Dynamic Bidding: PR's race for respect heads south with dynamic bidding

As more companies like Sun turn to dynamic bidding during agency reviews, many PR pros argue that the process turns the industry into a commodity.

As more companies like Sun turn to dynamic bidding during agency reviews, many PR pros argue that the process turns the industry into a commodity.

When Sun Microsystems announced earlier this year that it would use dynamic bidding as part of its agency review, it set off a wave of hand-wringing and whispered anxiety that the PR industry would once again be viewed as the Rodney Dangerfield of the marketing mix.

For years, PR has ached for respect. It doesn't get the huge budgets that advertising does, nor is it as easy for it to demonstrate ROI as it is for direct marketing. PR has fought so long and hard for a seat at the table that the phrase has become a clich?, and the industry works overtime to make sure it is not seen as just another commodity. So news of Sun's decision to use dynamic bidding, also known as a reverse auction, worried many agencies that they were ceding ground in this fight.

"Agencies are right to be worried about this," says Golin Harris chairman Al Golin. "It puts us in the position of being seen as a commodity."

But Karen Kahn, Sun's director of worldwide PR, has defended the use of dynamic bidding. She has argued throughout the review that dynamic bidding was never about picking the lowest bidder, but about streamlining the negotiating process.

The controversial method works like this: Shortlisted agencies submit their bids in an online marketplace. The lowest bid - though not necessarily the bidder - is continually displayed, compelling agencies to continue reducing their bids in a fight for the bottom.

And that allows rates and fees to be established immediately so the client and agency don't have to spend months in contract negotiations, Kahn says. To back up her argument, she points out that Bite Communications and MWW Group, which Sun selected late last month, were not the lowest bidders. MWW was the highest bid among the three firms competing for the piece of business it won, while Bite was the middle bid among three agencies for its piece of business.

Varied opinions

Some agency heads say that dynamic bidding - used to purchase everything from office supplies to hotel rooms - sets a dangerous precedent for the PR industry.

"We'd love nothing more than to work with Sun," says Curt Kundred, West Coast president for Fleishman-Hillard, a finalist and one of the incumbents in Sun's agency review. But the firm dropped out because of concerns with dynamic bidding. "It's bad for the industry. What it tells me is that the point of difference is price. That's what the commodities market is about. We're not about being a commodity."

The agencies pitching Sun were generous about the process. Burghardt Tenderich, Bite's North America GM, says it was a smooth and transparent one. MWW president and CEO Michael Kempner describes the review as one the best RFPs he's been involved in. Paul Bergevin, president of Citigate Cunningham, said the process was "a little out of the ordinary," but doesn't think it played much of a factor in Sun's ultimate decision.

Steve Cody, managing partner of Peppercom and a member of the PRSA's Counselor Academy executive committee, was not as gracious about his experiences with the dynamic bidding process.

"I liken it to 30 minutes of hell," says Cody, whose firm was not involved with the Sun review. But he has pitched other clients that used dynamic bidding, although he declined to name them. "It's demeaning, demoralizing, and commoditizes all the good things PR agencies can provide. It puts us alongside Home Depot and Office Depot as a vendor."

Role of procurement

Use of methods like dynamic bidding is still part of the hangover from the dot-com days, when pricing was out of control, adds Kundred. But at the prices some clients want, and some agencies are willing to stoop to, Kundred wonders if agencies will be able to find people who will be excited to work for that kind of client.

"There are so many intangibles with our business," adds Golin. "When you are looking for an agency, you are looking for a partner. And this is a hell of a way to start a partnership."

Procurement certainly plays a larger role in agency choice today than it once did. But it generally works best when it's integrated into the overall review team and not leading the review, adds Golin. When it does, it's a slap in the face to the corporate communications team because it relegates the in-house people - not just the firm - to the periphery when it comes to decision-making.

And that lessens the reputation of PR in the eyes of the client's executives, including their own PR people, says Cody.

And that is why in-house people are the first line of defense, he argues. They are the ones who need to stand up and establish the importance of PR in the eyes of their CEOs.

The review process works best when communications is the driver and procurement is along for the ride as an adviser, says Peter Debreceny, VP of corporate relations at Allstate Insurance and a VP with the Arthur W. Page Society. Procurement brings rigor to the process, makes sure the RFP is comprehensive, and helps provide structure.

But he doesn't believe that procurement should lead the process "because you can end up with the wrong vendor. It could be a vendor you like, but if their bid is low, they might not be charging enough money to run their business properly."

Communications people need to reach out to their procurement counterparts to make sure they understand that PR is not a commodity, and that much of the intangible nature of PR is more important than the lowest hourly rate.

"If you're buying solely on price, you will inevitably end up with the wrong supplier," adds Debreceny. "There is a relationship between quality and price."

Kundred blames agencies that are willing to drop their prices into low ranges. He says the economics are similar from agency to agency, and that agencies are shortchanging themselves and their other clients if they are willing to bid low for a particular client. Agencies need to refuse to participate in such procurement.

J. Francisco Escobar, whose firm, JFE International Consultants, provides marketing relationship-management services, says PR agencies and in-house PR people suffer from the same problem: They never say no. And in order to stand up to procurement, and to point out that the best cost isn't necessarily the best value, PR people need to start saying no.

"We need to see the industry come out and say, 'We don't support this,'" says Escobar, adding that industry associations are reluctant to take that kind of stand, as they don't know if 100% of their membership supports it.

Kathy Cripps, president of the Council of PR Firms, says the council advocates working with "enlightened" procurement people who are focused on the end value and will ensure fairness during the process.

But as agencies hungry for new business pursue opportunities, there's a big difference between saying "take a stand" in theory and doing so during an actual search. Thus, the industry would be wise to speak truth to procurement as a whole, and not just when it's easy.

"If our own culture and style is not right for the client, that's fine; They shouldn't hire us," says Golin. "But they're never going to know that if they're looking at just numbers. That's a stupid way to do things."

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