Economics + Wealth

Payment of pitch fees to agencies: Clients soon to be prosecuted

Payment of pitch fees to agencies

Should clients pay pitch fees when selecting a new advertising or PR agency? This question has remained one of the hottest industry topics around the world. The pros and cons have been debated extensively with no clear winner in sight.

Companies in Nigeria that fail to pay agency pitch fees will now face criminal charges. PR and advertising agencies have been advised to alert all their clients and prospects.

The red line on pitch fees has been drawn by the advertising industry under the auspices of APCON and the Association of Advertising Agencies of Nigeria (AAAN).

The public relations industry under the umbrella of PRCAN and NIPR is still streamlining the guidelines but both bodies are yet to pull out any red card.

APCON all set to prosecute clients

Steve Babaeko · CEO/Chief Creative Officer X3M Ideas and President, Association of Advertising Agencies of Nigeria has confirmed that companies that fail to pay pitch fees to advertising agencies after a pitch, would now be prosecuted.

Mr Babaeko pointed out that, “the issue of pitch fees is an age-long one that was a sore point for the advertising industry in Nigeria, for several years. Until October 6, 2021 when the Advertising Practitioners Council Of Nigeria (APCON) promulgated the Advertising Industry Standard Of Practise (AISOP) law.

“The law makes it categorically clear that clients calling for creative and or strategy presentation must pay pitch fees. Failure to comply puts the said client in direct conflict with the law.”

How will the law on pitch fees be enforced?

Steve Babaeko, AAAN President

Steve Babaeko warned that “all the sectoral groups covering advertising, media, outdoor and experiential, have constituted monitoring units to enforce compliance. As law abiding corporate citizens, it is our duty and responsibility to obey the law governing pitches as clearly articulated by the regulator APCON.

Although no company has been charged yet for non-payment of pitch fees, APCON and AAPN restated that any defaulter found by the special monitoring team would be prosecuted immediately.

Why clients should pay pitch fees

Payment of pitch fees to agencies

  1. Staff pressure and external costs

Pitches and speculative work exert a lot of pressure on agency staff and usually consume many man hours. This adds to the cost of doing business.

When pitching for a new business, the agencies may also need to invest heavily in external costs such as consumer research, creative accessories, videos and industry statistics. These costs are not recoverable.

  1. Disruption to the agency

The exciting opportunity to participate in a pitch can be great for agency morale, but it also disrupts the agency workflow and could also affect existing clients negatively.

  1. Embarrassment

The cost of the embarrassment of losing a pitch cannot be quantified. It dampens staff morale and dents the agency’s reputation.

  1. Intellectual property theft

Agencies often complain that some clients steal their ideas by modifying their proposals and using them for future campaigns. If pitch fees are paid, the pain would be reduced.

Disadvantages of pitch fees

Payment of pitch fees to agencies

Pitch fees also have the flip side and may not work out for the overall good of the PR industry. Here are a few disadvantages of agency pitch fees.

Reduced patronage of agencies

When agency pitch fees are mandatory, clients are likely to reduce the invited agencies to a very small number, resulting in fewer agencies being considered.

Small agencies squeezed

Smaller or lesser-known but highly creative agencies may no longer be invited to PR and advertising pitches. This does not produce an atmosphere of creative diversity.

Competition vs monopoly 

Competition should be allowed to thrive to its fullest. Pitch fees mandate reduces competition and promotes a monopolistic trend. Competition should be free. That’s what defines it.

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