GSK Review Sparks Industry Debate Over Reverse Auctions
Charting the future of public relations
Holmes Report
News and insights from the global PR industry

GSK Review Sparks Industry Debate Over Reverse Auctions

GlaxoSmithKline (GSK) has held a ‘reverse auction’ to whittle down its European medical education agency roster, drawing industry ire for an approach that remains viewed as an exercise in cost-cutting.

Holmes Report

By Arun Sudhaman

LONDON: GlaxoSmithKline (GSK) has held a ‘reverse auction’ to whittle down its European medical education agency roster, drawing industry ire for an approach that remains viewed as an exercise in cost-cutting.

The pharma giant asked as many as 40 agencies that comprise the roster to take part in the online process, which ranks agencies according to their proposed costs for different services. The roster, which oversees at least £5m in fees, is believed to include such agencies as Ogilvy Healthworld, Chandler Chicco, Huntsworth Health, Waggener Edstrom, Weber Shandwick, Red Door and Virgo. 

Before the two-hour reverse auction, agencies were asked to submit rates for different services. Those straying too far from the mean were then requested to revise their fees accordingly, before taking part in the online auction.

The GSK reverse auction comes after the company ran a similar exercise last year to refine its European PR roster from 20 agencies down to 10. “The process is not dissimilar from other big pharma companies,” said one source from a participating agency. “As an industry we can moan about it, but it’s a reality.”

Another participant described the process as “treating PR like paperclips and printers,” in a bid to drive down expenditure.

GSK’s reverse auction will again highlight the now-ubiquitous role of procurement departments in determining PR budgets and selecting agencies. Bristol-Myers Squibb called a reverse auction for its global marketing communications spend last year, while HP utilised the approach when reviewing its EMEA Personal Systems Group business in 2009.

British Airways, meanwhile, used a similar approach to pitch its global PR business two years ago, which was eventually won by Fleishman-Hillard. One agency source familiar with the situation said that the eventual decision to part ways with F-H barely a year into the assignment provided ample evidence of the technique’s shortcomings.

“Those client companies that have instigated them probably need to ask themselves whether it gave them the conclusions they thought it would,” said the source.

However, one of the participants in the GSK exercise defended the company’s use of reverse auctions, pointing out that – in a fragmented market – they at least helped to create a baseline for pricing.

“It’s not a Tesco-esque bullying of the little guy,” added the participant. “The real question is – is there business once you’ve gone through that? There should be some level of guaranteed business.”

GSK’s Nicola Lovejoy-Mellonie, who oversees marcomms procurement at the company, declined to comment on the review, calling it “company confidential information”. “However I would like to say that we do work in partnership with our agencies to drive the highest quality and deliver value to the business.”

Grayling UK MD Alison Clarke, who previously headed business development at Huntsworth Group, said that reverse auctions ultimately reduce the “intellectual capital” around a client’s business.

“At the end of the day, clients should want their consultants to add value creatively and strategically,” said Clarke. “Of course they need to ultimately deliver and there can be economies of scale in how they deliver, but content and creation are at the heart of everything we do and that should be the priority.”

View Style:

Load 3 More
comments powered by Disqus