November 2006
	Beyond Preferred Vendor and Master Service Agreements: Marketing Research by “Agency of Record” Against the backdrop of a long history of both informal and formal processes for selecting a marketing research vendor, beginning with a point in time where a client researcher actually had the freedom to make his or her own vendor selection, evolving to “Preferred Vendor Lists” and then “Master Service Agreements,” some pharmaceutical companies are beginning to experiment with a new, and I believe if appropriately executed, potentially very beneficial model. The “Agency Of Record” model has started appearing on our radar, and I believe it to be the important next step in establishing a win-win relationship between pharmaceutical companies and marketing research agencies. In its most simple terms, this approach mimics that taken by pharmaceutical companies for decades in working with their advertising agencies. The key elements of this model include: The pharmaceutical company agreeing to place all of its marketing research business, either for a specific product or in a specific therapeutic area, with a specific vendor for a one-year period. The pharmaceutical company specifying the number of dollars that will be spent to support that research for the year. The pharmaceutical company negotiating with the selected marketing research agency the general terms and business conditions under which this marketing research will be conducted, in a fashion similar to that used to establish the “Master Service Agreements” outlined above. On the other side of the transaction, the marketing research agency guaranteeing its ability to conduct the amount and types of research that the brand will require. More specifically, the marketing research agency dedicating a team of identified marketing research professionals on its staff to conduct this research. This team, moreover, will by contract not be permitted to work on any competing brands or franchises for other pharmaceutical companies. In our experience, establishing such a contractual relationship typically does, and should, require a number of steps that, while apparently onerous and time consuming in the beginning, actually substantially increase the efficiency of the working relationship for the long haul. These include: The initial selection by the pharmaceutical company of marketing research agencies that might be considered appropriate for the company to enter into such relationships with. Factors typically and appropriately taken into consideration in performing this initial triage include: A history of successfully working with these agencies in the past. The perception that these agencies have the breadth and depth of resources, including but not limited to methodological competencies and level of staffing, to conduct all of these research projects. The perception that the staff of each of the agencies that might potentially be selected has the required level of sophistication in the client’s treatment area(s) of interest to bring genuine value to the relationship. As one would expect, pharmaceutical companies considering putting all of their marketing research eggs for a product or a franchise in one basket take the Agency of Record selection process quite seriously. Equally unsurprising is the fact that the selection process typically parallels the requirement list specified above. First, for example, a short list of marketing research agencies is compiled that meets the criteria specified above. This compilation is usually conducted by a multidisciplinary team drawn from the pharmaceutical company’s marketing research and purchasing/procurement functions. Marketing research agencies that make this list are then typically invited into the pharmaceutical company to give a capabilities presentation. This presentation is, again, typically given to an audience comprised of marketing researchers and representatives of the purchasing/procurement function, and is designed to provide an overview of the agency and its special competencies. Focus will often be placed on aspects of competencies that the agency believes will be most relevant to the client’s research needs in the future year, to demonstrate familiarity with the product(s)/treatment area(s) under discussion and to attempt to differentiate this agency from others that it believes may be under consideration for the assignment. Agencies that make the cut on this first presentation are then typically invited back for another presentation with increased granularity. Here, the presenting marketing research company is expected to identify the specific team of professionals who would be assigned to the account, how much of their time would be dedicated to the account and how they would be organized. Based on this presentation, the pharmaceutical company team typically identifies the agency, assuming that an acceptable business arrangement can be struck, that the team would like to name as Agency of Record. The final step is typically for the selected agency to be called upon to negotiate with the pharmaceutical company’s purchasing/procurement department the terms and conditions under which the research would be conducted. Here, issues are laid out that range from general business terms and conditions to procedures for pricing individual projects. Once all of these individual issues are hammered out, the contract is mutually signed and the Agency of Record begins work on its new relationship with its client. Several benefits accrue to pharmaceutical companies and agencies alike when they adopt this Agency of Record model. First and foremost, this model, just as it does when pharmaceutical companies employ it with their advertising agencies, permits the formation of a closely knit team that shares experiences and gains collective knowledge over time. Such shared learnings are not possible when a series of agencies provide marketing research on a project basis. As a related aside, we are frequently called on to review the marketing research conducted in support of a product by examining the final reports and presentations resulting from these projects. Typically, clients assign us to conduct such a meta-analysis when there is controversy in the product management team as to what path (e.g., product positioning) to pursue, or when the team is simply searching for a new perspective on the information. When we conduct such analyses, moreover, we are frequently astounded at what we find when we plow through the box of documents provided to us which often reflects several years of work and several million dollars in marketing research expenditures. Amazingly, we have often found that no two projects in the box have been conducted by the same research agency. Given this fact, it is less than surprising that we often find many of the documents in the box breathlessly announcing the same conclusions, believing that they are the first to reach these insights, or that the documents do not fit together in any meaningful way to form a growing, logical body of knowledge. The Agency of Record approach eliminates this absurdity, since the marketing research conducted is specifically designed to fit together efficiently, and to permit the same group of researchers working on the series of projects to grow in their learnings. Obviously, but we will say it anyway, significant economies can be realized by growing a body of marketing research knowledge necessary to simply conducting independent and often overlapping projects. Perhaps most importantly, the adoption of the Agency of Record model takes the pharmaceutical company researcher and the marketing research agency professional out of the role of adversaries, with one trying to gain a marketing research project and the other trying to select among three, often largely interchangeable and extensively written proposals. Rather, the work can now turn back to the intended focus of constituting a unified team capable of providing actionable information that will help the ultimate decision makers do the right thing in support of the brand. In summary, pharmaceutical companies do virtually everything else that they do on a consistent basis. There is not a CEO du Jour, but rather one person who guides the company according to a consistent strategy. Similarly, in the manufacture of their products, pharmaceutical companies depend on the consistency of the constituents, typically provided by the same manufacturer, to ensure the safety and efficacy of their medications. Most similar to the case under discussion, pharmaceutical companies choose an advertising agency to support a brand and then typically stick with it for years. In many cases, in fact, the advertising agency personnel working on a brand have been on that assignment far longer than the members of the brand teams themselves! It is in this spirit, and because of these reasons, that the GfK US Healthcare Companies are now working with their pharmaceutical and other biomedical clients to establish Agency of Record relationships between their product and portfolio marketing research needs and our companies. The astute reader will note that, with our movement toward Agency of Record relationships, we are in many ways returning to the good old days, when all or most of the marketing research for a company was conducted by a single marketing research agency. While we have increasingly been moving in this direction on an informal basis with many of our clients, the formalization of Agency of Record status is, we believe, a positive trend for all the reasons noted above, and one that will spread across the pharmaceutical industry as its benefits are increasingly recognized. Richard B. Vanderveer, Ph.D. Group Chief Executive Officer GfK U.S. Healthcare Companies