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Value proposition

Creative services procurement decisions made on the basis of cost alone will compromise quality

Hand holding a golden egg Quite recently – and, I should add, innocently – I discovered that the term 'procurement' is steeped in irony. There are only a couple of things it can mean, but one of these is to 'obtain people to act as prostitutes', while the Latin origin, procurare, means to 'look after'. This provides an intriguing basis then for the term used to describe the process by which a services supplier is selected these days.

Way back in the historical depths of creative services procurement, about five years ago, I was invited to discuss the model as a member of the panel at the PM Society's annual Question Time. The event was held at London's Reform Club – a place designed, aptly, for the 'ferment of ideas and ideals' –  and the audience comprised a useful mix of pharmaceutical clients, procurement managers and marketing agencies spanning healthcare communications.

I spoke frankly, discussing the pros and cons, and explained what procurement meant to my role as an agency MD, and my agency. I came to the genuine conclusion that it was a most positive development. Why? Honestly, because PAN was thriving.

As far as I could see, we sat comfortably within this new world where procurement was an umpire in jaunty creative discussions and contract negotiation, refereeing the pitching process, and acting as a voice of reason when the squabbling threatened to boil over. That was the idea anyway and even if it wasn't quite meeting that objective yet, we had still managed to grow the agency while retaining reasonable levels of profitability under its influence. So, for me, a more pertinent question would have been, "Procurement, why not?"

After 60-plus months spent dealing with procurement departments and the quirks of the process, am I still of that viewpoint or has the worm turned?

Penny for them
The tale of a design student in the early 1970s coming up with Nike's tick, or 'Swoosh', as it's known, while working for a couple of dollars per hour ($35 for the idea), is an example of the challenge in valuing creative material at its point of creation. A moment's reflection in an empty hotel lift can become a multi-million dollar campaign. Conversely, it may take weeks, months and sometimes years of contemplation and unswerving devotion to yield the same seminal inspiration.

Are they worth the same to the buyer? What are you paying for, the idea or the work that went into summoning it?

A capped fee
It could be argued that everything Carolyn Davidson did in her life before she drew the 'swoosh' was, at least in part, a form of preparation for a mind that would ultimately excel. Likewise, it could also be said that $35 was about right. In reality, it probably took her a few days of talented doodling to happen upon the tick. That was her job, after all.

Whether she earned $35 or $35m, however, both would have been, for want of a better word, wrong. This is precisely the area where modern healthcare marketing procurement falls down. There must be a better way to define and agree on the value of idea creation.

The fact of the matter is that giving a brief to a creative team is like writing a blank cheque. It has to be, as no one knows how long it will take to crack any particular challenge. Rather, if there was a fixed fee arrangement for creating a minimum number of workable creative solutions, there would, at least, be some control and accountability placed reasonably on what that process is worth to the market.

I advocate this set-up. Not only does it avoid the client being hit with a larger-than-expected bill to cover the work undertaken – or, vice versa, horribly undervaluing a significant effort by a talented and highly experienced creative team – it encourages agencies to be more efficient. A capped fee for this part of the contemporary brief–create–pitch procurement process, including an amount for IP rights, would clearly motivate the agency to get on and 'just do it'.

Because great ideas can appear in a split second or after a five week grueller, sometimes the agency would gain and sometimes the client. What's important, however, is that both would be heading for a mutually exclusive, appropriate and acceptable middle ground at all times.

The pitching process
I feel I should add that the concept of pitching is rightly a core part of agency-client life, and I accept it willingly. It's not the concept I would change, but the process through which it's played out. Ironically, at a time when agencies are being told by clients to become more efficient, the pitching model remains so inefficient and only serves to add to the agency overhead, which the client ultimately has to cover through the fee structure.

The truth is this: rather than asking a handful of agencies essentially to do all of the work up front for clients to compare their wares at a pitch, clients should instead travel to their agencies' offices to meet the creatives and account handlers face-to-face, on the very ground upon which their beautiful campaign will be constructed. If they got to know the people behind the name, and talk to them over lunch about how they would handle particular issues, then call their five most recent clients, it would inform them so much more efficiently.

I don't suggest that we completely lose the presentational aspects of the pitch, for obvious reasons, just that a more explorative process, based on outreach and discerning, would be more efficient and certainly more cost-effective. This, I think, is a better way. Really it's about finding creative quality; the right ideas, people and chemistry. So why apply such a rigid, demanding, almost scientifically rigorous, and yet still quite inefficient process to wheedle this out?

One size for all?
Since I spoke at the Reform Club, several aspects have emerged in marketing services procurement that challenge the tripartite 'agency–marketing–procurement' assemblage.

Global-level deals have become more prevalent, bringing with them some of the most rigorous of all procurement demands. The requests for information (RFI) for international projects can be massive, time-consuming and repetitive processes. We recognise this as the cost of entry, and so we accept it. But just because it's demanding in some aspects does not mean that it's actually as fruitful as it should be.  

Where a procurement deal is done on a global level, obliging every client company to work only with the local affiliate agency, it also removes the one factor that binds strong relationships together – choice. This drives disenfranchisement, and even resentment in some cases. Similarly, an agency forced to work on a particular project for a particular client and at a particular rate can become quite demoralised, to say the least.

Every client must have some influence over the decision to work with a specific agency, and vice versa. Business models change, but given the nature of the task in question, I cannot see global-level procurement in this way as a viable long-term solution. The call for total transparency – with regards to how a pitching agency is composed, managed and funded – is another emergent issue. I truly believe that if you've got nothing to hide, then don't hide anything. However, while some procurement departments encourage an openness of agencies that would make Lady Godiva think twice, it often doesn't work the other way. When it does, it can be very opaque.

This isn't a problem with some of the newer, more enlightened procurement departments, with which I frequently have the pleasure of working, but I've seen the closed, one-way, interrogative tactics of 'old school' procurement breed a type of mistrust. By this I am not just referring to mistrust on the part of the agencies; I've seen deals fall apart because marketing and procurement fell out during the process.

Thankfully, however, the 'them and us'/ master and servant approach taken by old school procurement departments is on the wane. Many now understand that they will get the best from a creative agency by forging a partnership of equals.

That said, I am aware of recent incidents that concern me greatly and which I hope will prove to be one-off – or, at the most, two-off – events. We recently pitched for a piece of business and it became clear that our presentation had won on the day. However, literally overnight, we were gazumped by another agency because they were cheaper than our (already very keen) rates. This suggests that the procurement decision was made on the basis of cost alone – not value – which seemingly overruled what the marketing team wanted.

I know that this happened to our partner agency in the US last year as well. Both events are hitherto unprecedented in our respective markets, as far as we know, and are deeply worrying. Turning creative marketing services into commodities in this way will simply drive down quality at every turn.

If we're forced to lower fee structures below those of competing agencies in order to secure the business, even where our ideas are the strongest, there is little encouragement to service the agency with the resources needed to produce winning work. In the end, this will damage quality and creativity across the entire services sector.

I am an optimist, and so I hope these are isolated examples, but I'm also not blind to them, and I don't ignore them.

Onwards and upwards
Having lived and died by the procurement model for several years now, we've seen myriad issues arise through its widespread adoption. But, on balance, is it still a positive influence in securing creative agency business?

I think it is. In contrast to five years ago, the majority of clients now fall into the 'enlightened' category. Good procurement departments collaborate with their agencies to drive efficiency and hone pecuniary focus over the long-term, without compromising on quality. A keen procurement manager will recognise the quality 'mark' of a good agency too, as discerned in its creativity, reputation, management structure, peer-recognition, history, word-of-mouth recommendation and by the scope of the options on offer.

A savvy procurement department ensures a fair and objective selection process, and an appreciation of the benefits gained through longer-term alliances. It understands why this is, and how it all works, as well as the concept of 'preferred client' as much as 'preferred supplier'. Indeed, in my view, one of the key benefits of procurement for any agency is the ability to be the consistent, equitable and effective voice of reason between buyer and supplier when issues arise, as they will.

Marketing should be in a position to relax, with procurement on-side providing seamless quality control, help and support. I know this is not always the case on occasion, but it remains the potential; the goal.

Procurement in creative services, like the Reform Club in London society, has evolved, but has left the sector's traditional, progressive spirit undamaged. Criteria for admission: character, talent and achievement. Let's just hope it doesn't become all about the money.

The Author
Ben Davies is managing director of PAN Advertising
To comment on this article, email pm@pmlive.com

25th March 2009

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