Pitch not perfect: Is the rule book a solution?

It was in January 2023 that I first learnt about a big brand deciding to scout a new agency for its media buying. The pitch was called and the brand - with a significantly large size - was an instant dream account for every agency. But soon after the brand floated the terms and conditions, a few agencies backed out right at the start. Others braced themselves and went ahead.

This brand is known to be a tough one. It has just imposed a hefty penalty (rumoured to be around Rs 50 crore) on its incumbent agency for failing to deliver the promised Gross Rating Points (GRPs). While the incumbent agency claims they are not at fault and its global team is contesting it out with the brand’s global team, it has definitely sent out a message to every agency in the servicing industry.

This, however, is not the only brand that is involved in muscle pulling. Insiders say there are 10-15 big brands that have been giving agencies nightmares. They are more frequent at calling the pitch and are hard negotiators. With every pitch, they demand the pricing to go further low and margins to shrink.

In another case, a brand sent a confirmation email to the agency conveying its selection. It also conveyed regret to its incumbent agency. A month passed and just before the final agreement was to be signed it had a change of heart and decided to retain the existing agency. This was after the former client invested a good four months into the process.

Succumbing to such clients, the advertising body in Europe is believed to have initiated the process of drafting a rule book that could help make the pitching process less taxing for the agencies. There are speculations and a hope that advertising bodies in India may consider bringing all agencies together and draft guidelines that can make the process more fluid.

On average, three to six resources work on a pitch depending upon the size of the business. Clients often give a time frame of three weeks to three months to prepare the presentation. A more systematic approach will make things more cost-effective and viable for the agencies. I have collected during my series of conversations with several agency heads some solutions that can ease the process for the industry.

• Uncertainty hurts 

The brand I mentioned in the intro took six long months (half the year) to announce the agency it had finally chosen to partner with. Similarly, another big brand that had called a pitch in July 2022 gave the outcome by mid-March 2023. Such a prolonged process puts pressure on the incumbent agency and all the participating agencies. Brands should be encouraged to set specific deadlines for each stage of the pitching process, ensuring that agencies are not left in a state of limbo. By implementing a streamlined timeline, agencies can better manage resources, focus on delivering their best work, and avoid unnecessary anxiety.

• Clarity on evaluation criteria:Another area that demands attention is the evaluation criteria used in the pitch process. Agencies often find themselves uncertain about the factors that will be considered during the assessment. The problem is more frequent with mid-size and smaller clients. This lack of clarity can lead to ambiguity and subjectivity, which may adversely impact the quality and creativity of the pitches. To alleviate this issue, brands should clearly define and communicate the evaluation criteria at the outset. Criteria such as agency size, scale, expertise, and innovative approaches should be made transparent. This will enable agencies to tailor their presentations accordingly and provide a fair and objective basis for comparison. 

• Relaxed cap on malus: Agencies pay clients back for not achieving specific deliverables. Penalties in the form of malus clauses have become increasingly common in pitch contracts. While these clauses aim to hold agencies accountable for specific deliverables, they can create an imbalanced power dynamic and deter agencies from participating in pitches altogether. It is important to strike a balance between accountability and fairness. Implementing a cap on malus penalties can ensure that agencies are not disproportionately burdened by financial consequences if they fail to meet certain performance metrics. This approach will encourage agencies to participate actively in pitches and promote a healthier working relationship between agencies and brands. 

• Rate confidentiality:Rate confidentiality needs to be protected by ensuring that a very limited number of people at the client’s end have access to the submitted rates. Clients expect their data to be treated with utmost care. What about the other way around? Confidentiality is a cornerstone of professional relationships and should extend to the rates submitted by agencies during pitches. Currently, clients often demand access to detailed rate information, putting agencies in a vulnerable position. To maintain trust and ensure fair competition, it is crucial to limit access to this rate information to only a select few individuals on the client's side. By safeguarding rate confidentiality, agencies can freely present their proposals without the fear of compromising their competitive edge or jeopardizing their negotiation positions. 

• Sanctity of strategy and ideas presented in a pitch:Many clients use a pitch to gather ideas that they use with impunity, even when they do not award the agency the business. Pitching is not just about presenting capabilities but also sharing strategic insights and creative ideas. However, agencies frequently encounter situations where clients utilize ideas presented in pitches without awarding the business to the agency that originated those ideas. This practice undermines the trust and collaboration essential for a successful partnership. To address this issue, brands should uphold the sanctity of strategy and ideas by implementing policies that protect agencies' intellectual property rights. 

Besides these broader points, some ambitious suggestions would include introducing a pitch fee. Considering the amount of time and resources an agency invests in preparing for the pitch, it may just be fair to compensate them in case they lose it. Most developed countries have begun to pay agencies a fee for participating. On average, three to six resources work on a pitch for three weeks to three months depending upon the size of the business. 

Clients in developed markets also engage in “chemistry meetings” with their potential agencies to understand the work culture. Being a service industry, people are the central force here. Hence it is extremely important for both the agency and the client to understand each other’s work culture. 

Clients have a stronger say now than a decade back 

Today CMO and marketing heads have a much more granular say in the marketing and media planning process. Things were different two decades ago. CMOs today know what they want, why they want and their inputs factored in choices and plans.

When exchange4media started 23-plus years back, the clients had a much lesser say and media agencies and media CEOs, planners and buyers had a much larger voice.

In a recent case, a media agency CEO was asked by a CMO of a particular brand to reinstate an employee who worked with him on the account or face the consequences of losing the client. While in this case, the CEO did not succumb to pressure, in many cases they do. To make the relationship more equal, agencies too can be engaged in a rating system where, on the condition of anonymity, they are allowed to rate the client.

Again, this practice is prevalent in many developed markets. Perhaps it’s time to bring the much-needed balance back into this relationship. For now, it seems Client ich Bhagwan hai.