Ben Smith, Founder, PRmoment.com
Richard Tompkins, managing director at agency W Communications, talks to Ben Smith this week about all things procurement.
Ben Smith: Is procurement helping clients and agencies produce better work?
Richard Tompkins: In short, no. I think we’re all very much aware that when a pitch process is led, or heavily impacted by, procurement teams then the main goal is going to be price or ‘value for money’. Even when the finance bods are coming from the most forward-thinking and progressive brands in the world, the first thing looked at is not the creative response, the strategy or the results of any potential response, it is “how much will you charge us?”.
And we’ve certainly noticed even more of a move to this way of operating over the last five-plus years, where the first part of a large pitch process is now not a request to the agency for ideas or strategic thought but a review of rate cards, an agreement on contractual terms and even to agree to rebate structures… all before both sides have worked out if this is the right agency/client relationship.
The worst scenario, of course, is when the procurement or ‘financial response’ is part of the scoring for winning the work. We’ve been told on a couple of occasions that we’ve not won a pitch because of our ‘financial points’ score, and been told that we’ve had the best ideas/strategy/thinking but they’ve gone elsewhere because of price… a price that would equate to a couple of thousand pounds here or there. Madness.
BS: As the MD of an agency with a circa £10m fee income – what's your experience in dealing with procurement departments?
RT: I won’t lie, the heart sinks a little when you know that you’re doing the procurement dance BEFORE you win a piece of business. It’s like being the waiting staff in a restaurant and being asked by the diners to have the bill for food before they’ve seen the menu and ordered. Knowing full well that you’ll have to give them a cost of the tomato soap and mushroom risotto (with no pudding), a price they’ll duly sign up to and then subsequently order the oyster starter, fillet of beef and chef’s special ‘moon on a stick’ pudding…
Don’t get me wrong, there is definitely a benefit to getting agreement in principle on contract terms so if and when you win the business you can get moving quickly (and get paid for the work), however, this should be run alongside a creative response not being a hurdle to receiving the brief in the first place.
BS: Have you have ever had a positive experience?
RT: There are some procurement processes that are better than others of course, but broadly they are a tricky process to navigate, require a lot of patience and ultimately end with the agency taking a hit (or several) on rates.
The best processes are ones that run alongside the creative response and only focus on the top-line requirements from a potential future agreement rather than being totally legally binding and allowing for zero flex post agency appointment.
BS: You mentioned that you recently were asked by a procurement department if they could have a rebate if the client hit a certain spend. How did that work?
RT: This is something we’re seeing more of, particularly as you grow and work with bigger groups or businesses with parent companies. It’s a way of the businesses ensuring even more value for money from the agencies they work with. Essentially putting in metrics to recoup further fees should they buy more of your services. Usually, a percentage sliding scale, for example, if they spend £150k with you then they recoup 5% of fees back, if they spend £200k+ then they recoup 7.5% and so on.
Often agencies are so keen to not be scored badly on the financial response (which as mentioned could jeopardise winning the pitch) they’ll agree to almost anything, and then if the business is won they’re bound by the rebate structure. Something which makes turning a profit on a piece of business even more challenging.
BS: Is there a danger that taking a procurement based approach to buying marketing services will commoditise the agency market?
RT: There is always a danger of course that if every business decided to let procurement take the lead on sourcing agencies that we’d all have to move to the Mike Ashley model and just stack ‘em high, sell ‘em low, but I can’t see that happening in a market as dynamic as the UK.
These things tend to come in waves with businesses tightening their belts to save on marketing spend before realising that it suppresses creative work and ultimately results, before moving the goalposts.
BS: Presumably, as a business, you can only do what you can afford, so if a procurement department drives down your hourly rates, you have to put a less senior person on the account don't you? Thereby, in theory anyway, decreasing the quality of the work?
RT: Every agency will manage the procurement process differently, however, although we have to be proud of our work and our craft we all need to make money to pay salaries and continue to operate. So there is always some concessions to be made. It could be limiting teams to more junior staff, restricting senior strategy or creative time or simply stripping back the type of work for clients to make the numbers work.
All of these are obviously not conducive to the best possible work and in some way every agency will need to work out how they can ‘beat the system’. We have a few tricks up our sleeves, which work pretty well to ensure we’re not totally beholden to the procurement bods, but that would be sharing trade secrets…
BS: Are there occasions when you have decided to walk away from a procurement process?
RT: As yet, we’ve not walked away from a procurement process, however, there have been plenty of times that deep breaths, expletives, large G&Ts and the occasional bin kicking have been required to get through the process. Particularly when you hear the people you’re dealing with say things like “I know this is painful and in fairness, it will probably all change after six-months”.
The thing you always have to remember is that the often brilliant clients you’ll be working with are removed from this process, are as frustrated by it as you are and ultimately want the best people for the job. In that respect they are feeling your pain… or are at the very least aware of it!
BS: Barely a pitch goes by without the term "agency partners" – but aren't the current procurement techniques we see from PR clients, detrimental to an agency/partner partnership concept?
RT: We all want to be ‘partners’ or ‘extensions of the team’ and have to remember that the true partnership is between the marketers and the agency, not the finance department. Sometimes though, when there is a procurement heavy process, it is hard to separate that fact. I’ve certainly flagged previously to a key client contact that “he should know that all goodwill has now gone” following a seven-stage procurement process in which we very nearly had to walk away... We received a case of champagne in reply.
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