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OPINION11 June 2009

The ‘procurement paradox’ facing research

Research is recession-proof, right? Not this time round, says Andrew Wiseman, CEO of Quaestor. The squeeze on marketing budgets is putting pressure on research spend and bringing agencies face-to-face with procurement departments like never before. But can insight be treated in the same way as manufactured widgets?

But the sudden and dramatic slowdown of the global economy over the last year has brought to bear a relatively new phenomenon for research and insight consultancies – the spectre of procurement in the agency selection process for research contracts. Procurement in agency selection has, until very recently, been an anomaly, as research and insight buyers sought to gain actionable insight from suppliers – with the added-value becoming a catch-all term for all analysis beyond the very basic.

Given that the research industry has not managed to shield itself fully from the recession on this occasion, a paradox has been created in many clientside organisations. Insight managers continue to strive for this so-called added value (supported by director-level involvement throughout the project life-cycle) while the procurement functions have an eye on a single digit, the price per unit – while agencies rightly claim that services cannot be treated in the same way as manufactured widgets.

Clearly, in some instances the involvement of procurement functions in the agency selection process can have benefits in getting the best value for money and hence making the overall budget work harder. Our own experience in recent months has shown that some organisations are taking the opportunity to strip back almost all added value from research and insight projects, whilst ensuring that they continue to have a handle on the key metrics which they measure.

In such instances, cost per interview becomes a commodity price, much in the way that any other commodity is traded on the open market. Similarly, other recent experience has shown clientside research teams using procurement to push down on price for the nuts and bolts – thereby allowing them a greater amount of budget to allocate to the innovative add-ons – although whether these are supplied from the same agency is open to debate. The overall purpose of the procurement function is to reduce the costs charged by the agency to as low a level as possible – and given the last few years have yielded many phrases around the idea of premium pricing, the role that procurement can play in reducing that premium to a base, comparable price is significant.

But what about the old adage of you get what you pay for? It should be expected that agencies appointed to execute a given research programme can handle the nuts and bolts of collecting the data effectively and producing the basic analysis necessary to meet some of the key KPI requirements of clients – but the majority of clients continue to require insight led presentations, increasingly based around client consulting rather than research practitioning. The days of the charted questionnaire are long since gone, and today’s truly great debriefs are those that offer clear action, offer advice on potential barriers and are based in the context of multi-sector experience.

These tools of the trade are not something that research executives pick up overnight, rather, they are collected through a career of conducting research with multiple organisations, industries and methods – supported by a thirst for knowledge slaked by reading industry news and the like. And it is from this perspective that the procurement process breaks down.  During a procurement process, it can be correctly assumed to a certain extent that the deliverables from a programme of research will be similar in nature – and to a point this is true, in that the base information garnered might be the same, irrespective of grade of executive involved in the process.

What the procurement process fails to acknowledge is that the end outcome will very much depend on the expertise and experience of the individuals creating a story from this base data.  While a typical research executive might be charged at less than half the cost of a director for instance, in most cases, it would be expected that the director would pull together a more compelling, thought out story than the more junior executive – yet from a procurement perspective, an agency could quite easily cost all hours at a research exec level to win the work, but deliver a less than acceptable job to clients leading to dissatisfaction and likely client attrition.

So, how should this be overcome?  From personal experience, the procurement process has worked best when sourcing and insight teams work together, rather than at arms length to one another. Following a process of firstly asking agencies to submit their proposals (and being non-prescriptive in the brief) allows the client to understand where the most value can be realised from working with a particular agency.  A second procurement stage, either by e-auction or RFP (which is increasingly now a Request for Price, not Proposal) allows agencies to discount their prices – but in the knowledge that their proposal may be different to competitor proposals – hence removing some of the “widget” factor discussed earlier. The combination of these two stages should serve to satisfy both the needs of the sourcing and insight teams, in delivering research and insight that is not only cheap, but valuable as organisations navigate through the current downturn.

1 Comment

10 years ago

Good article Andy. The current conditions mean that many research companies are now faced with the classic business dilemma: do we compete on price and go for economies of scale, or do we compete on quality and look to improve our service? Many of the global research companies are now racing towards the low-cost model, laying off experienced staff and offshoring production. This creates a great opportunity for smaller companies to prove their value in the ways you suggested.

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