Market Research Preferred Vendor Programs: Quality Control Considerations

This is the second installment of a two-part series examining management issues related to the preferred vendor process. This edition weighs potential drawbacks that can occur without careful design, implementation, and supervision.

As established in the December eTip!, pharmaceutical firms typically implement preferred vendor programs to obtain greater value from their market research efforts. However, a poorly designed and managed program will be detrimental to the quality of both the study and the program in general.

If a program is understaffed or poorly managed, its value and reputation are significantly undermined. When this occurs, users sidestep the program and its usefulness erodes. Signs of mismanagement include:

• Skill-sets are inaccurate and not up-to-date
• Vendor with certain qualifications are missing
• Quality controls are inadequate or nonexistent
• Internal evaluations are absent or sporadic
• Feedback between users and program management is meager or rarely occurs Suppliers are not rewarded for their preferred status

Mishandled programs are discouraging to users as well as the approved suppliers who see little or no work. Since the application processes itself is time and resource intensive, and may require formal procurement agreements involving price and rebate clauses, expectations run high. When the initiative fails to generate a favorable return, relationships begin to suffer.
Another potential pitfall occurs when a "three-bid system" is used in conjunction with a preferred vendor program. These two practices can be viewed as contradictory and might cause unsuccessful bidders to suspect unethical use of their project philosophy and consultation. Should a successful bidder be chosen in advance while other bids are sought simply to gain compliance, trust could fade among these placeholder bidders. Ultimately, these actions could discourage vendors from further investing in the client's business.*

In conclusion, the preferred vendor process should foster mutually beneficial, long-term relationships. Even if the firm's primary motivation is cost-control, the program's return on investment will only be achieved if it's well-managed, flexible, and rewarding to its preferred suppliers.

*Source: Pharma Market Research Report, July-August 2003, Taking on Pharma's User-Supplier Partnership Dilemma, pp. 4-5.