Controlling spending is a high priority for most vendors during a recession. For analyst relations (AR) teams this mandate causes angst because it means cutting spending with analyst firms, usually a big part of AR’s budget. Discussing this issue has become an increasingly common inquiry for SageCircle strategists as clients work through budget cutting scenarios.
One of the main sources of anxiety is the perception that analysts will start bad mouthing the vendor to prospects, making negative comments in the press, and cutting off AR’s ability to brief the analysts. This is usually an overblown concern as reputable firms will not damage their standing with vendors – a significant source of information and market insights – over short term contract spending changes. Analysts at the largest firms often do not know the size of a vendor’s contract with the firm and will not notice if the vendor cuts the contract by some percentage.
Unfortunately, there will be individuals who do resort to threats and making overtly negative comments about vendors in the press as pressure tactics to get contracts. Typically these individuals are single practitioners or in boutiques that derive all their revenues from a small number of vendors. For these firma any cuts by an existing client are keenly felt. However, AR has to investigate whether these individuals truly have relevant opportunities to influence vendor sales deals. If not, then AR should plan on educating executives that these squeaky wheels, no matter how annoying, do not deserve contracts nor AR and spokesperson bandwidth to quiet them during a recession.
It is important to point out that contract cuts should not fall entirely on boutique firms as they can have as much or more influence on revenues than behemoths like Gartner and Forrester. It really depends on the market and relevance of the analysts. That is why we always recommend ranking individual analysts and not assigning a “tier” status to firms as a whole.
When reconsidering spending with analyst firms, AR should use SageCircle’s purchasing best practices (see below for a list). What changes will be the priorities and the number of firms under contract. AR needs to ruthlessly focus on those firms and services that directly support AR’s refocused priorities and activities. Often this means putting more emphasis on advisory firms that have significant end-user client bases that make IT purchasing decisions. The big losers will be market research firms, especially those that provide market share numbers with minimal useful strategic analysis. In a recession, managers are focused on selling so market share numbers are seen as “nice to have.”
- Review your list of analyst contracts against revised priorities
- Consider every contract coming up for renewal, even ones for Gartner and Forrester, as candidates for elimination
- Focus renewals and incremental spending on those analysts and services that support your revised priorities
- Ruthlessly reallocate money from one analyst firm to another
- Do not be afraid to tell analysts about reduced spending. However indicate that this is not a reflection on the analyst but a response to reduced spending throughout the vendor
- Do not go dark – continue and even increase outbound interactions (e.g., briefings and emails with information and insights) especially with analysts on the receiving end of reduced spending
Online SageContentTM Library clients can find additional depth of discussion about purchasing best practices and tools for downloading by searching for “Contracts – Table of Contents.” Advisory clients can get the same information via inquiry. In addition, Advisory clients are encouraged to schedule an inquiry to review individual analyst contracts up for renewal and overall spending. If you are not a client, you can get a free inquiry to discuss your analyst spending priorities as a thank-you for participating in an Analyst Relations DiagnosticTM.
Bottom Line: During a recession, vendor executives are primarily concerned with cutting costs and driving revenues. Because analyst contracts are often a big part of AR’s budget, AR needs to align its spending with analysts to ensure that it is contributing to AR’s efforts to drive sales and collect performance data. This will require hard decisions, but will contribute to AR’s survival in a recession. It is important that AR continue to brief analysts at firms that received smaller or no contracts than previously.
Question: How are you working and spending differently in this recession?
SageCircle has published or will be publishing a series of posts addressing a variety of recession-oriented topics
How AR needs to work differently in a recession:
- AR & recession – It’s about refocusing priorities and activities (overview)
- AR & recession – briefings need to focus on customers and fast business results
- AR & recession – refocusing metrics to emphasize outcomes not activities
- AR & recession – revisiting analyst lists and service level agreements
- AR & recession – telling stories of AR delivering business value to the company
How AR needs to spend differently in a recession:
- Why it is a really bad idea to cut AR, even in a recession
- Budgeting cutting can help AR focus and innovate
- Budget cutting part two – Alternate solutions for analyst contracts
- Notes on managing your budget in a recession – SageCircle’s Coffee Talk notes
- AR & recession spending – re-considering analyst contract priorities
- AR & recession spending – determining what out-tasked activities to bring in-house, if any
Purchasing analyst services best practices are more critical in a recession:
- Using five rights to avoid a wrong when it comes to purchasing Gartner or Forrester services
- Right reasons – Evaluate why you are purchasing analyst services
- Right services – Align the services you buy to better match the reason for info or advice
- Right firms – Search out alternative services providers that better match your reasons
- Right price – Acquire those services that meet your basics requirements
- Right usage – Drive usage of the services you buy to ensure maximize business value