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Tuesday, 01 December 2015

Royal Mail Group roster review prompts SME complaints

UK— A review of the Royal Mail Group’s market research roster has prompted complaints that it shuts out small and medium-sized businesses from competing by excluding companies under £3m in turnover.

The framework is set to run for three years, with an option to extend by a further two years. The group, which includes the Royal Mail, Post Office and Parcelforce, wants to appoint 15 agencies – less than half the size of its previous roster – while annual spend is expected to be around £5m, which is thought to be roughly a quarter of what was spent previously (see here and here).

Around 70% of that £5m will be spent on Lot 1, which covers audience insight work, including brand and communications trackers, U&A studies and customer journey projects. Lot 2 and Lot 3 – product and concept development, and market trends, forecasting and modelling – split the remaining 30%.

Sources have told Research that the restriction preventing smaller companies from applying is new this time around – and shortsighted. Some have pointed to Truth Consulting as an example of a small, startup business that wouldn’t have made it on to the roster if such rules where in place four years ago. Truth has since gone on to win the ‘Most Wanted’ Agency Award from the Association of Users of Research Agencies, a body of clientside researchers.

Andrew Smith, chairman of the Independent Consultants Group, suggests the rule was probably brought in at the request of Royal Mail’s procurement office, using the same one-size-fits-all mentality that often exists within government procurement processes. He points to cases where government buyers have insisted that small businesses have £10m-worth of professional indemnity cover. “They don’t think it through,” he says.

One former clientside research manager, now an independent consultant, thinks the turnover requirement may be linked to the size of the work Royal Mail intends to put through agencies. But a reader who contacted Research anonymously to bring the matter to our attention said: “Much of the work in the roster is likely to be relatively small-scale and likely to be perfectly suitable for very small agencies. The annual value of the framework is estimated at £5m, of which 30% is likely to go on small-scale spend, with multiple projects of values lower than £50,000. Very small companies (one- and two-man bands) can easily and competently manage qualitative research up to c.£30k and quantitative research up to £500k.”

Royal Mail’s turnover restriction shuts out 62% of the 445 agencies listed in the Research Buyers’ Guide from competing for its work. It seems smaller firms can come together to form consortiums of sufficient size to apply for the roster, but Royal Mail then reserves the right to require those groupings to assume a particular legal form or have one member assume primary liability.

“But this defeats the purpose of a small business being a small business – independence,” says our anonymous source.

Market Research Society CEO Jane Frost said this was “a disappointing development”. “Rosters should always reflect the tasks they are set up to serve and the characteristics and skill sets of the suppliers in the markets from which they draw. A £3m cut-off would exclude Royal Mail from the considerable talent and creativity of a large section of the research business.”

Royal Mail has not respondend to requests for comment at the time of publication.

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Readers' comments (6)

  • In Tom Ewing's Research magazine article Feb 2012 he highlights the issue of "diversification bias [which] leads people to pick a wider range of choices than they will actually make. If agency rosters are subject to it, then those selected should be wary of opening the champagne too early." So, to all those fretting about not being given the chance, it may all come to nothing anyway if behavioural economics has anything to do with it.

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  • £20m spend in the past beggars belief especially when one looks at the shambolic state of the PO ... What did they spend the money on and did they listen?

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  • I believe this is very shortsighted of Royal Mail. I used to work for a large PLC and they took a similar approach, meaning that we lost a lot of smaller companies from the roster, who were generally the best, the most innovative, the least complacent and the least likely to rip us off by being quick to charge for the slightest extra thing. As a member of the ICG myself I know we have some amazing, vibrant, highly intelligent members and really think the Royal Mail is missing out. Their loss!

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  • Limiting entries to agencies with more than £3m t/o ie c. the top 100, seems a highly restrictive practice that flys in the face of Government policy to encourage SMEs and stimulate bedrock of the economy.

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  • I have seen this minimum turnover requirement in the past with other research buyers. And it doesn't work.
    The typical pattern is that a new Head of Research / Insight starts off with a rigid spec for agencies on the roster e.g. minimum number of employees, turnover of £Xm+, experience of international work, located within Y miles or Z minutes travelling time of client's offices, etc.
    After a year or so, they discover the agencies on the sparkly new roster are more expensive, less flexible, more intransigent, and lack the specialised and detailed knowledge of complex markets or arcane products which they were used to getting from the single-person specialists they have now excluded.
    At this point the independents are invited back into the fold, usually under the roster radar, and, in no time at all and to satisfy the appetites of the Procurement Monster, a set of special circumstances is contrived under which it is acceptable to use smaller agencies - again.

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  • This suits me. I avoid large research agencies where possible as they often don't offer the flexibility, charging structures and innovation of smaller operators. So that keeps the smaller players available to work for me!

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