ISBA finds rise in client procurement activity

The involvement of client procurement specialists in agency negotiations is now so widespread that their controversial presence on the advertising scene looks set to become permanent, new research suggests.

The relentless growth in their power is revealed in new findings published by ISBA showing that the influence of purchasing departments in agency contacts has jumped from a third to half in six years.

At the same time, purchasers now have the final say in one in every five agreements between client companies and their agencies.

According to the figures collated by the advertiser body, 33 per cent of clients involved their purchasers in agency remuneration talks in 1997.

This year the figure has grown to 48 per cent.

"Advertisers continue to search for value from their agencies," Jonathan Lace, the Allied Domecq associate professor in advertising at Southampton Business School and the survey's author, said.

"Nowadays, that's as much a matter of specialist procurement, choosing where to resource services and the design of remuneration agreements as it is of negotiating the headline commission or fee rate."

Debbie Morrison, ISBA's director of membership services, added: "This report is invaluable in providing the benchmarks advertisers need to compare their own remuneration models."

The rise of purchasing departments is seen not only as a reaction to cost pressures and the breakdown of the commission system but a lingering client scepticism about the claimed transparency of their agencies.

This is reflected in the ISBA survey, which reports no significant rise in levels of client satisfaction with agency transparency since it was first carried out six years ago.

At that time, 33 per cent of advertisers questioned said they were happy.

Today, the number has grown by just 1 per cent.

The findings are bound to fuel the debate over the trend of applying procurement techniques to the marketing services sector.

Many client companies claim the involvement of procurement departments is necessary because of the complexity of fee negotiations and in order to allow marketers to get on with what they do best.

However, agency chiefs argue that procurement specialists have insufficient understanding of how to buy marketing services and see their activities as part of a crude attempt by clients to screw down agency margins.

Running parallel with the rise of procurers is the advance of payment-by-results agreements, which ISBA and the IPA have been eager to encourage.

Today, 40 per cent of all agreements between advertisers and creative agencies incorporate a payment-by-results element compared with 21 per cent in 1997. In media agreements, the growth has been even more spectacular - from 28 per cent in 1997 to the current 46 per cent.

Meanwhile, the survey confirms the almost terminal decline of full-service offerings. They now account for just 6 per cent of deals, a massive drop from 1997 when a third of all agreements included media buying.

As a result, media independents' share of media accounts has leapt to 77 per cent - a jump of 32 per cent since 1977.