Indian advertising today is witnessing a series of new paradigms. New technologies, new planning inputs, greater professionalism and dynamic impact, plus growing of marketing and advertising budgets in the “new” Indian economy.  At the same time while this is so our ad agencies of late have shrunk in their operations and contributions as full service agencies as a result of media outsourcing among AORs, and in some instances even clients taking on the media buying and negotiations directly with media.

 The Pitching Debate

Within this scenario, one specific area which has become a bone of contention between ad agencies and clients, making for an unresolved debate, is in respect of pitching for new business by ad agencies – purely speculative or on the basis of payment of some kind (rejection fee) paid by the clients! In India this issue has been a subject of debate over the years. Today the issue has again surfaced in view of competition between agencies and their need for new business – their lifeblood – in the growing advertising expenditures of clients at the marketplace. The pitching issue is further complicated with the other issue of agency commission versus a flat fee for the services that is taking place and affecting the agency-client working relationships today.

While the agency commission versus flat fee system is a bigger and more fundamental issue for the ad agencies in India, the issue of pitching, speculative or otherwise, is largely a phenomenon of the severe competition prevailing for a share of the 12,000 crore ad expenditure wit hundreds of ad agencies existing and fighting for their piece of the business.

Recently, in a news item on the Net it was said that the Association of Accredited Advertising Agents of Malaysia had implemented a mandatory fee system from January 2006, under which advertisers will have to pay their member agencies for making presentations. The pitch fee fixed was 5000 Malaysian Ringlets for advertising business up to 500,000 RM and 10,000 RM for business above 500,000 RM to be paid by the clients. The system it is felt will encourage a more professional approach on the part of both the ad agencies and clients. With this system the agency association hopes advertisers will see real worth of the agencies creative work. It expects clients will think of agencies as rightful creative and communication consultants and strategic partners instead of treating them merely as suppliers. Also the clients will be more mindful and responsible about the kind and number of agencies they invite for a pitch in the new system. It will mean agencies will no longer be losers, and the imbalances of the old system, such as of non-payment and of stealing of agency ideas will be got rid off. Though it is difficult to have legislation on IPRs specifically catering to clients usurping agency’s ideas, this system it is hoped will be a kind of “self regulatory” deterrent.

In India too the issue of pitching keeps is heading towards having a formal pitching fee just as in Malaysia. The Advertising Agencies Association of India (AAAI) has mooted this concept internally among its member agencies, and is in a dialogue with clients through the Indian Society of Advertisers (ISA), the official body of advertisers. There are, as expected, views and counterviews! In support and against the fee system. However, no fundamental issue is today resolved without a discussion and debate, and the issue of pitching fee is no exception.

The Indian Society of Advertisers is seemingly not receptive to the fee idea. They consider pitching activities of the agencies as an “investment” by the agencies in gaining business and growth. It’s a form of business development expense as expressed by an official of the ISA. Others have said implementation of a mandatory fee will be totally impractical on two counts: a) ad agencies will tend to break the system for their own selfish benefits – especially smaller agencies; b) medium and smaller size clients will stay away from bigger agencies who insist on the fee, and will prefer to work with agencies who are flexible.

Situational Analysis

The Advertising Agencies Association of India has gone about setting up of a Consultative Committee to look into this, and draft guidelines for the new system. The terms of reference for this committee include punitive action against non-complying members! The committee is also soliciting independent views and support of its members before it frames, announces and implements the policy. Coming to an acceptable agreement within the agencies, and with the clients, will still take some time and effort.

The obvious and simple solution seems to be that clients should be more stable in their ways and not go for unnecessary pitches – except in special cases. But in a highly competitive situation, and with the launch of new products, extension of brands and services at the marketplace, as well as the (business) growth objectives of agencies individually and collectively, what may seem simple and possible options can yet be difficult in the fundamentals of a pitching fee or pitching free! The pros and cons have to be looked into with an unbiased and professional eye. Something quite difficult in Indian advertising business, where “you can’t please all the people all the time.”  You are dealing with hard-nosed businessmen, entrepreneurs, and intellectuals who have heavy stakes in the Indian marketing and advertising industry.

As a professional who has worked long years on “both sides of the fence”, I wish to attempt offering a few practical views on the issue of charging or not charging for creative and strategy work in pitching for business, and then having it accepted or rejected by the potential client.

I will first like to analyze the situation in respect of the matter, and then humbly go on to suggest my views on one or two workable solutions for the leaders of the advertising business.

The practical situations that broadly prevail between agencies and clients currently are:

  1. Clients call for a pitch when they are unhappy or dissatisfied with their existing agency. When they are unhappy with service – creative, media and client servicing. Or when their product or service is not doing well in the market, and they feel it is the advertising responsible for it!

  2. Ad agencies who get wind of a client not being happy with the existing agency and proceed to pitch to dislodge the existing agency – openly, or discreetly, as the situation may demand, and their own desire for new or additional business

  3. When clients launch new and different products with big budgets, and will now like to expand their agency base, and also like new and varied thinking from another professional ad agency in their reckoning.

  4. Ad agencies that are on a growth path, and compete with the client’s existing agency. They pitch for a competitive edge with either a credential presentation, or with well thought out strategies to entice and woo the client. This is done at their own initiative, taking advantage of knowing people at the client/s who are all one big fraternity today.

  5. Ad agencies who are diversifying and expanding their services, and opening up second agencies to take on clients which otherwise would be conflicting. In this the motive and game plan could be first to make an inroad, and then later go for the bigger share of the account, or the brand advertising!

 Honorable Solutions?

The situation, on close analysis is tricky and very subjective in every way. What may seem right in one situation can be wrong in another, and what seems wrong can be right! Indeed a catch-twenty two situation!

In my view, now, one obvious option in the present day situation where the growing emphasis is on ethics, self regulation, and corporate governance, it may be ideal to let the sleeping giant (debate) be, and let the competitive market forces rule and help decide. But then with the growth of the advertising business (expenditure) within our growing and global economy, market forces compel us to resolve it if possible, to the mutual satisfaction of the agencies and clients. Finding an acceptable solution is the task, which in the case of some is a battle for survival!

In our present day competitive market environment, clients are looking for agencies that bring to the table creative, media and marketing strategy differentiation. Differentiations that work and can make the product or service successful at the marketplace. This is most often the yardstick, and not the size and type of the ad agency. Advertising is communication, consulting, and people oriented to business results and performance. This is then the requisite in selecting, maintaining or rejecting an ad agency.

If this were the fact, I feel we should take the business ethics route and look at the pitching issue in that perspective. Ethics is the cornerstone of the changing face of business today. Ethics is an internal chapter, and developed by the industry, for the industry and not imposed from outside. Ethics is determining the right from the wrong, and good from the bad. This principle helps us in advertising to do the right things in our daily work life and/or when faced with conflict of interest. We are fortunate to occupy a role in society where business, creativity, and media overlap. This role comes with its own opportunities and responsibilities. Our industry relies on trust. We need to act with integrity to gain trust – among our agencies, clients, customers and critics. Following this will help us avoid conflict, or the possibility of bringing us, as agencies and clients, into disrepute.

I have always believed that the higher you rise in the business world the stronger is the temptation to give up some of your principles for success! To me lasting success is more important than money. We must prioritize our professional relationships, because it is this that ultimately begets money. Professionals and managers in advertising must meet legal and ethical standards in conducting business -- for success.

Thus, in the cantankerous issue of pitching for accounts, I am of the opinion; we need to follow a code – in what we believe in as being right! And then standing up for what we believe is right, honour agreements, don’t bend or break the law, respect all people, strive for excellence, and be totally fair.

Managing and conducting business ethically starts with the leadership of any organization. It is the leaders who direct and model cultural values, norms, and acceptable (or non-acceptable) behavior in business organizations. This should be the basis on which one should guide the pitching fee or free issue facing us today. With the buoyancy in our economy there will always be space for everyone professional. So it is upto the Heads of agencies and clients to come together and lead the effort and enforce it at the ground level – personal, organizational, and the ad industry as a whole. The effort has to be from the Heads, the head and the heart, with personal integrity of high order.

Philosophically speaking “work ethics” means belief in work as moral good. It is on this that our decision should rest on the issue of pitching for accounts and clients. What is ethically correct should be done and accepted by agencies and clients, and the whole industry. This should be the rule of the game and the rules set to be followed without exception. In other words a self-administered code based on ethics and relationship – not just money and guerrilla warfare kind.