the lowdown on pitching fees
In asking agencies to pitch for their business, advertisers are increasingly asked for, and are considering paying, pitch fees.
In this edition of P3 e-news we look at the costs of pitching for agencies and discuss when marketers should pay pitch fees for their participation.
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paying pitch fees to agencies?
There are always times when an advertiser should go to the market to select a new agency. But this is not a process that should be entered into lightly. Going out to the market place comes with
several risks and costs to both advertisers and their agencies. Before we consider if the advertiser should pay pitch fees lets look at the cost to the agencies, which include:
internal human resources
Like most companies these days, agencies do not have a significant capacity within their human resources for speculative work. While few agencies appoint external staff for a pitch, the head hours invested in the pitch process is a cost to the business,
with the majority of the costs quoted for the pitch process comprising these human resource costs.
disruption to the agency
The opportunity to participate in a pitch can be great for agency morale, but many agency managers are rightly balancing the potential upside of chasing new business opportunities with the impact the disruption may have to existing
non-recoverable external costs
Depending on the size of the account, many agencies will invest heavily in external costs such as consumer research, animatics, external artwork and the like to provide a perceived competitive advantage. If the agency is unsuccessful, these are
hard costs that will never be recovered and even if they are successful, it can take many months to get back to break even.
intellectual property rights
The core value an agency provides is the ability to generate ideas. In many cases advertisers require the agency to assign the rights to these ideas to the advertiser as part of the pitch process. If you were not intending to use the idea why
would you want to own it? And if you do intend to use the idea, why would you not pay for it?
industry perception of failure
While the successful agency wants to shout their success from the roof tops, the unsuccessful agencies are naturally concerned that a number of unsuccessful pitches can create a perception that the agency is "off the boil" with little or no opportunity of
putting these losses into context as they are often covered by confidentiality agreements.
when to pay pitch fees
There are times when you should compensate the participating agencies for their costs. Our advice is to offer pitch fees when you want to buy the rights to all concepts, not just the winning concept, when you require the agencies to
prepare materials and incur external costs beyond what would be considered standard and if you are engaging a large number of agencies in the strategy / creative stage of the process.
To find out more on pitch processes and pitch fees, contact P3 in Melbourne 03 9682 6800 or Sydney 02 9279 4997 or by email on firstname.lastname@example.org