Mark Ritson: Should clients pay agencies to pitch?

Ritson head scratch small

An old chestnut rolled towards me last month and I am still not sure what to think about it.  Before I explain, let me issue an advertising agency health warning for this week’s column. I already know what you will say in response to the words below but, with respect, this isn’t Campaign or Ad Week and this is a conversation for marketers. For clients. For those who pay. I’m not saying your views are not super welcome, I’m just saying we already know what they are and it’s to the other side of the fence – the client side – that I address this week’s column (and all the other columns actually).

So, I was teaching the Marketing Week Mini MBA in Marketing last month and we were knee-deep in the world of zero-based budgeting and integrated marketing communications. There is a key stage in any zero-based approach in which the client team has to work out two very important things. First, how much they think they can achieve in the year ahead in terms of strategic objectives and what those objectives are worth in financial terms. Second, how much the tactical arsenal to deliver those objectives will cost by year’s end. To put it more simply, once a company has its strategy it has to work out both the investment and the annual return.

READ MORE: David Wheldon: Advertisers should remember they need agencies

The only way to do that is to brief a coterie (that is the correct collective noun by the way) of agencies using a proper marketing plan with target segments, positioning and objectives along with a rough guideline of budget. Then, and this is the contentious bit, four or six weeks later ask the agencies to come back to the client individually with general suggestions of how they might deliver on some or all of the objectives. There is no creative work expected, but certainly a fair amount of elbow grease to understand the brief and come back with a plan of attack and some very tentative numbers. The client picks the agencies, blends their tactics and hopefully signs them up on some form of performance-based remuneration and off we go. Cash city.

The problem with this rather logical approach is that it does involve an annual briefing process – anathema to agencies who prize the ancient ‘long-term marriages’ that don’t exist anymore but keep getting talked about when account managers get pissed. It also involves longer agency lists that can get as big as six or eight agencies being invited to the pitch, again striking the gong of disenchantment on Charlotte Street. It also almost always involves inviting both incumbents and new agencies to a shared immersion day where the brief is given out. And, worst of all, agencies are expected to come back with a relatively thought-out response to the brief long before there is even a sniff of the heady scent of contracts or the musky arousing smell of procurement negotiations.

READ MORE: Mark Ritson: Why Unilever is right to adopt zero-based budgeting

It was this final point that sparked an excellent debate among the Mini MBA students last month. As one of my forthright and experienced MBAs pointed out: “Why should agencies work for nothing?” It’s fair push-back. And I said so. There is no reason that a fixed fee could not be a part of the pitching process, though given the kind of tight-arsed, private equity-run monsters that are in the vanguard of zero-based planning I would not be entering much into agency budgets for 2017 under the ‘pitching revenues’ column just yet.

But what made my experience so intriguing was what happened next. I flew off to have an entirely fantastic week teaching MBA students – the non-Mini kind this time – at a prestigious business school in Asia. We got to zero-based budgeting by about day four and I mentioned the debate I’d been having in the UK. One of my students smiled and nonchalantly recommended that I “work more in Singapore” where “agencies have to pay clients to pitch”. After I got back up off the floor I verified the story. Sure enough, the university in question had indeed asked agencies to pay for a copy of the pitch materials and to be included in the pitch. Asian marketing magazine Mumbrella described the deal so caustically that they used a metaphor even I would not touch with a six-foot Singaporean barge pole.

I’m well aware of how it can get just a little precious in agency land when it comes to pitching. How they want ’tissue meetings’, ‘chemistry sessions’ and client transparency while avoiding ‘beauty parades’. It’s all rather quaint and very 20th-century but the most salient fact for marketers to remember is that the opportunity costs and basic expenses of putting together even a rudimentary response to a zero-based brief must easily exceed £5,000. That cost level means only the very biggest agencies can afford to turn up and respond to most briefs, meaning smaller, often better, agencies simply won’t respond to your RFP even though their return would have been greater and their requested investment smaller.

So while I do think a lot of the stuff about pitching etiquette is a load of agency wank from the 1980s, as zero-based budgeting takes hold we in client land should think carefully about what we are asking of our longlisted agencies and maybe, just maybe, pay them for answering the question too.

READ MORE: The big debate – Should clients pay agencies to pitch?

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Comments
  • Shan Preddy 10 Nov 2016 at 4:13 pm

    The short, easy answer is no. Agencies should never be paid a pitch fee. That’s because marketers should not be asking them to pitch in the first place. The appointment process isn’t difficult: (i) formulate your brief; (ii) draw up a long-list based on capability, client list and casework; (iii) do your research, reviewing potential against your brief and phoning clients to see what the agency is really like to work with, and draw up your shortlist; issue NDAs and meet each one separately for an in-depth discussion about working together, giving them the brief and asking for terms of reference with methodology, timings, fees, team-composition and T&Cs; (v) select the best and start working with them. At this point, and only at this point, should their expertise be provided and your payment made in return. Experts of any kind – lawyers, accountants, plumbers, agencies – whose income model is fee-based should receive payment (full payment, not just a token ‘fixed fee’) for their work, but not in a pitch. Save it for the real thing.

  • shirley whyte 12 Nov 2016 at 9:45 pm

    Not so simple, evidence of work is vitally important in the process. Team chemistry and credentials ticks one box but how can you genuinely judge the agencies capability to respond to your particular brief without sharing of ideas. I’ve been on both sides of the fence and yes marketers need to be more disciplined, and a paid element might just help with that. The model works in Germany, when managing pitches I had a choice either allow a portion of my budget to pitching or take a chance with one agency based on research, feedback & credentials. Either way budget is at risk.

  • Shan Preddy 22 Nov 2016 at 3:51 pm

    Every business decision carries some risk, Shirley; the key is to working out where the risk really lies. I can only comment on the design world where I work as a consultant and trainer, but the best (maybe the only good) design solutions come from a close working partnership between the client and the design firm. While it’s comforting – and exciting – to see creative solutions for our own product or brand or environment, in a pitch they will inevitably be (a) superficial and (b) created to please and to win the pitch , not necessarily to provide the optimum solution. And that’s where the risk is. Can you afford to get it wrong? In most areas of business we interview professional firms, shortlist them and make the appointment on a proposal without expecting the consultant, supplier or contractor to do the work first. In the creative sector, however, it’s somehow become an unhealthy ‘norm’ to expect solutions (mostly for free) before a full analysis and explorations has been allowed to happen. I’d be interested to hear more about your experience of the German model you describe above, though.

  • Matthew Connaughton 10 Apr 2017 at 1:08 pm

    I’ll call this now, shall I?

    Cue plenty of agencies discussing the “new norm” of the expectation of paid pitches, but none of the results-based stuff because 99% will run a mile.

    I can see a possible future where there are agencies who never do any client work, but who are maintained by their all-but guaranteed pitch income.

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