Richard Wilson

Exploring the relationship between the buyers and suppliers of Public Relations services: A focus on the role of Procurement By Richard Wilson

Introduction The Public Relations [PR] industry in the UK is a multi-billion pound affair with organisations outsourcing a wide-range of functions and activities to external PR consultancies. The UK PR industry contributes £3.4 billion to the UK economy, creates £1.1 billion in corporate profits and the UK PR consultancy sector generates an estimated £1.2 billion in revenue . The strength of the UK PR consultancy sector and the degree to which it is intertwined with UK businesses was demonstrated by its performance in the recent economic downturn, growing by 7% in 2008 – well ahead of UK GDP .

The International Communications Consultancy Organisation however, predicts four key challenges facing the UK PR consultancy sector : o o o o

Shrinking client budgets Shifting client expectations Competition and price pressure Profitability and growth

Another issue identified by practitioners and researchers as of acute importance for PR consultancies adds another challenge to the list: o

Evaluation

The purpose of this paper is to explore the relationship between PR consultancies and one key stakeholder with the potential to influence these challenges – the client procurement team.

PR Consultancies and Procurement Procurement is the function concerned with securing the skills and resources of supplier companies to achieve competitive advantage for the organisation it serves. The field of procurement has grown in importance in recent decades as firms spend a greater portion of their income externally, to the point where the value of a company’s purchases often account for 6080% of its cost-of-goods sold. More specifically, the field of procurement has become increasingly relevant for PR consultancies, with 52% now dealing with a client’s procurement team.

The evidence suggests this trend is set to continue and points toward procurement becoming more involved in the purchase of PR services. A study of 30 main board directors at leading US, UK and EU companies found that 70% were worried about how their firms purchase professional services. Furthermore, a Charterhouse study drawing upon the experiences of 200 procurement professionals working for Europe’s 500 biggest companies (by revenue) estimated that £615m could be saved each year with more efficient purchasing processes for marketing and PR services.

In the same study, half of all procurement professionals surveyed felt under pressure to improve the purchasing process for marketing and PR services.

Three objectives were set for this paper to effectively explore the relationship between PR consultancies and procurement, bringing fresh insights into the challenges detailed above: 1.

2.

3.

Explore the nature of procurement’s involvement in the purchase of PR services Identify key issues in the relationship between PR consultancies and procurement Explore how the PR service is evaluated on both sides of the relationship

Method Given the exploratory nature of this study, a qualitative methodology was adopted and indepth interviews were conducted. A total of eight participants contributed to this research, split between five PR consultancy professionals and three procurement professionals with responsibility for sourcing PR consultancy services. Given the qualitative methodology adopted and the purposive sampling technique used, the findings of this research are only intended to offer a snapshot of, and insights into, the relationship between PR consultancies and procurement.

Findings 1.

Explore the nature of procurement’s involvement in the purchase of PR services

The extent to which a client’s procurement team is involved in sourcing the services of PR consultancies was found to have increased in recent years.

“Procurement are definitely playing a bigger role in my job now, the whole process of engaging with a client has changed and procurement are now a key stakeholder in that process” (PR)

“Overall there’s been a huge trend, particularly in the last five years but which probably started five to ten years ago, for more procurement people to be involved… it’s now pretty much the norm” (PR)

The size of the company purchasing the PR service emerged as a key factor in determining the likelihood of procurement involvement. One participant noted simply:

“The larger the organisation, the more likely there is to be a procurement department and processes in place” (PR)

The current economic downturn was judged to have been a key driving force behind the increased involvement of client procurement teams.

“Definitely budgets are tight, definitely clients are looking for extra value, and definitely we’ll see more of procurement people than we used to and there’s more questions about making cost saving and cost efficiencies” (PR)

From a PR consultancy perspective, the nature of new business development was found to be affected as a result of the increasing involvement of procurement professionals.

“If we were reaching out, we would tend to reach out to their Head of Marketing or Head of Communication and that’s traditionally been the way we’ve gone about new business. But now we would actually include the procurement person in that so it would be a two-pronged approach… that wouldn’t have happened even a few years ago” (PR)

The decision to include procurement when ‘reaching out’ to companies regarding new business appears to be vindicated by the findings of this study. From a procurement perspective, it is clear that they are heavily involved when the direction of new business is reversed and it is companies ‘reaching out’ to the PR consultancy.

“My involvement is to review any brief coming from our marketing teams to understand their objectives and then recommend PR agencies in line with their requirements… in most cases I would send the brief to the PR agencies” (Procurement)

“The internal brand team or PR expert come to us and we will help identify what the shortlist of agencies is” (Procurement)

Both quotes service to illustrate the role of procurement as a gate-keeper with considerable influence over which agencies are given the chance to be considered for new business opportunities. The significance of procurement as a key stakeholder when performing this gatekeeper role was recognised from a PR consultancy perspective.

“Procurement people are important for us as a business because they are so pivotal within companies who are really stretched at the moment and are often in charge of who is going on the pitch list, who is good value, who gives back good ROI to the business, so it’s important to hold a good relationship with procurement people” (PR)

A key concept emerged in the findings regarding that relationship: trust. In performing the gate-keeper role, procurement act as an “intermediary between the internal brand team and the agency” (Procurement) and this role comes with the responsibility of giving sound recommendations concerning PR consultancies to their internal colleagues. To do so effectively, one procurement professional noted the importance of having trust in a PR consultancy so that they could offer recommendations without fear for their own reputation amongst internal stakeholders.

The pitch was identified by both sides of the relationship as a crucial point in the process of new business development once the shortlist had been agreed. The role for procurement here was found to range from sending out the brief, co-ordinating ‘tissue sessions’ to ensure alignment, clarifying objectives and then holding the pitch session itself alongside the internal marketing and PR teams. This level of involvement appears to have changed over time, as described by one participant:

“When procurement was still maybe more in its infancy it used to just be seen as more of a numbers game and you thought procurement used to just come in and drive down the numbers and that was what it was all about… but now we can pitch our creative ideas to a procurement person as well… they are really being brought into the whole process” (Procurement)

The findings suggest that as well as defining the pitch list, procurement are often involved in evaluating the performance of PR consultancies at the pitch.

“Ultimately nobody knows the brand better than the brand owners, so the internal brand managers would decide who to go with but we’re another pair of eyes and ears to measure the pitch as well. We would fill out scorecards ourselves” (Procurement)

The involvement of procurement post-pitch is highly dependent on individuals, companies and the nature of the project, with the findings suggesting each situation is different. There was agreement however that PR consultancies work closely with the procurement teams at the beginning of each new project to determine the commercial arrangements of their relationship.

The agreement of a work plan was also considered a significant part of the procurement function, typically formed as a contract and…

“The agency would sign, the brand team would sign and then as procurement we would sign it off as well. It’s only at that stage that we would issue a purchase order to the agency for the given project” (Procurement)

Moving forward past the agency selection process, a key function of procurement to emerge in the findings was the maintenance of chemistry between the people involved in the day-to-day running of the account on both the consultancy and client side.

“We also act as a bit of a barrier in terms of we’re the bad guys so we protect that agency client relationship by being that bad guy that deals with the more nasty stuff behind the scenes” (Procurement)

“If there are any issues for a campaign if the brand teams aren’t getting the responses they need or if the agency is proving difficult to work with then I would have those conversations with agencies” (Procurement)

2.

Identify key issues in the relationship between PR consultancies and procurement

One key issue in the relationship between PR consultancies and procurement to emerge in the findings relates to the intangible nature of PR as a service and the complexities involved in purchasing something which cannot be inspected as per a physical product. The intangible nature of PR was recognised by one procurement professional:

“You have to understand what they do… I’ve originally come from an indirect background doing things like waste recycling and then I moved over to marketing and it’s a different relationship that you have with suppliers… you are buying air, you are buying a person’s thoughts” (Procurement)

From a PR consultancy perspective, the need for procurement professionals to understand the unique nature of PR was identified as a key issue affecting their relationship.

“In some cases, they’re just not in our world and they can’t get it and they’re used to buying stuff and they don’t understand the people bit and the creative brain power side of things… that’s when the problems come up” (PR)

“If procurement don’t understand your business and what you’re trying to do, I think that can be a bit of a hindrance” (PR)

The need for greater understanding of the service nature of PR and the increasing importance of services as a key sector in the UK economy were combined and applied in one account from a PR consultancy professional:

“[The complexities of services are]… pushed to the side and you think ‘well hang on a minute it’s supposed to be what’s leading this country out of recession – the service sector – and there it is getting wacked and misunderstood by big corporates and their procurement teams’ ” (PR)

However, the research did identify an emergent trend for increased specialism amongst procurement professionals, presumably to deal with the complex nature of PR services and to instil greater understanding in companies’ service purchasing processes.

“We’re definitely finding now, particularly with large organisations that we deal with – public sector and private sector – that we’re now working with people who are much more communications specialists… that is much easier for us because they understand what we’re trying to do” (PR)

“I find that there is a lot more demand now for marketing procurement professionals than there was a few years ago because people are becoming aware of the value that we bring” (Procurement)

PR could stand to benefit from the increased specialism and understanding amongst procurement professionals in terms of their standing as part of the marketing mix alongside advertising and marketing.

“Because PR is usually the most squeezed or the most small of the [marketing] budgets it’s important that they get us and understand why we’re not as mathematically easy to quantify as some of the other disciplines because then they will help protect our budgets and we won’t get pushed down as much” (PR)

Understanding the human element which is the fundamental aspect of a PR service was recognised by both the PR consultancy and procurement professionals as another key issue in their relationship.

“[Procurement need to]… appreciate it’s a service industry… ‘service industry’ gets bandied around quite a lot but PR really is a service industry and our cost base is our people… that’s 60%, any agency, that would be 60% of their costs… it’s just time and some disbursement costs for photocopying and phones… there isn’t a lot more to cut” (PR)

“You are buying a person’s thoughts so understanding that process of how they come up with their ideas and how they work as a company is really important so you’ve got to take this into account” (Procurement)

3.

Explore how the PR service is evaluated on both sides of the relationship

The literature surrounding the evaluation of PR demonstrates that it is an important research topic for practitioners and academics alike. This was supported by the findings of this study where the attitude towards evaluation was summed up best by one participant:

“Evaluation is the most important thing… we can do great pieces of work but if we can’t evaluate it and show how effective it’s been, it’s pretty much useless” (PR)

The difficulties of evaluating a PR service were acknowledged on both sides of the consultancy / procurement relationship.

“PR is the hardest of the marketing disciplines to put a solid number against and no one’s really cracked it yet” (PR)

“We know that we’re touching a lot of people and getting our brand messages across but what effect does that have on sales? That’s probably the biggest difficulty with PR” (Procurement)

The effect of PR activity on sales and other commercial metrics has been a key area of focus in recent years with the publication of the Barcelona Declaration of Measurement and Evaluation Principles in 2010, endorsed by PR associations and trade bodies around the world . These principles attempted to create a universal standard for evaluation based on outcomes such as sales rather than just outputs such as media coverage. This focus on outcomes was recognised by participants in the study as key to the future of PR.

“We need as an industry to be better at showing our value, evaluating, giving ourselves

numbers that actually stack up and mean something so that procurement can see the benefit back to the business which they’re trying to protect” (PR)

The motivation behind the Barcelona Principles and the incentive for PR to be able to better demonstrate its value were highlighted in a telling insight from one procurement professional:

“PR is sometimes seen as a ‘nice to have’ if budget allows so I think it could help PR as a channel if refinement was made to ROI measures to establish itself back up that pecking order… when I say a true ROI, I mean an uplift in sales” (Procurement)

As part of the drive to shift the focus of evaluation to the commercial outcomes of PR activity, the Barcelona Principles were notable in their absolute rejection of Advertising Value Equivalence (AVE) as a metric of value to PR. Despite this decision being widely endorsed by PR consultancies in the UK and around the world, the findings of this research suggest that AVE is still widely used in the PR industry, with a strong client demand for the metric.

“Reporting in each organisation is different and some companies are very happy to accept AVE spend which is such a coarse way of evaluating PR but it does a job is somebody needs to slap down a number on the boardroom table and go… ‘Yes, that what my PR spend generated’“ (PR) “We often find ourselves having a bit of an uphill battle where at pitch stage, the client says… ‘We love your sophisticated approach to evaluation!’… and then when we start working with them, they go… ‘What we really need is AVE figures every week’… we’re back to square one again” (PR)

One difficulty with the evaluation of PR highlighted by both sets of participants was the integration of PR with other marketing initiatives during a campaign.

“Unless you were only running a PR campaign, you can’t say that this PR campaign resulted in this amount of sales because presumably there were other marketing initiatives going” (PR)

This presumption tends to be true, with one procurement professional noting:

“When we’re doing PR it’s generally part of an integrated campaign so it’s quite difficult to isolate any uplift in sales and relate that back to PR activity” (Procurement)

It emerged in the findings however that the difficulty of evaluating an externally supplied PR service does not necessarily rest solely with the consultancy concerned but in some cases with the internal PR and marketing teams.

“Procurement need to make sure that when their marketing colleagues are pushing out briefs or asking PR agencies to do work for them that they start from the point of knowing exactly why they’re doing it from a business perspective… I find it surprising how often that’s still not the case” (PR)

The early involvement of procurement in the purchase of external PR services helps to mitigate this risk of PR consultancies being engaged without enough forethought being given to what success would look like and what the desired effects are.

“We have set activation briefs which outline their [internal brand team’s] objectives for that piece of activity and what the brand was trying to achieve… I would review that, sometimes we would go back and challenge them… is PR right for what their objectives are as a brand?” (Procurement)

PR consultancies were also found to be contributing in this area, with one PR professional noting:

“We’re working with clients to try and ensure there is a really clear commercial brief from them which makes it then more obvious what it is we are evaluating to show that we have effected change” (PR)

From a procurement perspective, there are other factors taken into account when evaluating the work of a PR supplier other than the direct impact on a company’s bottom line. The findings suggest that procurement professionals take a more holistic approach to evaluating PR consultancies, especially in their annual review of roster agencies. These annual reviews were found to be concerned with a whole range of KPIs including account management, creative idea generation, strategy, collaboration between agencies and transparency to name a few. Such evaluation reviews allow for considerable information to be kept on a number of consultancies in a company’s roster.

“I would have scores from the previous 12 months to show who is performing in each area.

That’s a really important process because we effectively have a league table of how agencies are performing in each area” (Procurement)

This evaluation and the ‘league tables’ kept by procurement would then feed into the gatekeeper role outlined earlier in this paper where procurement give recommendations as to which consultancies should be shortlisted for new business. From a procurement perspective, the evaluation of PR services could therefore be seen as a recursive, almost algorithmic process, constantly getting stronger and more accurate with each annual review.

Conclusions Procurement are indeed important stakeholders for PR consultancies and particularly for new business development. Their role as gate-keeper, vetting which consultancies make it onto the pitch shortlist, is important for PR consultancies to consider. It becomes irrelevant how brilliant and creative the ideas a consultancy may have regarding a particular project if they do not have the chance to be in the room with the decision-makers to present those ideas.

The relationship that PR consultancies hold with procurement teams at different companies is very important given the key finding that trust plays an important role for procurement professionals when deciding which consultancies to put forward for new business. For their recommendations to be valued by internal colleagues, it is quite understandable that procurement professionals must have confidence that the consultancies they shortlist will deliver, with their own reputation being a factor to consider.

The main issues in the relationship between PR consultancies and procurement professionals appear to relate primarily to understanding. The importance of procurement professionals understanding the business of PR as a human-led service emerged through the findings. The limited evidence from this research does however suggest that specialism amongst procurement professionals is increasing and this would go a long way to creating the required understanding to make the relationship more efficient.

The evaluation of PR services is evidently still a complex area and this was recognised on both sides of the relationship. The involvement of procurement to make sure that consultancies are engaged with a clear commercial brief was found to be beneficial for PR consultancies to better show how they effected change post service delivery. The wide-ranging reviews which procurement undertake on their roster of agencies result in what one procurement professional called ‘league tables’, providing them with a suite of information as to which agencies are strong in which areas – neatly linking evaluation back to new business development and strengthening their role as gatekeeper.

References

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Available at: www.iccopr.com/news-event.

Watson, T. 2012. The evolution of public relations measurement and evaluation. Public Relations Review, 38 (3), 390-398.

Ford, D. 2002. Understanding Business Marketing and Purchasing: An Interaction Approach. 3rd ed.

London: Thompson Learning.

PR Week, 2011. Comms director survey. London: PR Week. Available at: http://www. commsdirectors.com/ Patel, R. 2005. Walking a Tightrope. COP Agenda. Available at: https://www.supplybusiness. com/login/?ReturnUrl=%2fprevious-articles%2fautumn-2005-issue%2ffeatures%2fwalking-atightrope%2f Charterhouse. 2012. The Marketing Maturity Matrix. Available at: http://www. charterhouseproduction.com/marketingmaturitymatrix/ CIPR, 2010. Barcelona Principles: the end of AVE?. Available at: http://www.cipr.co.uk/content/ news-opinion/presidents-blog/4912/barcelona-principles-the-end-of-ave-

By Richard Wilson