Why pitch fees are unlikely in SG

Singapore - When it comes to discussing pitch practices, one common topic heard from the agencies is that of remuneration or some form of compensation. While brands and clients swear on fair practice, agencies still have many gripes over the pitching process.

Many agencies Marketing spoke to agreed that pitch fees would go a long way in allowing agencies to invest more into pitch production that would help potential clients more. Others have also added that pitch fees will change the pitching landscape in terms of better valuing concepts and ideas.

We spoke to several agency leads for their take on the matter.

"Yes" to pitch fees, say agencies

Benjamin Tan, group CEO of Yolk(at)Grey explained that "investing (in an account)is part of pitching and agencies will always continue to invest the talent and time. But if pitch fees can help with bringing ideas to life more, then it's really a win-win for both sides."

Tan added if a client were to be paying out pitch fees then he or she would also expect more.  However, clients should not expect money to buy faster turnarounds and money should not equate to less time. Ultimately time is still a crucial factor in all pitches, he said.

However, Tan was also quick to note that while there are bad seeds, there are also genuine clients who observe a good professional code of ethics.

"Whether pitch fees is the right instrument to be used here, at the end of the day it's all about professional ethics," he added.

Managing director of Y&R Singapore Melvin Kuek also agreed that pitch fees would be helpful to the local advertising landscape.

Like Tan, Kuek felt that the practice would come with its own drawbacks, however. Kuek's concern is that with the pitch fee process in place, the new and small agencies might feel a little threatened as a pitch fee paying client would also be focusing on the more established agencies with the best chance of hitting the given brief.

Nonetheless, he added, that this will only put the onus onto the client to decide what kind of agency and specialist is required for their business.

"If cost is a serious consideration, the client's money is better spent inviting smaller, boutique agencies with the right skill sets to pitch. The pros outweigh the cons in the long run for all agencies in Singapore," Kuek added.

Rajesh Mahtani, head strategy & growth Southeast Asia, Starcom MediaVest Group added that if pitch fees are implemented, these pitch fees should be used to compensate agencies that spend a lot of time and resources to pitch for new businesses.

This will then motivate agencies to be serious about the pitch process as well and produce the best work for the clients.

However, one drawback Mahtani cautioned is that this might result in agencies trying to pitch for as many pitches as they can even though they may not necessarily be the right fit. For this reason alone, the right balance is needed in the financial quantum of the pitch fee.

"It should not be too high and the agency should not be compensated dollar for dollar in terms of resources used on the business. The pitch fees should however be just enough to deter clients from abusing the pitch process," he added.

Will it really work?

There are agencies who disagree with this.

Melvin Lim, CEO of Havas Media expresses his doubts saying the reality is that it is unlikely to take place.

"Why? Because clients have been conditioned not to pay for pitches and there are enough agencies out there who would pitch without a fee," he added.

This would then make any agency imposing a pitch fee relatively less competitive and likely to not even be invited for the pitch by the client.

According to Lim, there are two core problems.

Firstly, there is no mandate from the industry's associations or regulatory bodies to enforce pitch fees. Secondly, since this mandate does not exist, agencies suffer from prisoner's dilemma where one may charge pitch fees and another may not.

Lim explained that currently, without pitch fees, a pitch depending on complexity can easily cost an agency up to SG$50,000 (if there is extensive research and production that needs to be done). So while having pitch fees can sometime defray some of these costs, essentially, the pitching process is still remains the same.

"The question that needs to be answered is whether implementing pitch fees will actually improve the quality of ideas, creativity, media planning and I'm afraid the jury is out on this," he said.

Secondly, Lim also added that if pitch fees are arbitrary or discretionary, then it could lead to problems as there is no industry guideline as to how much a client needs to pay any agency for pitches.

This could then result in some agencies just participating in high pitch-fee pitches. Conversely, it could also end up in none of the agencies wanting to participate in low-pitch-fee pitches.

"Implementing pitch fees in the industry could spawn further fragmentation of our industry to enlarge the pool of unaccredited ad agencies which can operate outside of these rules and not charge pitch fees. This may or may not lead to a deterioration of creative quality or media planning," he added.

What is 4 A's doing about it?

Whether they agree or not, the common question that all these industry heads asked was:  What is 4A's doing about it?

When contacted by Marketing, a spokesperson from the 4As said that in principle it has always been an advocate of agencies charging a pitch fee for their work, "although enforcement is not in its charter."

"Especially in today's market, where agencies spend tens of thousands of dollars, and sometimes more on bigger pitches, the pitch fee would go, if not all the way, at least part of the way to help them defray their costs," he said.

However, he added the objective of applying these fees should not be to limit good work or options for the advertisers.

When asked where it stood in terms of implementing pitch fees, he said: "The 4As is also considering embarking on dialogues with our industry network both locally and regionally to look at how other markets manage their pitches."

What's being done in the region?

While the concept of pitch fees has not been executed in Singapore, countries such as Thailand are taking certain measures. The Media Agency Association of Thailand (MAAT) has set in motion rules to reduce number of unnecessary media planning and buying pitches adversely affecting MAAT Members' workloads and performance.

These rules are created specifically for MAAT Members in the category of Media Agencies and Advertising Agencies.

How it works:

1. When a member is invited to the pitch for an account, it must inform and confirm its participation in the pitch to the MAAT's office manager or an MAAT's authorised officer within three days of the offer.

2. MAAT will then check the information and details of the invitation to pitch so as to confirm the actual number of invitations and eligible MAAT Members and inform the client of the rules regulating its members in the pitching process.

3. Upon approval of the agreement signed by the client to MAAT, MAAT will inform the invited members participating in the pitch and issue an invoice for the pitching fee according to the terms and conditions under the agreement.

4. MAAT will then collect "the pitching fee" at the amount specified by MAAT. The client is required to pay in full within five working days from the date it receives the invoice from the MAAT.

5. Upon payment from the client, MAAT will immediately issue an official receipt to the client and will immediately inform the participating agencies to proceed further with their pitch preparation.

Despite the rules in place, at times if the client is unlikely to make the payment within the specified period, MAAT will inform the client of the joint decision from the members to delay the pitch preparation or postpone the pitch until the fee has been paid in full.

Also, if the client totally refuses to pay for the pitching fee, MAAT will inform each member and the member must inform the client of their intention of withdrawal from the pitch as enforced by the MAAT rules and regulations.

Meanwhile if any MAAT member agency violates the pitch process rules & regulations by entering the pitch without informing the MAAT in advance or intentionally helps the client avoid the pitching fee, they too will first be warned. Subsequent violation of the rule will result in limited access and authorisation to the member's privileges and be expelled from being a member of MAAT.

In a conversation with Marketing, Trilug Navamarat, chairman VivaKi Thailand said so far there has been no case of agencies neglecting to follow the rules in Thailand.