Agencies love to talk about new business—when they win. They’re less exuberant when it comes to talking about a futile attempt to land a new client: The drain on resources, the cost required to put together what one agency president described as “a dog and pony show,” and the hollow feeling that comes with a client’s decision to park the business elsewhere.
Those feelings can be compounded when taking into account some of the less desirable elements of the traditional RFP: requests for spec creative; a poorly defined scope-of-work; and an undue emphasis on cost.
The Institute of Communication Agencies (ICA) took direct aim at the latter this week (along with a cheeky marketing campaign to build awareness). Alongside its call to “retire the RFP,” the industry association launched a push for the adoption of qualification-based selection (QBS) as a replacement.
The ICA unveiled its guide to QBS, the opening salvo in what president and CEO Scott Knox says will be an international effort to create awareness and affinity for the approach.
Knox wants the ICA’s recommendation of QBS to become a landmark moment for the industry. “March 25, 2019 is the day the ad industry changed. I really believe that,” he says. “We’ve been talking for how many years about a new way of doing new business, and now a little old trade association in Toronto has come up with something that could potentially change the fate of our industry?” he says. “I’m really chuffed at that.”
In basic terms, QBS removes cost as a determinant in awarding new business; instead it places the emphasis on competency, qualifications and experience. In short, it puts the focus on highest value, rather than lowest cost. Its origins date back to 1972, when the U.S. enacted the Brooks Act, stating that price could not be a factor in the awarding of federal architectural or engineering projects.
QBS has made significant inroads in those two disciplines over the years, but its proponents argue that it is applicable to other professional services, including marketing—particularly as the price-based RFP process continues to proliferate (and in some cases agitate).
Cal Harrison, president of the professional services consulting firm Beyond Referrals and author of the ICA’s 150-page QBS Agency Search Guide, dismisses the price-based RFP as a “complete waste of time.” One of his chief criticisms is that it only succeeds in lowering initial costs for clients, and often ends up costing more in the long-term.
The ubiquity of RFPs as the standard process to run a review has led agencies to become increasingly frustrated by the time and expense required to pitch new business, and cost is often an unavoidable element of the process.
“Every RFP we [receive] that has a grading system, has cost in there,” says Robin Whalen president/partner with Toronto agency Church+State. It’s not the determining factor, she says, but it typically accounts for between 15-20% of the decision.
“[The ICA] has got some work to do there,” she says of its attempt to introduce QBS. “I think [clients] are always going to ask about cost, but what I would like it to see is that maybe it’s worth 5% rather than 20%.”
Harrison, who also runs a not-for-profit advocacy group called QBS Canada, estimates that the low-bid RFP process for professional services (a group including lawyers, engineers, management consultants etc.) costs Canada an estimated $5 billion a year in economic waste. The process costs Canadian agencies “hundreds of millions” a year in wasted time and effort, he says.
In the QBS guide, Harrison writes that even when price is presented as having a small weighting in the RFP, it often becomes the deciding factor—making it disproportionately important. Because of that, he says, agencies end up presenting the lowest-possible cost solutions that can still win them the business, rather than the best possible solution for the brand.
He contends that a price-based RFP can be 10x more expensive and difficult to complete, because of the difficulty in pricing a theoretical project. With a QBS approach, the agency is using “existing libraries of case-studies, bios, previous projects, and information about their corporate history and methodology,” he writes.
Leah Power, executive vice-president of agency operations at the ICA (and editor of the QBS Agency Search Guide), believes QBS can address a significant pain point for both agencies and clients. She spent 20 years working in agencies, mostly in finance roles, and says that RFPs—particularly those emphasizing cost—were a constant source of aggravation.
“A lot of times, you could tell [they] were adapted from more commodity-based searches,” she says. “You would think ‘Did they use this last time to source oil?’ They were using them to purchase and source something that’s really custom, complex and costly.”
Power says the ICA’s push to retire the RFP is being embraced by the agency community (“I got a ‘Hallelujah!’ on my LinkedIn last night,” she says) but is similarly confident the QBS approach it’s espousing will be embraced by clients. She says more than 40 clients in total have been amenable to the changes. “I think there is an appetite on the client side to do things efficiently, but most important, effectively,” she says.
Knox, meanwhile, says the ICA made a conscious decision to develop the QBS guide unilaterally rather than attempting to achieve industry consensus. “As a starting point, we’re putting a stake in the ground and saying ‘This is a start,’ rather than trying to get consensus around what will end up being a watered-down guide,” he explains. “We decided we wanted to put our neck on the line, because consensus guides have never worked.”
But client acceptance is, of course, all important. The agencies may want reviews to be run using QBS, yet the power remains with marketers.
Association of Canadian Advertisers (ACA) president and CEO Ron Lund says that while he hadn’t yet read the specifics of the ICA guidebook on QBS, some of its tenets are included in the association’s “Searching for a Marketing Communications Agency” guidebook (an updated version of which is in development). “Our process probably isn’t that far away from QBS,” he says.
The ACA recommended process ranks cost specifics eighth among its nine steps, but Lund says it’s unrealistic to expect cost not to come up at some point during negotiations, particularly since agencies would want to know the size and scope of an assignment before deciding whether to pitch for the business.
“We don’t say talk about price before you talk about anything, and smart clients don’t do that,” says Lund. “I have never been in [an agency pitch] where the opening salvo was, ‘Well let’s talk about creative later and your strategic approach to our business. Let’s talk about costs first.’ I have never seen that happen.”
Sara Clodman, vice-president of public affairs and thought leadership with the Canadian Marketing Association (CMA) in Toronto, says the organization has “no specific comment” on the ICA’s approach, but acknowledges that agency search is a “topic of interest” to members.
The CMA has developed some best practices and guidance around RFPs that it plans to release in the spring. “Our materials have been developed through having representatives of the client and agency side work together,” says Clodman. “The vast majority of marketing professionals we work with are fair-minded and want to do what’s best for the profession as a whole.”
Pizza Pizza used QBS for its media agency review last year. Vice-president of marketing, Alyssa Huggins, says she was very familiar with the RFP process—and the work it entails—after spending her career working in agencies such as Cossette.
“Most disconcerting when you’re an agency participating in a more traditional RFP is when you’re given an Excel template with a million different roles and you have to provide the hourly rate for every one,” she says. “The [RFP] is asking for really meticulous financial information that you know is just coming from procurement, and all they care about is the dollar.”
Pizza Pizza consolidated its media business for Pizza Pizza and Pizza 73 with Media Experts.
“[The process] was very clear in terms of our expectations of agencies at each step, and it was very clear that we were using existing clients as the basis for determining if they were the right fit,” says Huggins. “We weren’t asking them to do spec work, or do a deep dive on the pizza category. It became very straightforward and systematic, and everyone had a very clear understanding of what we were looking at.”
QBS’ proponents are convinced that with the proper education and some testing, it could quickly become the industry standard for new business pitches.
Harrison even predicts QBS could become the de facto process for choosing a new agency partner within the next five years, noting that change is already occurring both within individual companies and government.
“We’ve already seen the federal government agree to a pilot project [with QBS] in architecture and engineering, which tells me that one of the largest procurers of ad agency services is already looking at this, just in another sector,” he says.
The key for marketers, Harrison says, is education—”Nobody’s really aware that it exists,” he says—and realizing that it doesn’t require them to completely rework their procurement policies. “It just needs a tiny bit of training.”
Pizza Pizza’s Huggins says it is up to agencies to take a stand on overly onerous RFPs. “I don’t think agencies have pushed back hard enough,” she says. “Because they’re pinched more and more on their bottom line, they’re really nervous to say something, because what if it’s the one client they would have won that year that would have helped them make their numbers?”
The ICA’s Power has spent a lot of time dealing with procurement departments and believes the problem is that most have received no formal education or training around how to procure non-commodity items like marketing-communications.
“These procurement professionals were mostly tasked with sourcing commodities. Then the CFOs said ‘Let’s unleash this fabulous group that has been able to affect all of these cost savings on other services.’ They could only use the tools and knowledge they had, so they took a commodity-based education and said ‘I’m going to use all my experience and understanding and transfer it over to creative services.’
“A commodity is not an investment. The advertising service you’re getting from an agency is, so it has to be viewed with a different lens.”
—With files from David Brown