Should clients pitch in to the tender process?

Andreas Vogiatzakis, MD of Omnicom Media Group in Malaysia, says YES

“Last year brought about unprecedented media pitch activity, with twice as many media reviews compared with 2008. Perhaps fuelled by a sluggish economy, these reviews were driven in many cases by procurement. This is not necessarily wrong, as everyone is right in trying to maximise the returns on every cent of their media investment.

However, in the competition process, especially where the lowest possible price is sought, sometimes the wider reasons behind selecting and inviting certain agencies to pitch are not carefully considered, and these reasons are often at least as important as price.

From the agency view, the pitch process always requires a considerable investment in resources, time and money. If the invitation is indeed well thought through, then the client should be willing to consider investing a comparatively small amount of money vis-à-vis the total media billings, in order to evaluate which is the best media partner to consider for the future.

So a media pitch fee, if properly managed, could be a good measure in forcing clients to think more carefully about who they finally decide to invite for a pitch and why.”

Greg Paull, principal at R3, says NO

“Pitch fees are the wrong answer to a tricky question. Clients are wasting their own time, and the potential agencies’, if they brief too many too often and ask for too much.

Agencies are under too much pressure to hit quarterly revenue targets and continue to respond. The pitch fee is not a panacea to this sickness. The answer needs to involve more upfront research by marketers on their agency needs, more time invested in shortlisting the right agencies and briefing fewer of them more intensely on their business.

In our research in China, clients are now inviting an average of 3.7 agencies to their final round. We find when the final round consists of two agencies, both of them are far more engaged. This leads to better ideas that are not just discarded.

We’re not against the ideas of pitch fees per se; we’ve worked on several pitches where clients have used them, usually when agencies are asked to go beyond the normal.

The best question clients ask us on this topic is “Do pitch fees mean I now have intellectual property over every agency’s thinking?”

And that’s not a path any losing agency with $3,000 in their pocket wants to go down.”

Mark Cripps, regional director at MRM Worldwide, says NO

“Last year R3 published a survey claiming that 90 per cent of Asian agencies believe clients should be paying for pitches, with agencies investing anywhere from US$24,885 for a local pitch and up to $179,663 for a global review.

Those figures are about right in my experience. But the reality is that pitching has to be regarded as a necessary pastime and, no matter how much the industry tries, clients will not be willing to cough up much (or anything) to contribute to pitch costs. I can’t think of many industries willing to bear the costs incurred by their suppliers when undertaking RFPs.

Agencies have to understand that this is a cost of sale item — a cost of participating in the industry — and should budget as such.”

Stuart Clark, managing director at MPG in Singapore, says NO

“Pitch fees have little to do with covering costs and everything to do with disciplining clients. The fact that we even discuss them shows how much the advertising industry has become a buyers’ market.

In principle, the idea of imposing a penalty for calling too-frequent pitches or inviting too many agencies is a good one. But in practice, it is very difficult to enforce. Most clients don’t get paid for responding to RFPs, and will be reluctant to accede to such a request from their own suppliers. Furthermore, the over-supply of agencies means someone will always pitch for free.

An additional concern is the effect fees could have on smaller agencies. Many clients in Asia are already extremely risk-averse. If consideration for small or non-traditional agencies incurs additional costs, pitch lists will focus more and more on the safest choices.

There is an issue here, but fees are not necessarily the answer. It is up to all parties, including client associations and pitch consultants, to encourage basic standards. Professionally-run pitches, with disciplined shortlisting, focused briefs, and a level of mutual respect, will lead to a more efficient process.”

This article was originally published in the 25 February 2010 issue of Media.