ISBA, the representative body for some of the UK’s biggest advertisers, is calling for greater clarity from intermediaries, or pitch consultants, about how they are compensated, as concerns grow among advertisers over the lack of transparency in how some commercial models operate.

The primary concern expressed by members to ISBA is that intermediary models, in particular, win-fees, where agencies pay a fee if they win a pitch and are sometimes linked to future revenue, and pay-to-play fees, where agencies pay to be included in pitch opportunities, are operating without full transparency.

To address the increasing concerns from members, ISBA yesterday (7 August) published the Pitch Consultant Guide, as part of the Pitch Positive Pledge founded by it and the IPA, and in collaboration with the Alliance of Independent Agencies. It aims to offer advertisers a framework to better evaluate the intermediaries they work with.

AI threatens the agency landscape – make sure your key partners thrive

Intermediaries play a key role in helping the advertisers who choose to use them find, assess and appoint agency partners. The UK has a large intermediary market, with providers operating across a variety of models.

Some act primarily as pitch facilitators, while others offer strategic consultancy, bespoke frameworks or post-pitch support. These range from small independent consultants to larger firms offering tools and hosting industry events. Some limit their agency networks, while others work with open-market models.

ISBA has outlined four main commercial models: client-funded (where advertisers pay consultants directly), agency-funded (where agencies pay for general services), win-fees and pay-to-play. However, many intermediaries use a combination of models.

Many agencies can’t afford to pay to be on a shortlist. They can barely afford to put pitches together. So how is that fair?

Sam Taylor, Lloyds Banking Group

Concerns were escalated earlier this year when VoxComm, a global alliance for agencies, which includes representatives from the IPA, warned that pay-to-play models risk undermining client/agency relationships.

“Advertisers may be missing out on opportunities to work with great agencies that are not paying intermediaries or consultants to be part of their club,” Voxcomm stated in an op-ed released in February. “We fear such pay-to-play practices are now putting at risk the foundations of value and fair competition in our industry.”

In response to the op-ed, a rising number of advertisers, agencies and intermediaries raised concerns with ISBA. As a result, it engaged its members to understand the issue and produce guidance on what questions brands should ask when selecting an intermediary.

“The consensus was there needs to be a lot more transparency,” ISBA director of agency services, Nick Louisson tells Marketing Week. “Many advertisers were not aware of the changing dynamics and win/finders’ fees paid by agencies becoming more common.”

Despite broad agreement that commercial models should be transparent, Louisson says that after speaking with 15 brand advertisers, views varied, although many were mindful of fairness and the implications for both agencies and brands.

“There is no one view among advertisers,” he adds. “Different brands will take different perspectives, dependent on their values. Their values will influence the way that they act. But the one thing that is true to all of them is transparency.”

What do brands think?

In the UK, there are many types of consultants, each with its own commercial model. Some of the most well-known include Ingenuity+, AAR, Oystercatchers, Creativebrief and Tuffon Consultancy.

All five told Marketing Week they welcomed ISBA’s call for greater transparency and urged brands to question consultant fee structures to ensure the best fit. Before the release of ISBA’s guidance, each also confirmed they do not use a pay-to-play model.

Marketing Week spoke with brands ahead of ISBA’s pitch consultant guidance, and many shared concerns about the lack of awareness and transparency of models such as pay-to-play and the impact of other commercial models.

While win-fees can appear cost-effective, some industry figures warned the cost is often built into agency fees and ultimately passed on to the client.

American Express Global Business Travel (GBT) recently streamlined its agency roster to better support business goals. During this process, the firm used both intermediaries and ran pitches independently. Rich Atkinson-Toal, vice-president of global brand and experience studio, says intermediaries are especially useful for larger global partnerships. He is flexible on what model is used, but says it is crucial the intermediary is transparent about it.

“However, I don’t always think it is transparent and that’s where I have an issue,” he says.

Atkinson-Toal believes the brand should fund intermediary services when selecting agencies. If an intermediary provides additional support to agencies, like coaching or pitch preparation, then it’s reasonable for agencies to pay for those.

“That’s because the agency has instructed the intermediary to help them. I think whoever instructs the intermediary should pay for it,” he adds.

Prior to joining Amex GBT, Atkinson-Toal spent 16 years at Barclays and led a large number of pitches with a range of intermediaries.

“Basically, everyone that exists I’ve worked with,” he says. “Fee structure and transparency in the process are really important for me, including if we are going to compensate the agencies at any point for participating in the pitch. Transparency has always been the first thing I’ve asked about.”

Reducing visibility and limiting diversity

Where consultants only work with agencies that pay to access platforms or accept win-fee terms, some top-performing agencies may choose not to participate. Meanwhile, smaller agencies may not be able to afford the fees. This reduces visibility of the full market.

Additionally, consultants may not disclose when agencies decline to participate due to these models, which can give the false impression of open competition.

Sam Taylor joined Lloyds Banking Group as head of marketing in June. He was previously involved in several pitches at Direct Line, most recently a media review last September, supported by Tuffon Consultancy, where he was “clear” he wanted to approach agencies with data-driven expertise.

“Many agencies can’t afford to pay to be on a shortlist. They can barely afford to put pitches together. So how is that fair? We should celebrate diversity. We should give everyone a chance,” adds Taylor.

As he was aware of pay-to-play fees, he ensured the intermediary did not operate with this model because he wanted an “open and diverse” pitch. More generally, he says such fees can limit competition before a brand even begins its selection process.

“The problem is, if you go into a conversation with an intermediary, and they’ve got a pay-to-play scenario, then you’re already in a shortlist without even knowing,” he says.

“If there are agencies that are driving diversity in the market, then how do you hear about them? How do you get to see their work if they never make it onto a shortlist, because they’re not paying for it?”

Why brands are rethinking how they pay their agencies

The extent to which brands rely on intermediaries often depends on the maturity of their agency management function. Pharmaceutical and biotech giant Bayer, for instance, has a well-established internal system and doesn’t always need external support, explains Philipp Schuster, director of agency and marketing partnerships.

However, the firm does engage intermediaries for strategic projects, agency model reviews and more complex or global pitch processes.

Schuster says those intermediaries he works with are transparent, but acknowledges that the presence or absence of certain commercial models – such as pay-to-play fees – is not always clearly communicated to clients. Yet, while this lack of openness could create trust issues, Schuster argues such models can, in some cases, help smaller agencies access bigger clients.

“I understand that agencies will do, or have to do, everything they can, including having to pay to get access to clients. It’s hard,” he says. “For agencies that pay an intermediary to get this visibility, then maybe that’s the right way for them.”

ISBA’s Louisson adds that the views of larger agencies are not representative of the whole market.

“A small startup agency that doesn’t have a lot of contacts and network might love [these models], because it might give them an affordable path to meeting and getting involved in pitches, where they only pay after the fact.”

Good clients and good agencies form relationships based on trust and if that process starts with a process that has money involved through pay-to-play, then that is not a good basis to start to build trust.

Peter Zillig, Ford

Many advertisers remain unaware of how intermediary models operate, something VoxComm sought to highlight in its original open letter. Marketing Week contacted multiple brands for this article. Several, not included, said they had never heard of these practices before.

“So many [advertisers] were not aware of the changing dynamics and not aware that there was a growing pressure on agencies to pay,” explains Louisson.

This lack of awareness is often because it’s not a priority, especially for brands not actively pitching or using consultants. Ford Europe CMO Peter Zillig only became aware of pay-to-play practices around six months ago following media coverage. He believes the lack of transparency puts senior brand marketers in a “difficult position” because they assume the process to be fair and objective.

“We want absolute transparency and we want the very best agencies participating in any pitch process. We don’t want a bunch of agencies participating just because some have decided to pay and others haven’t,” he adds.

Are brands rethinking how they work with agencies?

Another issue is the pressure these fees place on agency resourcing. When agencies absorb consultant-related costs, especially at the start of a relationship, it can reduce their margins, potentially impacting the seniority or time they dedicate to the client.

“The only way the agency is going to get that money is by charging the brand more,” explains Atkinson-Toal. “That for me, is an issue, because the rate card we sign off is going to include fees for the intermediary and I don’t think that’s the right way to manage the funding.”

Trust between clients and agencies is already under strain, with mounting pressure on brands to deliver results often passed directly onto their agency partners. It’s not an ideal foundation for a new relationship.

“Good clients and good agencies form relationships based on trust and if that process starts with a process that has money involved through pay-to-play, then that is not a good basis to start to build trust,” notes Zillig.

What should brands do?

The number of both independent and business intermediaries is growing, bringing with it a wider variety of fee models. Compared to 1o years ago, most intermediaries worked in a “simple and structured” way, choosing agencies for pitches based on past relationships, according to Atkinson-Toal.

“Now, it’s a bit more complex,” he says. “It’s very challenging for brands to manage, because every intermediary has their own unique selling point.”

Meanwhile, he adds, the role brands play has changed post-pandemic.

“There is a lot more focus on cost efficiency, rate cards and fee negotiations. Intermediaries play a massive, beneficial role in that place, because they’ve got a much broader set of data, whereas brands can only work within their existing roster,” he says.

Even with good intentions, financial arrangements between intermediaries and agencies can create real or perceived bias. ISBA’s new guidance encourages brands to ask key questions to ensure any commercial arrangement is both transparent and proportionate to the services offered.

These include: How is the intermediary funded? What’s their revenue model? Do they accept payments from participating agencies? How are agencies selected for inclusion in a pitch?

Louisson recommends brands apply the “same due diligence and rigour” to selecting their intermediary as they do when selecting an agency.

‘More complicated’: Uncovering the current state of the pitch process

According to Atkinson-Toal, the first question should always be: “Who is paying, and for what?”

“The second question is, depending on the first answer, are you limiting the number of agencies you consider? If you’re using a pay-to-play model and I brief you on a social agency, is your shortlist restricted to those who have already paid you? If so, I’m not interested,” he says.

Even if brands only work with an intermediary once every few years, it pays to understand the different commercial models and ask direct questions about how, and from whom, they make their money. As long as the arrangement is transparent, it’s ultimately up to advertisers and agencies to decide how they want to engage.

As Schuster puts it: “It’s really a moral and ethical question. Every agency, intermediary and client needs to decide if it’s the right thing for them.”