New advertising ‘pitch watchdog’ looks to police fair marketing competition

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Advertising agencies' survival depends on them making a good impression with potential clients when they are pitching for business. That does not leave a lot of room for criticism when they believe that the pitching process is unfair.

On Monday, a group representing agencies in Canada is launching a "pitch watchdog" service for advertising firms to report what they see as bad practices by marketers when asking agencies to compete for their business. Reports can be anonymous. The Institute of Communication Agencies says it will investigate such reports, but also attempt to foster more discussions with companies about how to approach the search for an ad agency.

Competing for business "is becoming hugely cost-ineffective for agencies," said ICA president and CEO Scott Knox, who launched the same program in Britain when he was managing director of the Marketing Agencies Association (MAA). He suggested the two groups could work together in cases where complaints involve problems with a multinational client.

The announcement comes on the heels of a public battle Mr. Knox waged with the Toronto Zoo over its agency search. Among the ICA's objections – which it says were based on complaints from member agencies – was a demand that the winning agency resign any accounts with competing clients such as Toronto attractions or wildlife groups, even though the zoo was requesting that work be done for free. Another objection was the wide net cast in the search process, ensuring that multiple agencies would spend money and staff resources on the pitch, rather than limiting such investments to a smaller pool of competitors.

In other cases, agencies have also complained that cost-cutting is the primary motivation for pitches – that putting the business up for grabs is a way of pressuring existing agencies to charge less, when as an industry, profit margins are already squeezed. Others are concerned about pitch contracts that stipulate the marketer owns any ideas that are presented, whether or not that agency is paid for their intellectual property. And agencies are frequently asked to produce advertising work as part of the pitch, at a cost of tens of thousands of dollars, before they have even won the business.

This is such a common complaint that in 2015, Toronto agency Zulu Alpha Kilo made a spoof video in which a man went to businesses such as a coffee shop, a framing store and an architect to ask for their work for free, to help him decide whether to pay. Last year, 60 per cent of the pitches where spec work was requested did not pay the agencies for producing it, according to a survey of 39 Canadian agencies just completed by the ICA.

"We want to give agencies a sense of having an advocate," Mr. Knox said, adding that he hopes to meet with companies when complaints arise to encourage them to change their practices. If that is ineffective, the ICA could "resort to naming and shaming," he added.

The industry as a whole has faced a shift as both marketers and their agencies have been under pressure to cut costs. In the past decade, companies' procurement departments have become increasingly involved in selecting ad agencies. But some argue that creative firms who sell ideas cannot be handled as a commodity.

"The 15-per-cent commission world is dead. People are looking for justification on every [budget] line," said Ron Lund, president and chief executive officer of the Association of Canadian Advertisers.

Mr. Lund said he supports the idea of agencies having a vehicle to communicate feedback on pitch practices to advertisers, but that he is troubled by the threat to wage PR battles on the subject. "Does that advance the industry's interests, or does it advance their [the ICA's] image?" he said. "I hope that the ultimate goal is to enhance dialogue, not to name and shame."