely blame (new) clients. But you would be surprised the lengths of some agencies will go for a pitch – especially if it’s just a ‘cool’ brand, regardless of their planned spend.
Agree that agencies are willing participants in this game. Much of the onus list lies with agency management being able to say ‘no’ as you have done. Like you mentioned earlier, in this kind of market, there’s always someone willing to drop their pants. Now many clients just expect it….but agree ultimately that is agency/our fault
@anonymous – You’re right that whoever works for a pitch is usually already costed out to a current account. They simply work overtime on a pitch. However, from my understanding, those extra hours do get reported as ‘new business’ costs. If staff worked overtime on an existing, the agency could charge those hours. But yes, the agency itself won’t pay pitch staff for any overtime….