The reverberations of Reckitt-Benckiser’s decision to ask media agencies in India to cough up $10,000 (and also work initially for free) are going round the world, with agencies of all ilks fearful that other big clients will do the same and in other markets.
Once upon a time creative agencies used to be able to charge clients pitch fees although these shrunk to tiny amounts of a few hundred pounds or its equivalent. Agencies would commission original research and even make finished commercials to land an account, often spending £100,000 or more.
In the UK Bartle Bogle Hegarty tried to put a stop to this, saying it would not produce finished work or even any ads at all in pitches, it would merely offer insights and strategy thoughts. For a decade or two at least this worked, but only for BBH.
Chucking money at business opportunities is hardly new of course, it’s usually called bribery.
Giant British defence firm British Aerospace (now BAE Systems in a bid to distance itself from the bad old days) has been under fire for years over its alleged greasing of Saudi Arabian palms to win the various tranches of the giant Al-Yamanah contract to supply Saudi with trainer aircraft.
Quite why the Saudis needed all these not particularly formidable planes was and remains a mystery. The only certainty is that there are an awful lots of princes in that particular country.
It happens (on a smaller scale) all over the place. A contact in the property industry told your correspondent that he once received a present of a bathrobe following a deal in which he had acted as intermediary.
In the pockets was £20,000 in cash. The vendor in the deal received £40,000 (and possibly two bathrobes).
Governments bribe companies the whole time. Site your factory in our country and we’ll chuck in a few hundred million in grants and you won’t pay any tax for a few years. This is rather harder to do these days with the EU and various bodies in the United States keeping a beady eye on such practices but it still goes on.
Maybe Reckitts is just making the opportunity cost of a pitch more transparent. Maybe it was worried about bribes and backhanders.
So we’ll just have to wait to see if the practice catches on. Something tells me it will.