The Hindu Business Line : The issues at play

Creating slabs instead of charging a pitching fee upfront, the AAAI has fixed approximately Rs 25,000 for an account under Rs 2 crore, Rs 50,000 for one between Rs 2 crore and Rs 10 crore and Rs 1 lakh for those above Rs 10 crore.

Fixing the pitching fees is always going to be an issue.

Sangeetha Shetty, Executive Vice-President, RK Swamy BBDO, says, "To me the quantum is less important than the concept. If the system did not work in the past, it may be due to a variety of issues. I think AAAI recommended one per cent of the ad budget as pitch fee. Naturally, this would be considered high by anyone if they wish to review five agencies. A modest number like Rs 25,000 or even, say, a lakh,is okay for larger budgets. But for this to work, AAAI should monitor the process in some manner. Otherwise, this would be dead before it takes root."

As Madison's Balsara says, "Any system can be circumvented. The implementation agency will be the AAAI. Nothing is easy but it should work since the agencies themselves want it, to prevent exploitation by advertisers. Pitch fees is to bring sanity into the business, hopefully no one will try to circumvent it. Nothing ventured is nothing gained."

Parameswaran says, "Pitching fee will be easy to implement if AAAI makes the effort to explain to all the constituents that it is in everybody's interest that we bring some sanity to the pitching process. But fixing rates for pitching is not a way to recover the costs incurred, especially if you include the time costs. It is at best a disincentive to calling a pitch."

Advertisers unwilling

"Even the clients are wasting their time." Saugata Gupta

The advertisers' point of view is that it is the agencies that come calling. As it is almost like a sales call made by the agencies, there is no need for compensation. Saugata Gupta, Head of Marketing at Marico, claims, "Most of the agencies are hungry for business and in most cases, pitches come from their end. It is not just the agencies that end up wasting time but even the clients. In any case a pitch is like investing in a new business and is equivalent to an investment in R&D where there has to be some amount of investment upfront. In the development of new business there is no concept of a pitching fee. If at all, clients should do it voluntarily and that too, for close-second pitches that do not make it." Another FMCG client too feels that the concept of a pitch fees is unlikely to work in the long run.

An FMCG advertiser says, "Maybe some clients and agencies may try out this option but there will be business pressures and discounting whereby the purpose will be lost. A pitch is like making a business call. Nobody is forcing the agencies to participate so it is not fair to ask for remuneration. A pitch fee can work only in theory."

Paper tiger

Neither is it the first time that the AAAI is demanding pitch fees. There have been attempts in the past.

"The earlier principle of charging 1 per cent of the budget as pitch fees remained only in the rules. In today's time it is too high and no system or process was laid down to implement it. We believe this concept is gaining ground in many countries. Enlightened and serious advertisers are also in favour of the concept, since it is in their interest. Although there may be some minor differences in the procedure for execution, we will resolve it across the table," says Balsara.

"Ways to implement the fees have to be found." NIRVIK SINGH

"The AAAI charter did include it nearly a decade back but it was not implemented. But now there is a need since advertising has changed beyond recognition over the last decade. There has to be another look at the pitch fees and ways and means of implementing it have to be identified," says Nirvik Singh, Chairman, South East Asia, Grey Worldwide.

As the AAAI gets ready to meet the ISA in the coming weeks, the outcome will be interesting to watch.

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