CorpComms Magazine

Come on, admit it. Do you groan inwardly when you are pitching for an important PR contract and the potential client wheels in a procurement officer to oversee the process?

The bosses of most PR agencies certainly do if the legendary suspicion between the two disciplines is to be believed.

Maybe they are just nervous that all those receipts explained on expense sheets under the 'lunch with journalists' formula won't get paid. Or perhaps they still recall the old adage that procurement people understand the cost of everything and the value of nothing.

Alex Sandberg, chairman of financial PR agency College Hill, is one sceptic. 'If you're doing a car launch, you're going to be paying out for photo shoots, dry ice and razzmatazz,' he says. 'Maybe one-third of your fee may relate to these costs and a procurement process is going to bear down on those and compare them to industry benchmarks.

'But if you're at the consultancy end of the industry and are providing merger and acquisitions advice where there are few costs beyond the pay of the advisers, I'm not sure what the relevance of a procurement process really is.'

Despite such concerns, the involvement of professional procurement disciplines in the acquisition of PR services is expected to increase further as the economic downturn focuses corporate budgets on value for money.

Paul Mylrea, president-elect of the Chartered Institute of Public Relations (CIPR), and director of communications at the Department for International Development, says: 'As the economy emerges from recession, the value of PR and marketing input is going to be more and more critical and, to get it right, a procurement  process is going to be key. It's going to be even more important to do procurement of PR well so clients can see the value they are getting.'

This is likely to require a change of mindset, however, as some PR professionals are still horrified at the notion that their services should be bought in the same manner as stationery and widgets.

Tom Wells, managing director at marketing services procurement consultancy Gyroscope, believes this has to change. 'I think that procurement of marketing overall is actually pretty poor, and PR is probably the worst area of marketing in terms of procurement,' he says.

'PR is now an industry worth more than £4 billion in the UK and $100 billion (£60 billion) a year worldwide. In the UK alone, there are now at least 1,000 suppliers of PR and when you're paying agency fees you're paying for travel, design, editorial and all kinds of other services as well as salaries. This is an enormous industry that has grown faster than the ability of companies to manage it.'

Setting the right budget

Wells claims there are four major problems with the procurement of PR: how much to spend on overall PR budgets, how much to pay PR agencies, how to choose the right suppliers and how to be a good client.

'People simply don't know what their PR budgets should be,' he says. 'I come across organisations with budgets that are wildly inappropriate for what they want to do. One company had a budget of $28 million a year across Europe. It's entirely random. There's no reason for spending so much.'

Agency rates are more structured, with ranges of hourly fees for varying levels of expertise and seniority and industry benchmarking tools available to determine the number of hours that should typically be charged, but Wells believes many organisations just do not use them enough.

He also feels that most companies do not know how to navigate the many variations in size, specialisms and sophistication of PR agencies and are not specific enough in their objectives.

Bryan Taylor, chief development officer for Europe, the Middle East and Africa for public relations agency Waggener Edstrom, argues that the recession has made this situation even worse.

'In the current economic climate, pricing and budgets are more and more absent when you're doing pitches,' he says

'From an agency point of view, it's always great to know what sort of budget you're working to. But more and more we are seeing a blank sheet of paper and people saying, This is what we want. How are you going to price it, how are you going to guarantee that you do what you say you're going to do and how are you going to measure it?'

The key concern of external PR contractors is clearly that procurement processes will push down fees and erode margins.

'It shouldn't become a way of screwing PR agencies,' says Sandberg. 'We have costs and we must be allowed to make a margin.'

Horror stories like the one that Taylor tells about a Hewlett-Packard procurement process do not help to defray such concerns either.

The computer giant, he recalls, used a blind auction where bidders for a PR contract were asked to name their price and were then shown the (unidentified) bids of all the other firms competing for the work and invited to cut their prices. Taylor says: 'PR is very much a service value-driven business and to bring it all down to price, I think, is damaging for the industry. It's a fantastic way of getting the price down from a client's perspective but from an agency perspective, it's quite tough.'

The PR industry recognises there is a problem, with both the Public Relations Consultants Association and the CIPR publishing papers on improving the performance of purchasing in PR over recent years.

David Gallagher, PRCA chairman and president of PR agency Ketchum, says procurement processes are one of the top three concerns of his members at the moment, with most concerned about whether they are administered properly and what their real value is.

'I think most agencies would look to avoid having to go through a procurement process and would like to keep negotiations between corporate communications and public relations people,' he says.

'But over the last five to ten years we've seen great growth in procurement and most agencies have been forced to go through processes to demonstrate value.'

Indeed, there's a grudging acceptance by most in the industry now that they need to go through procurement procedures but those on the other side of the negotiation table want them to truly engage in the process to demonstrate value, rather than snigger on the sidelines.

At pharmaceutical giant GlaxoSmithKline, director of corporate media Alex Harrison stresses that large corporations do not all just roll out procurement processes regardless of what is being bought.

'It depends on what part of the group is involved,' she says. 'We do use procurement in corporate communications but it is probably used much more in our consumer business, which is very sales focused, with a bigger budget and a much stronger assessment process to make sure that they are getting value.

'It's a very complex process. Anyone can look at the number of hours and which people are on the account and what are their hourly rates and these are all variables. But you also have to measure outputs, such as the value of PR and the cost of taking out equivalent advertising and it is harder in corporate communications where measuring outputs such as changes in corporate reputation is not as easy.'

Emma Boran, communications manager for GSK's consumer healthcare business, which includes brands such as Aquafresh toothpaste, adds that the division's procurement process maps hourly rates for public relations professionals and hours charged against industry norms and plots them on a range where they can be compared with peers.

However, she says GSK's process also performs qualitative analysis so outputs are measured and taken into account when determining value. For the process to work properly, she stresses, a truly collaborative approach is essential.

'Procurement is definitely more relevant to the consumer business and we really look for very collaborative relationships with preferred suppliers,' she says.

'I would say that our preferred suppliers of public relations are very much in agreement with that approach because they also want a process that's fair and is seen to reward good practice.'

Understanding is key

The procurement industry itself also seems to want to collaborate. Mike Brookes, product development manager at the Chartered Institute of Purchasing & Supply, acknowledges that many PR professionals are concerned about being assessed by procurement processes but says they need to co-operate properly with them in order to obtain full value from the experience.

'The PR industry needs to be prepared to engage with and be open to the dynamics of procurement but there's a certain amount of reluctance to do so,' he says.

'As a procurement person, when you come up against that messaging, it can push you to focus on the prices and costs whereas if you are fairly open to a debate between PR and procurement you can focus on the objectives much more and both sides win.

'It's a little bit like Catch 22. It's important that there is transparency in the process; it seems to work much better when everyone knows what each other's objectives are.'

Despite this, Mylrea believes many PR departments currently do not have the procurement skills that they need to be able to discern the value they are seeking. 'To make sure that procurement is done well, you need to understand the product,' he says.

Gallagher says there has to be trust on both sides, arguing that some clients using procurement create distrust because they are focused purely on trying to drive down costs, without a lot of regard to value.

At the other end of the spectrum, he argues, other organisations take an approach of forming partnerships that lead to both sides thriving.

'At Ketchum, we have clients whose procurement processes have really benefited us, helping us identify areas of high value and improve efficiency,' he continues.

'But procurement is most likely to be beneficial after preferred bidders have been selected. When you're mapping out what you need for the relationship to work, procurement can introduce a level of structure and analysis that may have been absent from the negotiations. We see it as an honest attempt to come up with an answer to those problems. If it is just used to screw down the lowest-cost provider, procurement will not be able to achieve the objectives of clients and their agencies.'

Gyroscope's Wells adds: 'Sometimes you get better value by spending a bit more. You have to understand it in different ways. It's not simply about cost-cutting. It's about adding value.'

Part of the solution also lies in developing specific procurement processes for PR and standardising evaluation and measurement of campaigns.

'There are times when tender documents just set out standard terms and conditions aimed at procuring, say, heavy machinery rather than professional services like PR and public affairs,' complains Gavin Devine, chief operating officer at integrated marketing communications agency, Engine Group. 'Procurement teams might do more to tailor tenders to the services they are actually trying to secure.'

Waggener Edstrom's Taylor says: 'Standardisation of measurement is tricky. Unless it is set up in a particular way, you're going to get very different pricing responses from different agencies because everyone measures it in a different way.

'To properly get value for money, you have to tie business programmes to business goals, measure the inputs of the programme and then measure the results.'

Certainly, procurement processes seem to be here to stay in PR for the foreseeable future and Wells argues that the inevitable belt-tightening will mean they become much more prevalent in the public sector as well over the next few years.

The challenge for the industry is to become as effective in explaining its own merits as its members are in persuading media and consumers alike of the beneficial qualities of their clients. 

'I don't think that procurement needs to be a bogeyman,' concludes Sandberg. 'PR is a business tool. If it cannot demonstrate that it can deliver value, no amount of argument is going to get anyone the business.' 

How to Buy PR

• Define the objectives for the business, for communications and for PR itself
• Set targets for performance and service in all PR programmes
• Agree measurement metrics and scope
• Keep communication channels open with contractors and build trust
• Focus on more than cost reduction. Sometimes, better value may be obtained by spending more
• PR purchasing can fail when its key components are compartmentalised. Work with contractors to understand how the programme is delivered as a whole

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