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Advertisers softening stance on pitch fee?

Advertisers softening stance on pitch fee?

Author | Priyanka Mehra | Wednesday, Apr 23,2014 9:22 AM

Advertisers softening stance on pitch fee?

In times when RoI is the name of the game, and an agency is what it can deliver, long term client-agency relationships have often been seen buckling under these pressures. How acceptable is agencies charging a pitch fee in our current scenario? Taproot India, Law & Kenneth Saatchi & Saatchi, and Creativeland Asia are a few agencies that charge a pitch fee. Is the brand marketer’s reluctance changing to acceptance?

Size Matters
Pitch fee is also a means to justify the time and effort of a small team on preparation for the pitch.

“Usually smaller agencies who have smaller teams are occupied with work on their existing set of brands/ clients, which generates some amount of revenue for the agency. During this process, if a new client wants them to stop their existing work and invest 10-15 days for a new business pitch without a basic time/ effort cost, I feel it’s unfair,” opined Santosh Padhi, Chief Creative Officer and Co-Founder, Taproot India.

“On the other hand, bigger agencies usually do not charge a pitch fee as all the 300 people working for the bigger agency are never always busy, hence, they can manage to pull out a few of them and give it a shot. Thus, it is easier for a bigger agency as compared to a smaller one,” Padhi added.

Taproot India charges a pitch fee/presentation fee on most occasions and adjusts the charges once they start working on the business in the form of retainer/ project fee.

“An agency puts in a lot of effort during the pitch process. We think of the best possible solution for the client problem and give multiple options to choose from. Best of the agency’s creativity and strategic thinking is put behind a pitch. There has to be some value for the effort. You can’t ask an architect or a fashion designer to give away their ideas for free and pitch for the customers business. So why should an agency do that?,” asked Anil Nair, CEO & Managing Partner, Law & Kenneth Saatchi & Saatchi.

Deterrent to idea stealing
Law & Kennneth Saatchi & Saatchi uses the pitch fee as a deterrent to ‘idea stealing’. The agency believes that there is a growing trend among few clients to call for a pitch every time they are at a loss for ideas. They get the best ideas from the pitch and execute it with the agency who quoted the lowest or their current agency. Pitch fee, thus, also acts as an indicator of the seriousness of the client to change the agency. “The guys who resist this tooth and nail are the ones who call for a pitch for all the wrong reasons. If we feel that the pitch is genuine and the client is reputed, we don’t push for a pitch fee. Everybody needs new business for growth, so we are not stuck on revenue from the pitching process. But we don’t want to waste time and money on undeserving clients,” Nair further said.

Interestingly, Karthi Marshan, Head - Marketing, Kotak Mahindra Group agreed with this view and said, “If I valued the input of an agency enough to invest my time evaluating them, I would gladly pay for their inputs with cash too. Many clients have for long used pitches as a free idea generation exercise. What the fee does is legitimise it. Now, for a small fee, I am free to use the best ideas I get and choose who I want to work with, all legal and clear. I am not sure the agencies have thought through the implications themselves.”

Reluctant clients?
Though the agencies may put forth a valid argument, in the real world the wielding power remains with the clients (the buyers). The agencies (sellers) agree that they have observed great reluctance, at least at the initial stages. 
We live in a world where clients are far more powerful than the agencies. So, we have seen great reluctance from most of the clients initially.

“The agencies and clients, in addition to being creative partners have a business relationship. The agencies are offering a service, if there is value in it, the clients will pay. Best of luck to the agencies who are trying to charge pitch fees,” said Anil Jayaraj, Chief Marketing Officer, Pidilite Industries. He remarked, “My personal view as a client is that I would be very reluctant to pay pitch fees if I was ever in a pitch situation. While it is true that agencies incur some costs towards preparing for the pitch, the intent is to form a long-term partnership. I don't think pitch fee is a way towards fostering that. I would think agencies might want to consider the time and costs towards pitches as investment or business development expenses. Having said that, pitch fees or not, I believe clients would love to work with the best talent.”

The best talent obviously comes at a price. While both Taproot and L&K Saatchi & Saatchi may be choosy about the pitches that they participate in and may concede to give up pitch fee for a genuine client, Creativeland Asia, on the other hand, makes no exception to the pitch fee rule.

“I can be quite sure to claim that Creativeland is the only agency in the whole industry who has never pitched without a fee. I have never been a fan of agencies putting their best foot forward, reducing fees, and working for nothing. But it is tough to stand our ground. Fortunately, I don’t work with network pressures and other controls and conditions beyond my control yet. I know a lot of people who have secretly told me that they wish they could as well. And I respect them for sharing the view. I haven’t till date gone without a pitch fee, because I really wanted to work on the brand, when I have really wanted to work on the brand, I have gone all out to convince the most difficult brands to give us a pitch fee. I have failed many times. But this is unfortunately my own little war for respect. I will lose most days, but the days when I win drive me to put everything I have behind that brand for respecting what I believe in,” said Sajan Raj Kurup, Founder and Chief Creative Officer, Creativeland Asia.

Is it fair?
While other agencies, irrespective of size, continue to pitch without a pitch fee, is it fair that these agencies alone demand a fee?

“Fairness doesn’t enter into the equation. Google does for free what other email clients used to charge for. It’s a marketplace, the market will decide what is fair to do or not,” opined Marshan.

Clients can also fairly judge an agency on the basis of their past work; after all, if an agency has produced great work on 17 different brands, they are most likely to do justice to another project.

Padhi added here, “Some clients do pay (most clients that we have on board today have paid us the presentation fee/ pitch fee), and there are many in the industry who don't; everyone has the right to choose what’s right for their business, it’s neither legal nor illegal.”

While pitch fee does differentiate genuine pitches (read clients) from others who may enjoy a parade of agencies, the reality is that clients are paying where they see genuine value being offered though few in number. Does this mean more agencies will jump the bandwagon of pitch fees? Only time will tell. There are agency creative heads who, too, would like to charge pitch fees, however, being part of a network setup could be a reason where such a step is not taken.

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