In the first post in this series, I provided a few background observations from a recent Advertising Age article analyzing the marketing spend area and those that are getting involved in managing this category for the business. In this post, I'll continue to provide some background on the subject, quoting some of the more salient observations from the article. But first, I thought I'd start with the observation that marketing Spend Management is caught in a rather interesting conundrum. To wit, in other areas of services spend (e.g., print, legal, outsourcing, etc.), it's often the role of existing intermediaries (e.g., contract specialists, brokers, etc.) to get us the best combination of price and service. But with traditional marketing agencies, the incentive is only on one side of the equation (hint, hint -- it's not price).
Agencies and agency holding companies, which are typically completely cut throat in how they compete against and talk about each other, are anything but aligned with customers in terms of cutting costs. In fact, their incentives are to convince people to spend more -- ideally based on ROI, if calculable -- because they're paid a percentage of the overall budget. Like GPOs in healthcare and other areas that get paid a percentage of transaction volume -- as opposed to savings -- their incentives from a pricing perspective will never truly be aligned with ours. Still, it is possible to find some common ground to work together. But one of the problems is that marketing and ad folks tend to look at us with disdain because they don't believe we belong to the creative cult.
Consider this observation from the article that suggests "There's also a good chance procurement people at the negotiating table may not want to be there much more than the agency people on the other side of the table want them there. In fact, many career procurement people would rather be buying equipment or commodities on the belief that they can more readily get quantifiable savings that will help them advance their careers." To this I would say hogwash. Go talk to top performing financial services or CPG companies who source marketing spend well -- show them this and you’ll see how completely incorrect this statement is, at least in companies that are further down the path of their Spend Management journey.
The article includes a humorous aside at the end designed to help agency folks identify who their new "enemy" is. I say enemy because based on the tone of the article, it's clear they often view us as the adversary. In this regard, the article implies that agencies should be on the lookout for negotiators with the following terms in their titles: "strategic sourcing, product supply, strategic relationship optimization, finance, marketing operations, indirect procurement."
Alas, even though this list is incomplete for any true enemies watch list, I would hope that in the next post in this series I can do a good job of showing how procurement can actually be an important ally in helping better manage marketing spend vs. just focusing on hard dollar cost savings. Of course I would not expect Advertising Age to see our involvement as anything but an assault on the very livelihood of their readership. But hopefully I can do my bit to change that perception. Still, I must say, just to make an anecdotal observation, the margins of agencies must still be too great given the propensity of their employees to wear $200 jeans to meetings. After taking out some fat, let's send them back to the Gap -- which by the way, will be running TV ads this holiday season for the first time in two years. Still, that's not good enough for creative types ...