Spend Matters welcomes this guest post from Peter Portanova, senior project analyst for Source One Management Services.
Marketing Spend: The last bastion holding out against procurement’s advances. Looking toward this previously untamed category, you dust off your copy of “Sourceror’s Guide to the Galaxy” and pick the ideal strategies for wrangling this seemingly unmanaged spend. You are riding a high from recently optimized spend in the MRO, HR, and IT categories, where your tried-and-true classic approaches have proven themselves time and again. The expectation for marketing is no different; however, like dominos, countless strategies topple, expectations are not met and stakeholders are disappointed with your efforts. So where did you go wrong?
For starters, you didn’t recognize just how different marketing is from other spend categories. Marketing sourcing requires a vastly adapted take on strategic sourcing to achieve success; trying the same strategies that work elsewhere simply will not cut it. A recurring theme with procurement teams at larger companies is the submission of the marketing category to the marketers, who are well-equipped to achieve success in their roles and view any outside activity as an affront to their very existence.
The relationship between marketing and procurement is tenuous, at best, thanks to procurement’s image as a team of spendthrifts and marketing’s reputation for imprudence. Regardless of history, marketing and procurement have both developed into critical business functions with direct lines to the most senior of executives. So when marketing and procurement fail to hit their goals and are unable to succeed unilaterally, where are those senior execs going to look? Right at you.
Here are the top preconceived notions procurement has about marketing that most often land them in hot water. As you read through, ask yourself if any rings a bell, because it may mean ticked off stakeholders will soon be knocking at your door.
1. Marketing is Like Any Other Category
Problem: Long story short, it isn’t. Marketing is more volatile than other categories and, in terms of indirect spend, is more directly correlated with the success and top-line growth of any business. Applying traditional sourcing principles with no regard for the industry, the relationships in place and the people executing campaigns provides a total disservice to the business, and one that can be hugely detrimental. Even the few commoditized marketing expenditures out there are subject to the volatility of the market and require continuous improvement that can be immediately undone by any meddling.
Solution: Recognize that marketing is a complex category filled with legacy vendors and strong personalities. Take the time to learn about the category and your company’s history with the supply base. Take more time to involve marketers in critical conversations and ensure you are aware of the impact that marketing has on the business.
2. They Spend How Much?!
Problem: Around 10% of revenue is typical for most companies to budget for marketing. For billion-dollar corporations, marketing can be seen as a true cost center ripe for the gouging. Looking only at the total spend and not considering the impact it has on growth, revenue or other metrics does not provide a clear picture of the spend category.
Additionally, savings are short term here — revenue impact is long term and often severely damaged by intervening with marketing spend. Stemming from the fact that marketing budgets may seem bloated, procurement may be inclined to propose targets and projections that are unachievable without damaging the business. Additionally, using these metrics to achieve executive buy-in is a high-risk proposition that can easily angry stakeholders before, during and after sourcing.
Solution: Develop metrics outside of savings. Marketing should be measured with a comprehensive ROI metric that accounts for the marketing spend and the delivery of growth. Additionally, the business or marketing may also use additional metrics outside of ROI that should be considered when sourcing.
Furthermore, having the assistance of executives to steer the conversation on the organization objectives can be critical to aligning stakeholders from the disparate business units. By simply earning this support through the proposal of unrealistic savings estimates, the stage will be set for an internal turf war that leaves the organization in an uncomfortable situation.
3. Marketers Have to Adapt to our Process
Problem: Old school procurement worked through heavy-handed tactics that delivered savings irrespective of the long-term implications. Although sourcing has changed from the procurement teams of yesteryear, marketers are wary to provide access to their vendors and budgets for fear that procurement will be a disruptive force.
Solution: Involving marketing executives in business conversations from the outset can dispel these concerns and encourage comfort amongst the marketing team. The sourcing process should be flexible and adaptable to adjust for fluctuations in the industry and should be high touch with vendors and business stakeholders.
4. There are Cheaper Alternatives
Problem: The focus on savings is dangerous, and selecting vendors on cost alone can negatively impact growth (or your metric of choice). While lower rates have their place in negotiation, marketing is about delivering results, which may include paying for the expertise of a more costly partner.
Solution: Cost should never be the primary consideration, although it will still be a key factor in the decision-making process. Use benchmarks and industry information to negotiate rates and value-adds to align providers more closely on pricing. Additionally, ensure marketers are involved and valued in reviewing proposals to ensure all parties realize success.
5. The Process Works, It Always Has
Problem: Sourcing is a wonderfully process-oriented function that enables similar strategies to be slightly adapted for use across categories. Marketing spend sourcing may require a tactic completely outside of the familiar. Not forcing the spend to fit into a current approach is critical to maintaining the support of marketers, who can be instrumental in assisting with the development of scope and sourcing documentation.
Solution: Sourcing principles remain applicable, but the process will change. Each stakeholder may require a different approach, and the category may still be an incorrect fit for your approach. Remaining flexible and adaptable are the keys to success here.
An executive working with a large fast-moving consumer goods (FMCG) client in the marketing sourcing space remarked, “Marketing is tough, you spend several weeks developing a half-dozen strategies, you present them to the stakeholders and none works.” In a category that is already riddled with complexity due to the industry fluidity and the opinions of stakeholders, it is critical for procurement to avoid the five common missteps when approaching strategic sourcing. As the final holdout, marketing will be apprehensive to provide procurement with an opportunity deliver results. As a professional, you must remain flexible, steadfast and willing to learn if you are to find success with marketing. Put simply, if you avoid these five blunders when approaching marketing sourcing, you will cultivate a successful relationship between marketing and procurement.