Even top advertising agencies are known to give it away now

Usually, when we hear about top advertising agencies giving their ideas away for free the focus is on pitching. But agencies have been kindly donating their IP since advertising began.

The first compensation model for ideas was based on a percentage of the media spend. Ideas were thrown in as added value. Nothing appears to have changed much since then. Except that today there is no longer a media commission. But agencies still give plenty of their value away for nothing.

The most obvious, but not necessarily the biggest give-away, is the pitch. There are still marketers, procurement people and legal advisers who want to own all of the IP from every agency involved in a pitch.

The legal department’s justification is that they are protecting confidential information written in the briefing. They also say they are reducing the risk of being accused of copyright infringement if one of the agencies develops a similar idea.

Both of these arguments are, in fact, fallacious. Both issues can be resolved by making a simple agreement before the pitch.

But pitching is only the tip of the iceberg. Agencies fritter away their value every day. One of my favourites is the free resource provided by agencies to their clients. The free CEO and the free client director and the free strategy director.

Often we see agencies propose retainers like a sale in a supermarket. Buy the agency get the senior staff free! What better way to reduce the perceived value of your key assets than to just give it away? Unless, of course, you have no intention of honouring the offer.

Then there is the account management bonus discount. The marketer adds extra work into the proposed scope, and the agency takes on all the work at no extra cost. This is usually when the marketer has extra work, but no extra budget. So the agency comes to the party to help out hoping that they can either make it up in production or make a claim at the end of the financial year, because the head hours blew out. Only to find out that the marketer has spent their budget.

Then there is the agency practice of not giving it away, but discounting to the point that you may as well have done. This particularly applies to creative or concept fees. A number of times we have seen agency production estimates loaded with creative hours way out of balance with the actual creative supervision of the production.

The reason is that the agency charged a pittance for the concept, say $500 or $1,000, and is hoping to make it up in production. The problem is this steals from the value of the production. The marketer has a production budget, and the more the agency tries to claw back the concept fee they didn’t charge for, the more it takes away from the dollar value seen in the final execution. Could that explain why there is so much bad advertising around?

And what about where the agency signs a standard services contract, where they agree to assign all IP developed by the agency during their relationship with the client? So this means that if you come up with a great idea for, say, an iPhone app, and you have a telecommunications client. They effectively own the IP even though they may not have briefed the requirement, or even if the use of the app is not directly related to the client’s brand or products.

Agencies continue to live – and die – by the bizarrely altruistic philosophy of the lyrics of the Chilli’s “Give it away, give it away, give it away now”. And it’s not good for the industry.

This was a guest posted on Mumbrella

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About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com
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2 Responses to Even top advertising agencies are known to give it away now

  1. Agencies should charge for creative as that is where the ROI is for the client. The tendency to focus on production I find really frustrating. In the old days you could put together a creative brief and the agency would come back with at least three different concepts probably more, prepared as rough outlines or hand drawn, and you would decide from there what to develop further. Now you wait twice as long while they prepare concepts worked through to finished art stage, and find most of the effort, cost and time has gone into the production side – for concepts that you reject – it’s a waste of the client’s time and money.
    If you pay real money for the creative concept work then you should own it – if you don't then you shouldn't be asking for the IP to be assigned. We pay for pitch work, but we only ask for the IP assignment from the agency that wins the pitch. We just insist participating agencies sign a confidentiality agreement before they receive the brief. That’s fair.
    IP is always a tricky area. I think the point from the clients prospective and particularly for the higher education sector, where competitors are known to quite blatantly rip-off creative, is that we don’t want our agencies working with our competitors or supplying IP that would provide them with a competitive advantage during the contract period. What if the agency comes up with a great idea but we cannot afford to execute it? If creative is produced outside of the briefing process but the idea is generated through their relationship with the client then there is a problem if they take that to a competitor while still under contract. You go with an agency that you think will provide you with a competitive advantage and is focused on your business. For an agency to enter into a business relationship with a competitor during the contract period would be considered a conflict of interest and a threat to your considerable investment in that agency. An agency's knowledge of a sector and the opportunity to pitch for competitive business is created directly through your investment in them. When an agency looses a contract then in my experience the first thing they do is start talking business with competitors, which I fully expect them to do; that’s their compensation if you like and we are protected by our standard contract agreements.

  2. Good point of view Eveline. The only point I would make is that there are other ways to restrict agencies working with competitors other than owning IP. In fact I have found that most areas where IP is used to manage a particular behaviour there is usually a simpler and easier way to do this.
    Have you actually had an agency legally assign their IP to you?

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