Analysis: Agencies face up to procurement

There is mounting concern among agencies that the involvement of procurement experts in pitches merely serves to stifle creativity and drive down prices. Simon Ellery reports.

The PR industry is increasingly facing up to the emergence of procurement specialists, drafted in to scrutinise how agencies are recruited and paid.

Fears are being voiced that this breed of manager only seeks to cut prices and disregards creativity in the process.

At last month's PRCA annual conference, delegates heard a stark warning from advertising industry body ISBA director of membership services Debbie Morrison. She told the PR industry that it had its head in the sand and should 'get real' over the use of procurement specialists.

Morrison said PR executives had complained about calls for growing account scrutiny and new inquisitors being brought in to pitches. 'The problem is that sometimes (the client) does not get the answers,' she added.

This comes as ISBA research out this month shows a jump in the use of procurement in advertising, from a third of all pitches six years ago to almost half this year.

PR agencies are also increasingly seeing their pitches face a new tier of scrutiny. Storm Communications MD Derek Lowe sums up the negative side of the argument: ' The bad thing is that they frequently do not know how a PR campaign is run.'

He says best value emphasis often means procurement executives merely try to push down fees: 'But in our world it is hard to do that when we are already on quite tight budgets. Procurement executives are probably more used to buying stationery.'

However, Lowe concedes that the involvement of procurement execs is not entirely a bad thing. The upside is that they have a clearer understanding of the money side of contracts and can engender a more transparent relationship, he says.

'Clients and agencies can become confused about what is included in the fees - such as the costs of sending out press releases. But because procurement people go into that kind of detail, you are on a firmer footing if you need to review work done and costs for any new work proposed,' he adds.

One industry source points to a concern about their popularity within larger corporates, where the procurement executive controls the roster and can put price before the relationship.

But on the client side, there is a growing wish to instil value for money in the recruitment process. Mobile network Orange head of PR, sponsorship and events Niamh Byrne is a firm backer of procurement experts in pitches and the drawing-up of contracts. She uses a two-strong in-house procurement team to thrash out contract details.

Byrne says: 'Procurement is a great resource because it takes the pain out of it. But I would never hire an agency on the basis of cost. It is their experience and their ability to move the brand on that counts.'

Agency search firm AAR director Carolyn Jordan says a lot of clients are looking at benchmarking agencies and developing best practice mechanisms, while ad agencies are hiring their own in-house procurement people. 'This will flip over into PR as well, as it always does,' Jordan predicts.

Rival search firm Agency Insight MD Andrew Melsom defends the work procurement consultants do: 'It is not a conspiracy to mug agencies.'

As part of the ten-strong team's work, he is currently devising new remuneration methods and contracts to motivate agencies.

According to Melsom, most contracts 'simply don't work'. He says: 'Many client contracts with agencies are archaic. We tell people that they are paying substantial premiums when they don't need to.'

BT marketing services purchasing manager Steven Sargent says a crucial factor is that the purchasing specialist is skilled in the area he is buying. 'We work hard to raise the professionalism and market knowledge of the buyer. The whole point is to get better value for money and more effective marketing,' he explains.

Tech specialist icas PR board director Lindsay Highet supports procurement involvement in pitches, saying firms increasingly want to see details such as account retention rates. 'I do not think it is a bad thing, as it takes out the ambiguity,' she adds.

Morrison goes a step further: 'Embrace it. Get to know the people and work together - they are solely buying marketing services. These people are not trying to drive the price down... all they want is business transparency.'

Morrison points out that it is in clients' interest to see healthy profits on PR agency books as they don't want to work with 'disgruntled' people.

But, she adds, this means they have to ask more searching questions.

She has been working with the PRCA to draw up commercial guidelines for agencies, and is due to launch a project in the autumn to thrash out new model terms, so agencies and clients have standard contracts to work from.

Demystifying how agencies are paid is clearly in the best interest of the clients. But it could also be in the best interest of the industry itself. With the backing of the PRCA, the PR world could tackle the issue head-on and engage with clients to identify clear targets, along with the motivation for delivering them.

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