Cut down to size

Traditionally, research agencies tend to pitch for every piece of business, even to existing clients, with no knowledge of where the next pound is coming from. It’s a competitive game, with no guarantee that a successful pitch will provide work for longer than a few weeks or months.

Using a roster of agencies – the traditional approach for most companies – has become prohibitive for many clients because of the costs involved. Finding agencies, briefing and re-briefing them eats up substantial sums. Increasing pressure on procurement departments to cut research expenditure has led to many companies reducing the number of agencies on their rosters – some by up to 90 per cent.

As a result, relationships between agencies and clients are becoming formalised. Although this is good news for larger research companies, it could sound the death knell for smaller agencies. Fears are growing that this trend of companies rationalising rosters may endanger the individuality of the industry, leaving clients with sterile, unimaginative programmes. Plus, with little in the way of choice, relationships between agencies and clients could become such that this cementing of partnerships leads to domination of the market by larger agencies, a lowering of standards and the demise of the personal touch.

NOP had billings of &£70m in 1999, 80 per cent of which was repeat purchasing. Tony Lees, spokesman for NOP, says: “Some of our clients have been buying from us for decades because it works for them. A research buyer needs to feel in safe hands. Human beings have a tendency to gravitate towards the familiar.”

Preferences

However, Stephen Martin, managing director of research company Aspect International Consulting has a different view.

“My experience of preferred-supplier lists is that it’s a price-focused exercise applied to companies that aren’t competitive enough,” he says. “Supplier lists are normally put together by procurement departments keen to advocate bulk deals.

“They put you on a preferred-supplier list and you have to pitch at very competitive prices. The whole process is diluted by people focusing on price rather than value.”

Although the benefits of bulk deals for buyers and larger agencies are obvious, will contracts, hitherto unnecessary, make life easier? “There’s no doubt research agencies have been held back by short-term relationships with clients,” says Research International director of business solutions Mike Cassidy.

“We are in a twilight period between the formal preferred-agency status and the totally ad hoc relationships that have previously existed in market research. A contract, instead of a one-off deal, would enable us to get to know the client, develop both our own and our client’s skills and provide more knowledge rather than simply providing data ad hoc.”

MORI works on annually renewable contracts. Head of MORI’s corporate and consumer division Peter Hutton explains: “As a matter of principle, it makes good sense to build up long-term relationships and the clients value you more than they would if they just chose you for being the cheapest.”

This type of commitment may not always be beneficial to the client. “We don’t try to lock people into contracts, as we don’t think it’s in the interest of most client’s research needs,” says Bill Pegram, chief executive at Pegram Walters.

Falling standards

A major concern for many clients is that if they are tied to a contract, the service standards may drop.

“Often clients ask agencies to repitch because they aren’t convinced the agency’s approach is unique,” says Aspect’s Martin. “Also, there is often a difference between the original pitch team and the delivery team, and clients know that.”

One option that enables agencies and clients to work alongside each other, without the need for contracts, is to constantly review the process. Last September, SmithKline Beecham (SKB) created Project Passion, in which it established a core roster of agencies and freelancers for each of its brands.

“We looked at our system and decided the research side was far too complex,” explains Gaye Myatt, head of market research, consumer healthcare UK at SKB. “Working with such a wide range of suppliers was inhibiting our ability to add value and greater consumer insight.”

One of the agencies to benefit from SKB’s rationalising was RDSi. “We now conduct a quarterly review of SKB’s work; but it’s not a formal contract,” says RDSi board director Geoff Bayley. “There is a lot of openness on both sides, and we’re happy to invest the extra time and commitment that this relationship calls for, because we believe it’s a richer way of working, both for ourselves and the client. Our researchers get to know the brand and product development teams and we attend non-research, brand planning meetings and creative development workshops. It’s a great way of broadening the awareness of our researchers in terms of the wider business context in which they work.”

The system is still relatively new, but both RDSi and SKB are encouraged by the way it is working so far. “We feel we’ve made the right decision,” says Myatt. “We are aware that there are things to guard against, such as potential complacency in terms of costs and services.” To insure against this, SKB has established account managers on the client side that are specifically responsible for the consultancy relationship. SKB also conducts its own cost and quality reviews.

As the benefits of sticking to one team become more apparent, the smaller research agency could become a thing of the past. According to Lees: “The size of an agency isn’t always relevant. Of course you will always need larger agencies for global research, but for specialised and focused research, you’d always go for smaller agencies. There is always room for niche markets.”

Pegram also believes that many clients are becoming disillusioned with very big agencies – despite the trend towards appointing them.

Global partnerships

At the moment, large consultancies do seem to have the upper hand, if for no other reason than that they can work globally.

“We’ve certainly seen a trend towards more global partnerships that are longer term than just one project,” says Research International’s Cassidy.

“During the past few years, we’ve had more clients asking us to sign contracts to become one of their preferred-agency suppliers. There is no sign that people are moving towards using agencies exclusively – but they are certainly reducing their rosters,” he adds.

“We’re getting briefs asking us to work in 50 countries for three years. This has made us realise that there is a real need to be globally effective.”

It would seem that rationalising rosters, and therefore being committed to existing relationships, is a growing trend that indicates how ad hoc working practices are on the wane. The industry seems to be consolidating itself, but for the smaller agencies, as long as they have a niche or area of expertise to draw on, all is not lost – for now, anyway.

BMRA AWARDS 2001

The BMRA Awards have been introduced this year to demonstrate the practical contribution made by market research in aiding business decisions and making a difference to business performance.

Twenty consultancies submitted work for four categories: marketing; business performance; communications; and innovation.

Judges picked a winner in each category and an overall Grand Prix.

GRAND PRIX and Winner of the Communications Category: RSBG

Client: Scottish Radio Holdings

Scottish Radio needed information to bridge the gap in knowledge supplied by industry radio-listening measurement and local consumer purchasing-behaviour data. The research helped the company attain its corporate and marketing objectives, added listeners to the company’s radio stations and introduced new advertisers to the stations.

Marketing Category

Winner: Magenta

Client: Civil Service Motoring Association

Business Performance Category

Winner: MORI

Client: London Borough of Southwark

Innovation Category

Winner: Continental Research

Client: Electronic Arts