Thursday, September 10, 2009

Honour amongst thieves

As I put fingers to keyboard, I’m angry. I keep telling myself this shouldn’t sound like sour grapes. I keep telling myself, that in these tough times, businesses have to make tough decisions. But one thing really gets my goat. And that’s PR companies that try to win business by attempting to steal clients away on the basis of pricing alone.

Now of course price is a key component of most purchases. PR firms, like many professional services companies, may choose to be flexible with pricing to win a new client over. They also frequently struggle to secure annual increases or adjust agreed rates in a timely fashion. You’ll hear the pricing question come up most often during a competitive pitch. Especially true in North Asia where in a game called “you show me yours and I won’t show you mine”, budgets are all-too-frequently not disclosed during the critical pitch process. The agencies simply have to apply the tried and true “finger in the wind” theory of financial modelling combined with an all too common patchwork of services and tactics. If all of the planets come into alignment they’ll hit the magic number and the relationship begins.

But I digress. Pricing is undeniably important and most companies are putting considerable pressure on their suppliers to do more with less. Over the past 12 months, I’ve had everything from retainer cuts, project spends drying up, complete shifts to project only work and immediate cancellations of agreements, in spite of agreed contract terms. That’s an unfortunate business reality and agencies are typically accommodating. I guess we, in some karmic fashion, acknowledge that such concessions and acts of goodwill will be rewarded at some magical point in the future (hopefully not too far in the future).

The other key factor is relationship. Fundamentally, no relationship is perfect. PR agency / client relationships are frequently like marriages – they have their ups and downs. But what really gets my goat is when competitors come a-knocking on my “partner’s” door and sell on price alone. “We’ll provide the same service at half the price,” they whisper into all-too-willing ears. Certainly, it sounds like a compelling proposition. But is it grounded on reality – or desperation? Sure, we’re all under pressure to make our numbers. But this type of behaviour brings our industry, which already struggles with its own PR challenges, into further ill-repute.

Naturally, these approaches raise questions in our clients’ minds. Am I getting real value for money? Did my procurement team push hard enough in the original negotiation? Can the work be done for less? But these questions need to be balanced with a few from the other side of the brain. Such as…has my agency been a loyal supplier for many years? Do they continue to provide me with valuable insights? Has the account team gone above and beyond the call? My fear is that price alone has become a weapon all too frequently used in the competitive arsenal. We’re not selling fish at the market here. Long term business relationships surely count for something, even in these unsettled times.

I had a situation several years ago in Australia where a client was approached with a similar offer. It had been a challenging relationship for many reasons, but the account team persevered and was making considerable progress supporting a tough proposition in a tough media market. Then we got THE call. A competitor had offered to provide the same level of support for half the fee. While we could be flexible, we couldn’t compete to the same level. And so the hard work of two years was cast aside and we parted ways. Four years later, my former client is now working with its third agency partner as it continues on its search for the holy grail of a perfect balance of best service and lowest price.

The other consideration is the question of the greenness of the grass on the other side. While these types of approaches may sow seeds of doubt, the decision to review or change agencies can’t be taken lightly. Certainly, agencies need to continually add value and nurture their client relationships. Taking clients for granted is a cardinal sin. But next time the price question raises questions, a conversation with yourself – and your agency – is in order.

To my clients I ask that if there are nagging doubts regarding service – or pricing – have the conversation with your account team. And to the unscrupulous agencies that choose to use the price lure – may the fleas of a thousand camels infest your armpits forever.

- Jeremy

This article appeared in the August 2009 issue of Marketing Magazine Hong Kong