The Healthcare Communications Association (HCA) today announced the results of its second Healthcare PR Benchmarking Survey on business practices and attitudes. Compared to the previous year, when no survey respondents considered that the economic outlook would improve, the latest survey revealed markedly increased optimism about the overall healthcare communications industry and prospects for business in 2004 onwards.

Whilst this optimism has been reflected already this year in increases in overall billings - following essentially a year of consolidation in 2003 - agencies' profit margins are actually diminishing overall. Just over 90% of responding agencies are expecting some growth in gross billings in the forthcoming year (compared with 71% last year) although as a result of the squeeze on profit margins this means they are having to increase the amount of business they do in order to cover their cost base.

Human resource factors also reflected the overall increasing optimism. Nearly 70% of agencies said they were likely to be recruiting / increasing headcount in the forthcoming year, with no responding agencies anticipating any reduction in numbers - compared to 14% who anticipated reductions last year. Recruitment is of course both a time-consuming and costly exercise, however, with the rates paid to recruitment agencies / headhunters varying quite widely. Overall, staff turnover was comparable to last year, with that of account directors being identical at 25%. However, in contrast to 2002 when there was 0% movement at the most senior levels, there was quite a degree of turnover in these positions. Flexibility in working arrangements and salary / benefits packages continues to be vital in order to maintain and motivate staff - as does ongoing investment in training and development.

Commenting on the results, Fiona Hall, Chair of the HCA Benchmarking Sub-Committee and European Managing Director Healthcare, Weber Shandwick, said: "Clearly much more of a positive feeling is prevalent, although agencies are coming under increasing pressure to maintain their profit margins."

The focus on procurement is continuing to play an important part in squeezing profit margins, although interestingly procurement was ousted from its position last year as the greatest perceived threat to the healthcare PR industry, to be replaced this year by recruitment, as the focus on attracting and maintaining good quality staff becomes ever more business critical. In line with the increasing emphasis on procurement, the number of pricing agreements being forged is, as predicted, on the increase, with ‘reduced fee rates for volume work' again coming out on top, with 53% of agencies exercising this with at least some of their clients. Interestingly ‘cost plus' arrangements, which looked last year to be on the increase, have not taken off, probably because of the difficulties experienced in making them work in practice. Fiona Hall commented: "What we may well be seeing is a ‘settling in' with regards to the procurement process, as agencies and clients learn how best to foster collaborative and cost-effective working relationships. We hope that the annual HCA benchmarking survey, which this year involved 19 agencies, will continue to provide a firm foundation for this."

Payment Times and Contracts

In 2002, ninety three per cent of agencies were experiencing payment delays from the average client. Whilst there has been some improvement in the past year, nearly three quarters of agencies still experience payment times later than those agreed with clients.

Pitch Insights

The mean number of pitches carried out in 2003 was 10.2, with an average success rate of 63% - a slight decrease in numbers but increase in success rate from the previous year. In nearly 8% of cases where agencies were unsuccessful in pitches this was because no agency was appointed. This is an improvement on the figure of 16.6% from last year but is still some cause for concern. The total expenditure involved in doing pitches of various sizes (both fees at chargeable rates and direct costs) were estimated to be as follows:

Evaluation

A new aspect probed this year related to the setting of evaluation criteria for healthcare communications programmes, something that is fundamental to the HCA's mission of furthering best practice. Across the total pool of accounts, over 70% were reported to have had SMART evaluation criteria set. Certainly the willingness to evaluate was apparent from responding agencies, although issues over the investment required in order to assess outcomes continues to limit robust evaluation in practice. Stuart Rose, Chair of the HCA, commented: “With increased focus on cost management in industry and the pressure on profits for agencies the need to really effectively evaluate communications programmes is becoming paramount. The power of PR is clear and as the UK pharma industry comes closer to the outcome of the next round of PPRS negotiations it is likely that PR agencies and their clients who perform (and resource) regular evaluation will be the ones who develop competitive advantage and ultimately succeed. Those who refuse to resource evaluation or believe it cannot be done will be left behind. The HCA is committed to working with agencies and industry to both highlight the ability to demonstrate RoI through PR and to embed it into standard practice. The findings of this survey demonstrate not only a growing willingness to perform evaluation but, more importantly, a business critical need to do so.”

The Survey was again carried out on behalf of the HCA by an independent market researcher, Aline Beresford, according to the strictest codes of confidentiality, and fully in line with the Sarbanes-Oxley Act. Aline commented: “the Act has raised concerns with some agencies, but thankfully many have been fully reassured of the integrity of the HCA benchmarking exercise and been motivated to participate, as witnessed by the 35% increase in agencies contributing this year.”

Notes to Editors

The HCA Benchmarking Survey is carried out annually and, whilst not intending to be prescriptive, aims to provide comparative information for use both in reviewing internal agency operations and client/agency working relationships, thus helping drive best practice in healthcare PR business management. The HCA Benchmarking Survey covers a broad range of questions on the financial aspects of agency functions and client agreements (including financial performance, client budgets, and pricing agreements), human resource factors and current / future business issues. The full results have only been made available to participating agencies. In addition, those who are HCA members get the additional benefit of an individual benchmarked report. An executive summary report has been made available to HCA member agencies that did not participate.