Recruitment replaces procurement as top concern, but PR sector optimistic
pharmafile | September 23, 2004 | News story | |Â Â Â
Business prospects and optimism is picking up for the healthcare communications industry, a new survey has revealed.
Results of the second Healthcare PR Benchmarking Survey on business practices and attitudes, conducted by the Healthcare Communications Association (HCA), showed 42% of the 19 agencies surveyed believed the economic outlook for 2004 and onwards would improve.
These results compare favourably to last year when no-one surveyed thought the economic outlook would improve and 43% of respondents thought things would get worse (only 16% for 2004).
This optimism reflects an overall increase in billings following a virtually static 2003 – but agencies say their profit margins are actually falling as their margins are squeezed.
About 90% of responding agencies expect some growth in gross billings in 2004 (compared with 71% last year) but say they are having to generate more business to cover their costs.
Renewed business optimism has also had a positive impact on recruitment – about 70% of the 19 agencies surveyed said they were likely to be recruiting/increasing headcount, with no agencies anticipating cutting numbers (compared to 14% last year).
Actual staff turnover remained similar to last year with account directors unchanged at 25%. At the most senior level, there was considerable turnover this year, in clear contrast to last year when none of the top executives moved jobs.
Flexibility in working arrangements and salary/benefits packages continue 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."
Interestingly, recruitment (attracting and maintaining good quality staff) replaced procurement as the biggest perceived threat to the healthcare PR industry.
Despite this, procurement continues to play an important role in squeezing profit margins and the number of pricing agreements are predictably on the increase.
'Reduced fee rates for volume work' came out on top again with 53% of agencies using this fee structure with at least some of their clients. Interestingly, 'cost plus' arrangements, which looked to be catching on last year, have not really taken off, probably because of the difficulties experienced in making them work in practice.
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."
Agencies say clients are still paying them too late – in 2002 93% of agencies experienced payment delays and although this improved the following year, about 75% were still paid later than agreed with clients.
A new aspect of the survey related to the setting of evaluation criteria for healthcare communications programmes, a fundamental aspect of the HCA mission of furthering best practice.
Across the various accounts, over 70% used SMART evaluation criteria, representing an apparent willingness to evaluate, although issues over the investment required in order to assess outcomes continues to limit robust evaluation in practice.
"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," says Stuart Rose, chair of the HCA.
"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 pitching process is another fundamental fixture in the sector. Respondents were asked to disclose how many pitches they had taken part in during the year, producing an average of 10.2.
On average, agencies reported success in 63% of pitches, a slight decrease on the previous year. One bugbear for agencies is when multi-agency pitches result in no-one being appointed, something which is seen as a waste of precious time and resources. The survey showed that this phenomenon had halved since last year to 8%, but remains an area of concern.
The HCA is an independent, not-for-profit organisation of marketing and communications professionals from the pharmaceutical industry and PR consultancies, and aims to evaluate and raise standards in the sector. The Association currently has 36 members, made up of 12 pharmaceutical companies, 24 PR consultancies and three associate members.
