Advertising account pitch fee wars
Ad industry says Telkom has asked too many agencies to bid for its prestigious account — a costly business which it refuses to pay fees for and wants too quickly — given a less than 10% chance of success
Advertising’s representative body the Association for Communication & Advertising (ACA) has stepped in to help adjudicate Telkom’s R300m account pitch process after complaints from the industry about the number of agencies invited and the short turnaround time on presentations.
Telkom has indicated it’s not prepared to pay pitch fees, which in recent years has become the norm with a process of this size. The account is seen as one of the most prestigious in the industry and includes a full strategy and creative component for the Telkom consumer brand as well as technology company Business Connexion and fibre company Openserve.
As many as a dozen agencies are involved in the process, which includes large groups as well as smaller shops pitching for different components of the business.
Concerns were initially raised about what the ACA claims was an "unreasonable turnaround" of just a few days.
After discussions between Telkom and the ACA, that has now been extended to the 15 working days requirement contained in the ACA’s code of conduct that governs tenders and pitches.
ACA CE Odette van der Haar says: "This situation is disappointing because the code was put in place for good reason and Telkom was informed of the benefits of adherence that promotes fair, equal and healthy competition, transformation, a level playing field, good ethics and conduct during new business acquisition as well as protecting the intellectual property of agencies."
She adds that the code also mitigates risk and wasteful expenditure on the part of agencies and clients.
The Financial Mail understands that agencies competing for the business include WPP (Aqua Online, Wunderman, Geometry, Ireland/Davenport, Demographica); Omnicom (DDB SA — the incumbent); IPG (McCann Worldgroup); Publicis; King James II; June 15; The Odd Number; Riverbed; FoxP2; Avatar/M&C Saatchi Abel; Blueprint; Praekelt; and Sugar Ray Leonard.
Van der Haar says the ACA’s principal concern is that there are too many agencies being asked for strategic and creative presentations, which are costly. Also, given the number of agencies involved, each stands a less than 10% chance of winning business.
"It is a large investment with a small prospect of success, and prejudices smaller agencies as they do not have the same available resources to invest in this pitch as the larger agencies."
The industry is also concerned that without payment of pitch fees, the unsuccessful agencies cannot recoup costs. Says Van der Haar: "It is paramount to the sustainability of the profession that agencies stand united in order to maintain the value and currency of the profession."
Agencies competing for the account are predictably unwilling to talk about the process, fearing it might harm their chances, but one CE says: "There is no doubt Telkom is playing hardball and the process seems unreasonably competitive. But it’s a blue-chip account most agencies want on their list."
The issue is being discussed by the ACA’s executive committee amid concerns that with a big account move like this there is the potential for job losses and staff upheaval between losing and winning bidders.
Jacqui O’Sullivan, Telkom group executive of communication & brand marketing, says the company has opted for a closed tender and has purposely invited a large number of agencies to pitch, "specifically to allow smaller, black-owned and more niched agencies to bid for specific bodies of work".
She says Telkom wants to hear from large and established agencies as well as smaller and more specialist ones that are often overlooked in large corporate pitches.
"We believe these lesser-known agencies should be offered an equal opportunity to pitch for the section of work they believe they are most geared to serve.
"While the ACA code of conduct requires the list of agencies shortlisted to not exceed five, in a pitch like this where there are multiple bodies of work, that requirement is limiting and potentially exclusionary."
O’Sullivan says Telkom does not pay for pitches nor does it pay a "decline fee" and that all work is treated as confidential.