The big debate: Should clients pay agencies to pitch?

Following our columnist Mark Ritson’s assertion earlier this month that clients should pay for agencies to pitch, Marketing Week asked both clients and agencies where they stand.

client-agency-pitch

To pay or not to pay. That is the question. Or at least, that was the question posed by Marketing Week columnist Mark Ritson earlier this month when he asked whether clients should pay agencies to pitch for marketing services. Ritson says this “old chestnut” of an issue has become relevant again with the growth of zero-based budgeting within client-side organisations, whereby companies precisely cost all of their objectives for the year ahead and the tactics used to deliver them.

This has made the pitching process more onerous and complex for agencies, suggests Ritson, and led to clients inviting a longer list of agencies to pitch. Given the high expense of pitching – and the rising likelihood it may not succeed – he argues it could be time for clients to pay a fee to their pitching agencies as standard practice.

READ MORE: Mark Ritson – Should clients pay agencies to pitch?

Client-agency relationships are often a source of friction within the industry, though trade bodies such as ISBA and the IPA have sought to create a framework for best practice. This includes The Good Pitch, a broad guide of six principles compiled by both organisations that seeks to encourage fair and effective pitching. One of the recommendations advises clients to consider paying for pitches.

Despite this guidance, ISBA’s director of consultancy and best practice Debbie Morrison notes that payment for pitching “comes and goes in fashion” and that its implementation varies greatly across different clients. She states that prior to the 2008 recession “we had quite a good hit rate” on brands paying for pitches, but that this trend has declined in the years since.

In addition to the financial constraints facing clients, Morrison points to the explosion of agencies putting themselves forward for pitches in recent years, which has in turn reduced the demand for payment. “There’s a degree of ambulance chasing to get on pitch lists, where some agencies are very happy to jump in and pitch for free,” says Morrison. “When you have got that behaviour, it’s very difficult to say we all demand a pitch fee.”

However, Morrison also highlights a continuing lack of understanding on the client side about the true cost of pitching. Alongside The Good Pitch guide, ISBA and the IPA published research in 2013 showing that while it costs agencies around £178,000 on average to take part in a large international pitch, clients believe it costs only around £31,000. Furthermore, there continue to be disputes within the industry about who should own the intellectual property (IP) of any pitch – the agency or the client.

agencies pitch vue

Morrison suggests that a nominal fee of £5,000 or £10,000 can help to establish trust and goodwill during the pitching process. “We’re not talking about anything anywhere near the actual cost of pitching, but it’s something that shows the seriousness of intent,” she adds.

Peter Cowie, founding partner at marketing consultancy Oystercatchers, agrees that clients should pay agencies for pitching and that it is more a sign of “respect” than a financial consideration. However, he says anecdotal evidence suggests it happens in less than half of pitches. “The problem is that there are so many different sorts of pitches these days,” says Cowie.

“Whether it’s SEO, programmatic, modern media… the big creative pitches are becoming much more disparate as there are so many touchpoints.”

Cowie suggests that clients could devise new, less formal ways of inviting pitches to reduce the cost burden on agencies. “L’Oreal did a ‘speed dating’ pitch where it had around 12 agencies involved,” he says.

“I thought the agencies would hate that, but having spoken to some of them, they really liked it. They had 15 minutes, so you can’t spend much money, but you can be really concise with your thinking and it’s very economical on your time.”

READ MORE: Performance-related pay: good for transparency but bad for creativity?

What the clients say

Dominic Rowell, commercial director at cinema chain Vue, believes pitching should be a two-way process whereby the client invests as much energy as the agency. “To me, that is as – if not more – important than recognising that effort in the payment,” he says.

Vue does not pay agencies to pitch, but Rowell states that “we’re not a big pitching business” and that the company has done three pitches in the last two years to support a wider strategic overhaul. He suggests that many marketing teams are reluctant to pay for pitches because they work to “finite resources”.

“I have worked in numerous companies where a pitch would be deemed unaffordable,” he says. “Quite often those with the purse strings will only respond once they see the creative output. There are companies at different stages of maturity that don’t recognise what they’re missing out on until they see the output of the pitch.”

However, Rowell also believes that paying for pitching would reduce the rate at which companies go out to pitch.“That would be no bad thing,” he says, as it would cut down on “creative or technical churn” within industries. Furthermore, he is sensitive to agency concerns about IP theft.

“It would be wholly unethical to take an idea in a pitch process when you haven’t paid for it,” he says. “If I’ve paid for that process, the IP should sit with the client.”

Despite these concerns, Rowell does not see a need for tougher regulation of the pitching process, noting that client-agency relationships vary greatly across different industries such as retail, FMCG or entertainment. Instead, he notes that such relationships are built on trust and that it is incumbent on both sides to work together to ensure all parties are happy.

“Hard and fast rules could be incredibly stifling to growth in any of those industries,” he says. “To me, the pivotal thing is experience. Whether you use third-party support or your own experience as a marketing leader, you have got to understand what process is going to get the best results – and critically, the most enduring results.”

agencies pitch isba

Harriet Hastings, founder of biscuit company Biscuiteers, states that she is “sympathetic to the agency perspective”, having worked for agencies in the past. She believes it is “unlikely” that payment for pitching will become standard industry practice, but says there are several ways that clients can ensure a fairer process.

“I’m very anti-large pitch lists,” she says. “It is very unfair on agencies and quite time-intensive for everyone. My approach is always to try to meet for a chemistry session first and then from that reduce any agency pitch to a maximum of two to three agencies.”

As a small company, Biscuiteers calls on agencies to support its marketing activities as it expands, though the brand does not pay for pitches. Hastings believes this would be unrealistic for many business owners, noting that in many cases clients do not simply base their pitch decision on the creative work produced.

“It is about [the agency’s] ideas, but it’s also about their experience, their credibility and their fit with the team,” she says.

What the agencies say

Neil Simpson, founding partner of ad agency The Corner, believes there are strong arguments in favour of paying for pitching given that the process has become increasingly complex. He states that when he held client-side roles at brands such as Coca-Cola and Adidas during the 1990s, the practice was to pay a pitch fee.

“What’s changed in the past few years is that to pitch properly against the client’s business challenge, you have to present a much wider selection of creative work to properly demonstrate how an idea is going to work across all touchpoints. It’s much broader than it ever used to be.”

Simpson argues that this change in the media landscape should encourage clients to pay for pitching as standard practice. He adds that in other creative industries, there is greater recognition of the costs facing agencies during the pitching process.

“My friends who are architects always think our industry is hilarious because we put so much out there in terms of our product and ideas, with no guarantee of any financial recompense,” he says.

Although Simpson believes The Good Pitch guidelines set out by ISBA and the IPA are “a great start”, he suggests there are “more tangible parameters” that could be added, such as the payment of a nominal £5,000 fee. “It would be respectful if nothing else of what an agency is putting in,” he says.

“Agencies can choose to spend a heck of a lot more than that of course – they probably will – but it just recognises their investment in this.”

Simpson is also critical of the use of delayed payment terms by clients, where final payment for commissioned work is not made for many months after completion, and of the potential for IP theft. “I do believe that respect for IP needs to be tightened up,” he says.

Ash Bendelow, managing director of creative agency Brave, estimates he has been paid a pitch fee “probably about half a dozen times in 11 years”. He believes that of greater concern is the lack of education on the client side about the amount of money that goes into pitching.

You have to present a much wider selection of creative work to properly demonstrate how an idea is going to work.

Neil Simpson, The Corner

“We have done nine creative pitches this year and the average cost to the business on those responses was between £30,000 and £40,000,” he says. “For that agency business model to work, the agency has got to be making a gross income of £300,000 to £400,000 to break even.”

Bendelow states that “a £5,000 fee is nice but it’s not going to be a deal-breaker as to whether I take on a pitch”. Instead, he looks for clear signs of “discipline” from the client-side that shows him their motives are “authentic”. This includes bringing in procurement at an early stage in the process to ensure that there are “clear rules of engagement”, for both client and agency, that are not distorted later on in negotiations.

Bendelow argues that understanding between the two sides is improving, but that ultimately it is down to individual clients and agencies to find the best route forward. “There’s good and bad on the client side, as well as good and bad on agency side, but discipline is fundamental,” he says.

“It’s one of the big checks and measures that I look at as best as I possibly can when deciding whether to go for a piece of business.”

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Comments
  • Stephen White 22 Nov 2016 at 10:29 am

    EMM is an international media audit company based in London operating globally for the last 25 years. We manage media agency pitches on a regular basis where the UK is only one of the many markets we operate within.We firmly recommend that Advertisers need to pay agencies and consultantsies based on the quality and expertise that they can deliver . Not based on the advertiser’s media spend.Advertisers need to respect the agencies they are working with and consider some form of bonus for exceptional work.This is known as a PRIP (performance related incentive programme/payment) Where does the money come from to pay for this ? The swollen with cash media buying agencies !

  • Justin Cernis 28 Nov 2016 at 3:17 pm

    The debate depends on what lens you view this through – but the real issue isn’t about money. It’s about creating the right environment to make best use of skill, intelligence and resource.

    A shift in mind set needs to happen so both brand owners and agencies benefit from a more beneficial shared pitch agenda.

    Currently they don’t, which is a shame as actually we are all on the same side.

    In my experience: 20+ years in an variety of agencies (of which 12 years purely in new business development roles), 7 years client side, 3+ years in an international TV production company pitching to agencies and clients alike, and for the past 6 years pitching for my own agency.

    By and large the pitch process is seen as a benefit TO the agency – the opportunity and kudos of winning a pitch (and in some cases an ‘honour’ to be on the pitch list itself) – but that view is actually detrimental to the process and the final outcome – which has to be the most ‘brilliant’, competitive, differentiating and implementable solutions to the client brief.

    And just to stress that point – FOR the benefit of a clients’ brand and business (and of course broader stakeholders – staff, shareholders, community etc).

    Whilst we would hope the pitch solutions are in fact ‘brilliant’ etc – historic data from industry sage David Wethey at Agency Assessments International tells us that in over 24 years of the pitches they ran only 1 in 5 creative ideas pitched actually saw the light of day – and that there is no correlation between the short term magic of a pitch and the benefits of a long term relationship.

    Despite tough economic times all round, covering the cost of some overhead with a pitch fee – and as nice as that is – isn’t what really motivates agencies (well it shouldn’t anyway).

    What most agencies would probably prefer is the best environment to do their very best work in i.e. well managed pitch lists and timelines, that make sense, clarity, focus (with a real strategic and creative challenge) in the brief itself, freedom to data, access to the right people, early doors respectful conversations about remuneration and most importantly honesty all along the way.

    True belief and respect for the role of an agency would also be great, but hey!

    I can promise you what clients would get as a result are people passionately engaged in the challenge of their brief, and genuinely determined to do the very best for their own reputations – and not having a resemblance of that spirit simply because their time is covered by a token fee.

    Creating the right pitch environment is an investment in the process in the right way.
    Incumbent upon clients to make that happen.

    If it does happen, an investment in an agency invoice shouldn’t be necessary.

  • Suki Thompson 13 Apr 2017 at 11:29 pm

    The best clients and agencies look to build and invest in long term partnerships. Expertly run, challenging pitches with briefs from authentic clients that have a real need for a new agency will result in a fair process with a real winner. The use of a quality intermediary or an expert process is better than any small pitch contribution, but a payment it is a great sign of intent and a classy client.

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