The Healthcare Communications Association (HCA) today announced the results of the first ever Healthcare PR Benchmarking Survey on pricing and practices at a forum on procurement.  The Survey, which achieved a 41% response rate, revealed increasing commercial pressures but also a move towards greater flexibility, transparency and collaboration between agency and client functions.  In addition, the Survey also revealed increasing standards and flexibility in staff management, in the face of the well known shortage of good, experienced healthcare practitioners.

The Survey provided clear evidence of an increasing commercial squeeze   both in terms of overall economic pressures and stringent requests from client procurement functions   with an average increase in fee income of about 3% between 2001 and 2002, but a corresponding decrease in operating profit of 1%.  Additionally, a variety of different pricing agreements are increasingly being discussed between agencies and clients, with ‘reduced fee for volume work' coming out top.  One concept, however, which is viewed positively by agencies but which is not being requested by clients is related to payment by result and subsequent bonuses for over-achievement.

Commenting on the results, Fiona Hall, Chair of the HCA's Benchmarking Sub-Committee and Managing Director of Shire Health London, said: “Whilst agencies are feeling the pressure they are responding proactively.  The emphasis increasingly has to be on collaboration between agencies and clients in order to engender the most productive, harmonious, transparent and cost-effective working relationships.  The HCA Benchmarking Survey should form a valuable basis for optimising this process.”

Finally, looking to the future, no respondents considered the economic outlook for healthcare PR would get better. Fifty-seven per cent of respondents expected no change and 43% anticipated a change for the worse with perceived threats to the healthcare PR industry being ranked and, in line with the general themes from the Survey, procurement, commercial pressures and experienced staff shortages coming out on top.

Jeff Smith, Manager, Product Communications for Eli Lilly and Company, commented: "I welcome the findings by the HCA and the agencies' perspective because transparency and collaboration should be core principles guiding procurement negotiations.  It would be a mistake to impose an industry view without accounting for specific constraints or financial processes unique to consultancies, who, after all, are supposed to be our partners in strategic communications.  It is clear that they deserve a representative view on this topic."

Specific Findings of the Survey

Managing Cash Flow, Payment Times and Contracts
Cash flow continues to be an important issue for agencies, with 93% experiencing payment delays from the average client, an increase of 23% over 2001.  All respondents have a 30-day payment policy with few, if any, clients complying with this.  However, it is reassuring to note that nearly 50% of client arrangements involve working to formal contracts, with the majority of the remainder requiring some form of written authorisation.

Increasing Flexibility in Staff Management
Not surprisingly, around 80% of agencies' overhead costs are staff related and no real surprises that 86% of healthcare PR practitioners are female. The Survey reflected the strong commitment to staff focusing on the retention, motivation and development of high calibre employees, in the face of a continuing shortage of good, experienced healthcare PR practitioners.  This is demonstrated by an increasing flexibility in benefits packages / working arrangements and an increasing focus on formal appraisal systems - 100% of agencies now hold reviews at least annually.

Pitch Insights
The thorny question of pitches evoked some interesting results, which indicate significant wastage of time and resources, with a high degree of variability.  On average over 30% of clients were considered to produce unsatisfactory briefs for pitches.  Moreover, in 16.6% of cases NO agency was appointed at the end of the pitch process. Pitches are estimated to cost agencies an average of £7,950 and £23,000 for small (circa £50K) and larger (circa £200K) assignments respectively.

Shifting Audience Focus
There is also a clear shift in focus with greater proportions of client budgets increasingly being spent on audiences other than healthcare professionals:

The Survey was carried out on behalf of the HCA by Aline Beresford, independent market researcher, who reinforced the importance of confidentiality in carrying out such research: “In line with the Sarbanes-Oxley Act, all replies to the HCA Benchmarking Survey were handled according to the strictest codes of confidentiality, with no data being attributed to individual agencies.”  She added “…the bottom line, however, is that as more agencies contribute, more detailed overall benchmarking data can be freely shared, to the benefit of all'.”