Rumor has it a large corporation is preparing to consolidate its agencies through a process that is euphemistically known as "dynamic bidding" or "reverse auction."
Though somewhat acquainted with this process following last year's Dupont review (won by Ogilvy), I sought expert help to better understand the process from Susan Fieldman, SVP of procurement for Omnicom's Diversified Agency Services. She was formerly employed by Electronic Data Systems, which was a pioneer in this procurement system through its eBreviate division.
Contenders for the business are given an access key and start putting their bids in at a certain time. The lowest bid at any given moment is displayed, so companies can throw out another price and try to be first to the bottom.
Seems like a great idea if you are trying to buy ballpoint pens by the thousands. But as a method for selecting a PR firm, well, it has its limitations, to indulge in a euphemism of my own.
To briefly state the obvious, the success of an agency-client engagement hinges on relationships. There is a reason why eBay doesn't do personals.
Kathy Cripps and the Council of PR Firms has come up with a excellent guidebook on best practices for reviewing agencies. This method definitely isn't in there. Some clients may still need to be educated on the reasons why this is not an ideal method for choosing an agency, particularly our procurement friends.
Fieldman, for her part, is working with DAS clients and others to help find ways to streamline some processes without sacrificing an appreciation and need for the intangibles like creativity and culture.
Agencies also need to work to make their clients understand what makes them unique, and find more and more ways to differentiate themselves from their competitors.
However, while no one seems to think this is a full-blown trend that will dominate the industry, something nags at me about this process, isolated though it may be. There is no doubt that clients are looking for greater reassurance that their agency choice is a good one and that they are getting it for the best price they can.
As Fieldman put it, "Clients are desperate for control because they are buying something that they are not sure is going to work."
Companies also invest a lot in procurement systems and it's not hard to understand why they would want to apply the expensive technology to everything they can to make it worthwhile. But there may be another, less innocent motive for running this kind of auction that should make everyone nervous.
As pointed out by Francisco Escobar, a procurement consultant, there is a danger that clients will use this process to engineer a pre-determined result that gives them the advantage of retaining their well-trained incumbent at a lower price.
Clients are not required to take the lowest bid proffered, so it would be remarkably easy for a company to throw its agencies and competitors into a situation where they will go as low as they possibly can, then retain their existing agencies at bargain-basement rates.
Big brands are in the best position to take advantage of the desire by firms to add their names to the roster, or to keep them there. Though it may seem unlikely, there is huge potential for the auction method to prove not only ineffectual, but downright unethical.