Pitch Fees—Who Should Pay? What is Fair?

The wacky world of agency new business may have reached new extremes.

–In India, Reckett Benckiser is reported to be asking agencies to pay $6,500 to be eligible to pitch for Reckett’s media buying account (and, in a demonstration of how quickly even really bad ideas can travel, Thomas Cook in the UK is rumored to be contemplating a similar idea).

–In the USA, Prudential is reported to be paying $300,000+ (each) to multiple agencies that were invited to submit creative concepts (the $300,000 fee is payment for ownership assignment to the client).

Are Reckett and Thomas Cook exploiting their buying leverage, or are they soliciting bribes which will ultimately work to their detriment? Will best-in-class agencies agree to pay for the privilege of pitching?

Is Prudential enlightened? The Pru review does include Prudential’s in-house agency as a 4th contender and it is not clear that there is a going forward assignment for the agency winner. Is the Prudential approach prudent?

What gives?

What is your point of view?

  1. I think Reckett is a misspelling. Wouldn’t the correct one be Wreck-it?
    If a firm wants to be nothing but a tool, I guess there would be no problem in paying up front for the “wonderful opportunity” — though it sounds like nothing more than an expansion of the bribe system which seems to permeate Asia and the Middle East.
    Every agency is already “paying” a considerable amount of their asset base — skilled people — to assemble a presentation and cover the expenses of the people traveling to present. It’s kind and generous of Prudential to cover some of the costs, but we’ve always considered those a cost of doing business. Put your best foot forward, winner take all.
    I would hope no agency “pays to play” (a practice that got Blogo in hot water in Illinois), but there are always those too eager to have the ethics to say “NO”. Too bad for us.

  2. Taxidodger says:

    No serious client would contemplate charging a fee to get agencies to pitch but if they do, they’ll likely get the agency they deserve (unless of course this crazy idea gets off the ground and all clients start to do it – so lets not lend too much credence to it).

  3. Gerald Smith says:

    With every pitch there is always a favored contender. Should the idea of pay-to-pitch catch on, 4A’s and/or other industry organizations would need to provide enough guidelines for leveling the playing field? The challenge is not with the idea of pay-to-pitch, the challenge is creating the standards whereby current norms and expectations of ‘the pitch’ are crushed. Paying 6,500.00 to a prospective client will just be additional to the already 10′s of thousands of dollars we spend preparing and pitching. Who pays for all this now? The next client. For those of us best-in-class agencies (smile) who are confident in our work, this could be a good thing to weed out the weaker players – but only if we were confident that we would be competing without prejudice. I can’t see that happening.

  4. I can only imagine that if the client is busting chops this far out front, then they’ll be a nightmare to work with. Agencies expend too much time and resources winning these accounts to begin with. Additional fees up front? It’s unconscionable. Bravo Prudential!

  5. glen peak says:

    Gee………why doesn’t Reckett just put the account on EBay and sell to highest bidder!! Their actions say a lot about what kind of relationship could be expected with this client. It’s absurd….but they will likely get pay-to-play entrants. Perhaps they have been studying the U.S. political system model.

    glen peak

  6. With “Wreck It” and Tommy, shame. This is right out. Pity the agencies who participate.

    With Prudential, I don’t know if we know enough there. Me thinks there’s some detail that would be great to have. Still, that’s the highest number I’ve publicly heard to buy ideas in a pitch.

    So while I want to offer kudos…what’s the scope? What’s the value of an idea to a multi-billion dollar client? How much could it build their business? The industry, being led in part of the 4As, is talking about value-based compensation. A good thing. And one has to wonder how that might be applied to Prudential.

    Steve Congdon
    http://thunderclapcg.com
    rainmaking blog

  7. Bill Burton says:

    Today, seems like everyone is trying to get paid for “privileges”. The dilemma being, of course, what former “free” service can now be defined as an acceptable privilege, and an expense? Airline bags? That move didn’t endear customers to carriers, and agencies will react the same way. Unfortunately, many flyers don’t have an option. But in the case of agencies, we do. We don’t have to “fly” with those clients who want a payment to simply get in the door. At least with airlines, we’re getting from Point A to Point B. With these “Pay Me” clients, we have to perform for them with no value received. A bit out of whack, don’t you think?
    I’d like to pose this question to other service businesses — legal firms, CPA’s, etc. — and see what their responses would be. There would be some laughter, too, I’m sure.

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