‘Emerging practice hurts advertising agencies’

PETALING JAYA: The Association of Accredited Advertising Agents Malaysia (4As) has expressed concerns over the emerging practice of advertisers, including some multi-national companies and government-linked companies, declining to provide pitch disbursements to its member agencies, says association chief executive officer Khairudin Rahim.

He said there are some advertisers having even gone to the extent of compelling 4As member agencies to secure a written exemption from the long-standing 4As pitch disbursement by-laws.

The association believes these decisions are primarily due to the companies and their management being unfamiliar with the rationale for pitch disbursements introduced since 2006.

“The pitch disbursement requirement is intended to allow 4As members participating in a pitch to recover some of the costs associated with preparing customised strategy, ideas and creative submissions for the pitch.

“However, 100% of the successful member agency’s pitch disbursement allocation would be returned to the advertiser upon the results of the pitch being announced.

“Enlightened advertisers understand and recognise that speculative pitches are expensive and resource draining, resulting in a financial burden to agencies already operating with sliding margins.

“Furthermore, advertiser pitch briefs are increasingly more demanding, with multiple assignments and complexity in their requirements,” Khairudin said.

Since its implementation, over 200 companies have supported the 4As pitch disbursement requirement, including Celcom Axiata Bhd, Etiqa, Malaysia Airlines, Malaysia Rail Link Sdn Bhd, Malayan Banking Bhd, Petroliam Nasional Bhd, Proctor & Gamble Malaysia Sdn Bhd, Telekom Malaysia Bhd, and Watsons Malaysia.

He said the pitch disbursement is paid by the advertiser to defray some of the agency’s expenses incurred to develop a customised response to the pitch brief.

It is not a pitch fee, he said, adding that a fee implies there is cost plus profit margin included.

This disbursement is merely a means for partial cost recovery, he said.

The 4As offers best-practice options for advertisers who are unwilling to commit to pitch disbursements.

Firstly, is to work within their existing advertiser-agency relationship and try to make the agency relationship work rather than thinking that a move to a new agency is necessarily the best answer.

“Be very clear that changing your agency would be in the best interest of the brand and will enhance shareholder value. Before embarking on a search, be sure that best efforts have been made to restore the existing relationship to health,” he said.

Long-term advertiser-agency relationships often benefit the health of the advertisers brand, with 65% of advertisers surveyed in 2019 by the World Federation of Advertisers (WFA) and marketing consultancy Observatory International stating a long-term relationship with their agency is either important, very important or essential in producing great work.

Khairudin said the second option would be using an agency’s credentials or past case studies as the sole selection criteria before engaging a new agency. Many successful agency appointments are based on reputation, referrals, team chemistry and testimonials from other advertisers opposed to a speculative pitch, he noted.

The 4As points out that there are a few advertisers who call for sham pitches with the agency selection already made, prior to the presentation, while others have exploited agencies by using speculative pitches to garner free brand positioning, strategy and creative ideas.

He said some advertisers have even tried to legitimise the practice by introducing clauses into their pitch requirements that demand the right to utilise or release an agency’s proposals, documents, concepts, ideas and intellectual property regardless of whether the agency is chosen in the competitive pitch.

Khairudin said: “A pitch exercise should not be used as an opportunity to mine agencies for ‘free’ ideas. Unfortunately, part of the ongoing work that the 4As undertakes is having to highlight unfair and unethical practices by advertisers including the requirement for exorbitant tender document fees, tender deposits and demand for retention of pitch ideas.

“The 4As believes that with clear understanding of the rationale, advertisers will support the need for pitch disbursements and support 4As agencies in their drive to provide the best possible solutions to their prospective clients.”