Pitch Fee or Pitch Free?
Sometimes in this business, we get asked to pitch for work against other agencies. It’s what we call a competitive pitch. Malaysia’s 4A’s have asked us to strongly request a pitch fee, and as a standard, it’s RM5000. Reasons being that as an industry, we’ll be putting in effort and resources to develop marketing communications solutions, and because it’s a competitive pitch, most of the participants (agencies) in the pitch will naturally not get the business. Sure, that makes sense to the agencies. For big clients with big business, agencies can go into pitches with work that runs into the tens of thousands (and even hundreds of thousands) in terms of resources spent. So, it caps the clients propensity to invite as many agencies as they well please, just to see if anyone hits the mark. If it’s going to cost them to invite agencies, they’ll be less inclined to waste other people’s time and resources. So, yes, that makes sense to the guild and to the industry as a whole.
Now, lets not talk about the big corporations and their multimillion dollar marketing budget. I want focus on small to mid value pitches for clients with smaller marketing and communications budgets, one off jobs that could run into say, total creative budget of less than a hundred thousand ringgit. For example, property clients, or upstart brands and products. The argument against paying a pitch fee is that with a small total marketing budget, who has the money to pay RM15,000, or 15% of creative budget (for inviting 3 agencies) for what is essentially a pitch. If agencies really want my RM100K business, then the risk is theirs. Take it or leave it. Right? Wrong.
When clients don’t pay a pitch fee, they are putting themselves under more risk than just RM5000. How? I can say, from observation, not paying a pitch fee is most likely to be the attitude of clients who also have limited value for dedicated market research. i.e: Extensive research even before the product is developed. If they’re not going to pay RM5000 for a pitch fee, it will be most unlikely (in most cases, but not in all) to pay for third party research on product development. It’s one of those things that happens in typical asian business practices. They may put in hundreds of millions of dollars into production of the product itself, but very little in finding out first what kind of product to develop – what kind of product will really resonate with customers and consumers. Sure, they may ask some friends over morning coffee, or evening beers, or what they read over the internet, but is that really enough, especially when you’re going to spend millions on the product? (and I’m not exaggerating on the RM millions bit).
So, when clients don’t pay the RM5000 pitch fee, what are they losing out on really? They lose out on the additional value an agency can bring onto the table in terms of real firsthand insights. If I’m competing against two, or three other agencies, and knowing that my chances of getting the business is 25%-30%, how much should I be putting into the work? Definitely not 100%. So, if no one is giving 100% into the pitch proposal, who really loses? The client.
Because things can go wrong with the insights that you get. The one thing you shouldn’t assume is that in a FREE pitch situation, an agency will do all it can to solve your unforeseen problem for you. They won’t. They’re doing it to win your business, in the least expensive way they can. (Note: they’re already absorbing the cost of creative development). Now, if you’re information is not entirely or reliably accurate, what makes you think theirs will be more accurate?
As a client, you can limit the risk of that by making sure you’ve done your homework in terms of extensive research before you develop the product (in which case, you should be fairly confident your product will resonate with the your target market), and just passing off all those relevant information to the agencies who want the business.
It’s all good if you’re pretty sure the product will sell. But what if you’re not entirely sure? Should you really trust the pitching agencies to give you an accurate solution when they’re really relying on you to give them accurate information to base their solutions on?
So when clients who don’t pay pitch fees, are they really saving money, or are they actually putting all their investments at risk?