Goodwill Gesture vs. Pay to Pitch
Advertising, we have a problem.
The agency industry is unlike any other. People in other industries don’t provide their would-be clients with “spec work” for free. So why are agencies expected to think for free when pitching for a new account? It’s a topic that strikes a chord throughout the industry with an ongoing debate over the question of should agencies be paid to pitch?
It’s very expensive to pitch. A small project could easily land at $25,000, with average pitches running closer to $100,000+ and some as high as $1M for global accounts. The issue lies not only in the free-thinking, but all of the out-of-pocket costs the agency ensues just to have a chance (typically a one in four shot) at winning new business.
The pitch process is a source of ongoing frustration for clients and agencies. According to studies, 61% of brands and 93% of agencies are wanting to see change in the traditional pitch process. In order to improve the process, clarification is needed on who owns the intellectual property and a mutual appreciation for both sides of the pitch process is desperately needed.
So the question becomes, is there a happy medium when it comes to pitching new business that benefits both the client and agency? From what I’ve seen in my experience as an agency search consultant, goodwill gestures are an appropriate answer as opposed to getting paid to pitch, and here’s why…
Pay to Pitch Problems
Paying to pitch can quickly turn into tricky and murky water. When you pay someone, unless it’s legally and specifically spelled out beforehand, the client can easily be under the impression that they own the agency’s work and ideas. Paying an agency to pitch makes clients feel as though they own the intellectual property shared throughout the pitch process and that misunderstanding can quickly turn into litigious concerns.
Since the days of Mad Men, it often feels as if clients have the upper hand in the pitch process, but this shouldn’t be the case. The process should be executed with mutual respect for both parties, keeping in mind the time and effort they are contributing to the cause. In fact, the process itself is a leading indicator of how the client will treat and consider their agency in the relationship – will they be considered as a partner or a vendor?
Clients need to keep in mind that agencies are not only thinking about your business for free, but they are pouring their heart, soul, resources, nights and weekends into the process. That needs to not only be acknowledged, but also appreciated. So what is the best way to go about this without paying for the pitch? In almost two decades of managing agency reviews, two of the best alternatives I have seen put to use are: Goodwill Checks and No OOP Expenses.
Goodwill Check
One effective tactic of acknowledging the expense of an agency pitch is rewarding all finalists with a check for their time and effort in sharing ideas. However, it’s crucial that these checks are distributed after the agency review concludes with a clear understanding that it is simply for reimbursing some of the pitch costs.
Obviously, this check will not cover all costs included in the pitch process. However, the gesture shows a sign of respect and understanding that the agency invested time and money to share ideas on their business. That goodwill check typically ranges from $5,000 to $25,000 per agency depending on the actual process.
This check is somewhat of a stipend for the fees incurred throughout the pitch process but again, it does not imply that the client owns any intellectual property since the transaction is made after the review process concludes. It’s more of a gratitude gesture to offset some of the spend for pitching their business and can be used just to say thank you, even though it certainly won’t cover all of the costs.
No Out of Pocket
Another gesture to acknowledge the expenses the pitch process entails is to absorb out of pocket expenses. If you can’t pay an agency for their ideas, the next best thing is making sure no money comes directly out of the agency’s pocket for travel expenses, hotels, food, etc.
The most effective way to do this is for the client to designate a team member to plan all logistics for the agency and pay for it directly so that no checks ever exchange hands. This way, all travel costs are absorbed up front. Again, this won’t cover all expenses, but the “travel token” will certainly reduce a fair amount of the hard costs of pitching.
I have had three clients involved in agency reviews in the past year who offered goodwill gestures to the finalists to help alleviate expensive pitch costs. Although it may be a fraction of the total OOP, it’s more than just about the amount. It shows that the client is serious about the process, acknowledges the expense to pitch and exemplifies appreciation for the agencies’ willingness to think about their business without any guarantees of being awarded the account.
Ditch the Pitch?
Agencies don’t have to participate in the pitch process. In fact, some agencies have operated under a “no-pitch” policy for decades including BBH and Crispin Porter Bogusky to name a couple. Their strategic and creative resources are their most valuable assets and they were protecting their intellectual property by choosing not to show creative work. The landscape may be difficult, but agencies have a choice of whether or not to participate. With that said some of the following contemplation pointers have helped agencies to say “no” a bit easier:
- Reverse Auctions – Agencies are not selling widgets. If the client can’t be human about the process, agencies will think twice about the potential relationship.
- No budget? Most agencies have the following guideline: No go. Period. End.
- Procurement – Is procurement too heavy-handed in the process? If so, agencies will feel that it can lead to “penny pinching” and tough times ahead.
- Cattle calls – Open “casting or cattle calls” are not optimal for either side and is a sign where the client team lacks industry knowledge and/or experience with running an organized process with rationale behind each step…again, another red flag for agencies.
As for offsetting some of the agency expenses for pitching when they do decide to go for it, goodwill checks and clients absorbing out-of-pocket expenses directly are just two gestures to transform the pitch process into one of appreciation for the agency. The agency pitch process as a whole could be greatly improved by just showing mutual respect for the effort and ideas the agency provides during the pitch.
If you need assistance navigating the agency realm and pitch process specifically, reach out to AAR Partners to find the best fit partner for you and your team.
Tags: Agency Search
