Why qualification-based selection won’t work for clients

Last week, The Message outlined the ICA’s efforts to transform the agency review process, moving from an onerous and costly RFP process to a value-driven Qualification-Based Selection (QBS) approach.

I applaud any attempts to move the industry away from a price-based RFP selection process, which I think anyone who’s been on either side of the process will agree is terribly flawed. A new process to replace the traditional RFP that places a greater emphasis on competency, qualifications and experience should be welcomed by any strategic marketer and any organization that values great work.

But as someone who’s spent most of his career as a client, I can tell you an agency-selection process that attempts to completely remove cost as part of the decision-making criteria is unlikely to ever be adopted.

Is it shortsighted and silly to make cost the deciding factor when choosing an agency? Absolutely, without question. But it’s also unrealistic and impractical to think you can ever entirely eliminate it as part of the decision-making process. You achieve value when the benefit you receive costs less than what you’d be willing to pay. If you set that up as a simple equation—value equals benefit divided by cost—it’s easy to see how cost is an integral part of the equation, and thus must always be considered.

As an aside, the value equation further serves to demonstrate why even the best-intentioned procurement professionals shouldn’t ever be the decision-makers when choosing an agency: they’ll understand the cost line well enough, but often won’t understand the benefit a strong agency can represent. If you need to buy paper for your office printers, you can easily determine the minimum quality you need (without being a paper expert, it should be noted) and choose the supplier that offers the best price. But securing agency services isn’t the same as picking up a ream of paper at Costco.

So if cost needs to remain a part of the decision-making criteria when choosing an agency, yet shouldn’t be the primary factor used in making a selection, where does that leave us? Where’s the critical in-between between RFP and QBS?

It’s where clients treat agencies as valued partners, not as input suppliers. Where agency selection processes are thorough, but also completely transparent and not onerous. Where clients value the contributions that solid partners can make to their businesses, and are willing to pay agencies fairly for the results they help generate.

That last part is Business 101. And I mean that literally: almost 25 years ago, during a first-year management class, my professor loudly exclaimed during a lecture, “You want your agencies and partners to make money! If they don’t, they’ll go bankrupt, and then you’ll need to find new partners. That’s doesn’t help anyone.”

Contrast that with the thinking of at least one global organization I know that, after using an elaborate and complicated procurement-driven process to choose agency partners, mandates they find annual “productivity efficiencies,” which contractually lowers their fees each year by a predetermined percentage. And that’s after using cost as a significant factor in selecting those agencies in the first place.

It’s easy to understand why agencies would want to avoid a client that becomes less and less profitable each year by design. But clients, why would you ever want to squeeze the margins of an agency partner to the point where they need to find reasons to bill you for every single word they speak, and say no to you often, just to ensure they don’t lose money on your account?

I’ve worked with dozens of great (and a few not-so-great) agencies over the course of my career. I’ve had the opportunity to bring new agencies on board, and I can say I’ve been able to do so without ever having to resort to a standard RFP. (Full Disclosure: I did recently create a mini-RFP where I asked a shortlist of agencies to address a specific list of questions to help me make my decision, but in that case I proactively offered each agency on my shortlist a reasonable flat-fee based on the time I expected it would take for them to respond.)

I’ve always asked agencies for detailed breakdowns of their fees so I could determine whether I could afford to work with them. I won’t apologize for that, because I don’t think that’s a bad thing: it helps me manage my expectations up-front so that I don’t make unreasonable requests later on.

In a world where marketers have to deal with finite budgets, looking at the costs associated with a given agency—no matter how exceptionally talented they may be—is simply unavoidable. But if a client is committed to treating potential agency partners fairly and with respect, agencies shouldn’t be afraid of outlining their complete cost structures as part of a decision-making process.

And clients? When making decisions, it will help to remember that, “you get what you pay for” is an adage for a reason.

David Pullara is a chief marketing officer, writer, speaker, consultant, and course facilitator for the Schulich Executive Education Center. His career has included roles at Starbucks, Yum! Brands (Pizza Hut), Coca-Cola, and Google. You can read his thoughts by following him on Medium, LinkedIn, and Twitter.

David Pullara

David Pullara is a senior business leader who has worked with renowned, consumer-centric organizations like Starbucks, Yum! Brands (Pizza Hut), Coca-Cola, and Google. David is currently the Principal of dp Ventures, focused on consulting, teaching and facilitating, speaking, and writing engagements. He also serves as a part-time marketing instructor for the Schulich School of Business at York University. Subscribe to his blog at dpthoughts.ca.