To Pay Or Not To Pay – Dilemma In Advertising

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More than a decade ago, I started off my career in one of the largest agencies in the world. Providing brand-building solutions rooted in actionable insights, the agency was, and still is, a global business partner to the biggest FMCG names since its inception. While we helped clients build their brand, being the client servicing team, we were also responsible for fetching in more business and achieving sales numbers. This means we were either making cold calls, arranging meetings with potential clients, or receiving briefs to develop our proposals, business solutions, sales deals, etc.; all of which are referred to in advertising agency lingo as the “Pitch”.

The agency team generates business by making a pitch that will – hopefully – win the client’s heart and soul and they will choose your agency versus everybody else “pitching”. No pitch is complete without the financials and the money talk, which is a critical part of winning or losing the client.

A number of times; we would win the client, start working for them immediately and the money will start rolling in. At other times, we would come back “empty-handed”. (When I say empty-handed, believe me, it literally translates into not earning a single dime)! This was termed as a “lost effort”. The big question; can effort loose? Apparently yes, because of the time spent on building the pitch, the brain juices extracted to carve a solution, and the creative directions have taken were not appealing enough to the client to give a go ahead and let the pitch mature into a business deal. This meant that nothing was earned against the time, operational cost, and overhead cost that the agency bore.

Needless to say, the bigger the client, the bigger the effort; including the size of the team (sometimes the whole ad agency is working on the pitch), and the involvement of senior resources in developing the pitch – a deck whose future is unknown. This reminds me of the time when we were working on developing a pitch for one of the agency’s development sector clients, which is also one of the largest financial institutions in the world. The pitch took fifteen working days to complete; and other than the operational team, the agency CEO and an expert from the regional team in Dubai were also giving inputs to develop a winning combination for the client. I remember senior members of the agency remarking that we should charge the client for this pitch whether we win or lose, considering the kind of time and effort the whole company is putting in.

We went on to win the pitch, and nobody brought up that issue again – till the time we were working on another pitch for a client from the same sector and we lost it. All hell broke loose – all the time and effort that had gone into developing the pitch became a “huge loss”. The team’s performance and ability to decipher client needs and provide required solutions, so much so that even their presentation skills were questioned. One of the senior members of the agency, who had presented the pitch, remarked that we should have selected a person from the directorial level to present such an important project rather than a business unit head! At the same time, all us fresh grads and executives with one to two years of work experience were silently contemplating becoming ‘clients’, and getting away from the throes of the agency madness!

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Fast forward five years, and here I am on the ‘client side’. When I joined; all energetic and filled with hope, high in my mind as the agent of change; I vowed to be empathetic towards the creative agencies working for us and never be “unfair” to them when it would come to payments. Have I been able to achieve this? I would say only partly. To date, clients do not pay agencies for pitches, to the extent that nobody even talks about paying for a pitch any agency is making, let alone look at it as something that should be charged for.

Looking at the flip side of this whole debate, where the game starts with the receipt of the brief for an agency, the effort only starts to count when a creative agency has been taken on board and it starts to churn out campaigns, creatives, and other marketing collateral for the client. To those sitting at the brand side, the whole pitching process is as invisible as it could be – it’s as if they asked for a pitch, the agency already had a few ideas ready, which they inserted in a presentation, and BINGO! And if it’s that easy, then why does the brand has to pay for a pitch? The agency already has all the ingredients, they know a number of recipes, and so they created some creative options for the brand in question too. Besides this, the biggest part is that they have not started working for the brand company yet. If the agency has not helped generate any business then why should the brand pay them? Cutting a long story short, it’s not the effort that any agency puts in, rather the “productivity” or what an agency has produced so far for the client.

In the light of the above argument, most pitches that have a high likelihood of losing, never receive a dime from the client. On the other hand, the creative agency that has a cost attached to developing a pitch never receives any compensation, which adds to their losses. This is not just the case in Pakistan, it is a global phenomenon. There is an unease woven into the client-agency payment model about pitch prices or if anything should be paid for it. However, there are agencies globally that are charging up to three (3) million as Pitch Price for one pitch. Taproot India, Law & Kenneth Saatchi & Saatchi, and Creativeland Asia are a few who charge for pitching right across the border in India.

Such creative agencies argue on the following three points mainly when asking clients to pay for a pitch:

  1. The time and effort involved in developing a sellable idea or direction.
  2. To prevent the possibility of idea theft – clients do continue to develop their pool of ideas while a creative agency has already been selected.
  3. To come up with quality pitches in terms of originality and creativity. When an agency knows it will be paid, they do tend to think out of the box. Otherwise unsold and irrelevant ideas will also be pitched.

If one were to analyze these points, especially the last one, it does seem like a pitch fee may actually help the client in the long run. Yet, selling the idea of demanding pitch payments requires some deliberation. Following are some win-win solutions that I came up with from my experience, which I am sharing here for the readers.

  1. Discuss payments with the client before pitching
    If a creative agency wants to charge for the pitch, it should be discussed beforehand. The price may depend upon the scope of the work or the time and effort involved in various resources. Pitch only if the client agrees to pay for it.
  2. PAA takes up the cause
    In the past, when clients used creative agencies ruthlessly; by getting work done and then changing the agency without paying them their dues; APNS (All Pakistan Newspapers Society) introduced the NOC (No Objection Certificate) document. According to this regulation, the new creative agency will only sign a contract with the brand if the previous agency has given a NOC to the client; otherwise, both the client as well as the new agency will be penalized. Also, the client will not be able to release any communication on any medium.
    A similar regulation can be developed in the case of creative pitches, where PAA can bind clients to pay some standard amount for any pitch they are asking a creative agency to develop.

While expecting clients to pay for pitches may seem like a farfetched idea in our industry, it may not be impossible to start a process of change, step by step. The benefits will only emerge in the longer run, where clients will benefit in terms of being delivered with high-quality pitches, while the creative agencies will gain by getting their due share for the effort they have put in.

Easier said than done, but definitely not impossible.

This article was originally published in Synergyzer Issue 2, 2021.

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