Malaysia's ad accreditation body challenges unpaid pitches

The CEO of the Association of Accredited Advertising Agents Malaysia (4As), Khairudin Rahmin, has expressed his concern over the emerging practice of advertisers refusing to partake in a pitch disbursement requirement by the body, to help compensate their member agencies for customised pitch strategies, ideas and creative submissions.

Founded in 1971, the 4As is Malaysia’s foremost industry body that represents and promotes the value of advertising agencies in marketing communications amongst advertisers, media, suppliers, government, and the public. Rahmin, who has been CEO of the 4As since 2015, began his career at McCann-Erickson in 1975,before moving to Lowe, and has over 30 years of experience in the industry across Manila and Sydney.

In a statement shared via a press release, Rahmin stated some multi-national companies and government-linked companies (GLCs) are “declining to provide pitch disbursements to its member agencies, with some advertisers having even gone to the extent of compelling 4As member agencies to secure a written exemption from the long-standing 4As’ pitch disbursement by-laws.”

He also shared that the 4As’ belief is that these decisions are primarily being made due to the management of the aforementioned companies being unfamiliar with the rationale behind pitch disbursement, since its introduction in Malaysia in 2006.

The purpose of pitch disbursement

Addressing a commonly-faced gripe amongst the ad industry worldwide, the disbursement requirement was put into effect to allow 4As’ members participating in pitches to recover a portion of the costs associated with preparing bespoke solutions created during the process. However, in accordance with the by-laws, 100% of the successful member agency’s pitch disbursement allocation would be returned to the advertiser upon the results of the pitch being announced.

Over 200 companies have supported the 4As pitch disbursement requirement, including Celcom Axiata, Etiqa, Malaysia Airlines, Malaysia Rail Link, Maybank, Petronas, Proctor & Gamble, Telekom Malaysia and Watsons.

Rahmin penned that “enlightened advertisers understand and recognise that speculative pitches are expensive and resource-draining, resulting in a financial burden to agencies already operating with sliding margins. Furthermore, advertiser pitch briefs are increasingly more demanding, with multiple assignments and complexity in their requirements.”

How it works

• Advertisers pay for pitch disbursement to defray a portion of the agency's expenses incurred during the development of a customised response to a pitch brief. It is not considered a pitch fee, as there is no profit margin included; the disbursement is only for the purposes of cost recovery.

• If an advertiser cannot pay, they are encouraged to work with their incumbent agency to rectify, enhance or continue the relationship, as opposed to calling for a new pitch. 

• If this is also not possible, then it is recommended that advertisers use a potential agency’s credentials or past case studies as the sole selection criteria when engaging in the pitch process. This includes aspects such as reputation, referrals, team chemistry, and testimonials from other advertisers as opposed to a speculative pitch.

Pitching with genuine intent

Rahmin noted in his statement that in addition to a refusal to pay for disbursements, the 4As also continue to face “a few advertisers who call for sham pitches with the agency selection already made prior to the presentation, while others have exploited agencies by using speculative pitches to garner free brand positioning, strategy, and creative ideas.”

Some have also added clauses during the pitch process that demand the right to utilise or release an agency’s proposals, documents, concepts, ideas, and intellectual property, whether or not the agency is selected after the pitch is complete.

Rahmin, who has been an outspoken advocate for the industry since his appointment, concluded that pitch exercises should not be used as an opportunity to mine agencies for ‘free’ ideas—highlighting that part of the work the 4As continues to undertake is focused on managing “unfair and unethical practices by advertisers including the requirement for exorbitant tender document fees, tender deposits, and demand for retention of pitch ideas”.

Rahmin shared that he believes that with a clearer understanding of the rationale, “advertisers will support the need for pitch disbursements, and support 4As agencies in their drive to provide the best possible solutions to their prospective clients.”