INTERNATIONAL: Letter From America - PR agencies must educate procurement people

The involvement of non-PR savvy procurement people in new business negotiations is a pain for agency heads, but the industry can play its part in educating them, writes US commentator Paul Holmes.

PR agency principals are not a happy bunch these days. The recovery that many of them anticipated in the final quarter of 2002 failed to materialise, and the prospect of a war in Iraq makes any rebound this year unlikely.

Employee morale is down and parent companies are demanding more cost-cutting. But a new factor in client-agency relationships is causing even more concern: the increasing involvement of procurement people.

In many cases, procurement departments are running new business pitches and ask for information that many firms used to considered privileged: highly specific data regarding pay scales for account staff at different levels, overheads, even profit margins. They are using that information to tell agencies how much they are willing to pay for an account executive's time, how much they think a press conference is worth, and essentially how much profit they are prepared to allow the firm to make.

Some agency principals concede there are benefis. By demanding such information, procurement people are forcing firms to exercise more fiscal discipline.

Over time, this emphasis on financial criteria may give rise to better practices that will be adopted by those who want to compete for big accounts.

But there are questions about whether procurement people really understand the business they are overseeing.

Many RFPs now come directly from procurement people and contain dire warnings not to contact the organisation's comms professionals. That's fine, until an agency asks a simple question such as 'What are your communications objectives?' and is told (real-life example) 'I don't understand your question'.

The inference is that procurement people not only don't understand, they also don't care. They care more about cost than about value.

It's clear that many corporate communications professionals share that concern. Some are worried they are being directed to hire agencies because they are cheaper or because they offer a month of free service, rather than because they are the best suited for the job. Important but intangible elements of the hiring process, like chemistry and creativity, are being overlooked because they are hard to quantify.

Procurement people aren't going to go away, so they need to be educated about our business and agencies must have the discipline to reject clients who ask them to squeeze margins to the point that their culture is compromised.

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