Do Other Services Procurement Areas Get as Much Negative Press from Suppliers as Marketing Procurement?

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Tina Fegent is mad as hell and she’s not going to take it anymore.

OK, that may be a bit of an overstatement, but for someone with a couple decades of experience in the marketing procurement space, Tina is officially en garde when it comes to marketing services suppliers (namely, the agencies) bad-mouthing her chosen profession.

“Time and time again, the [marketing] trade press slags off procurement,” she told me.

Tina has worked on both the agency side and the client side in the U.K. for firms such as Telefonica, GSK and Lowe Advertising, and has come to know the intricacies of both operations. She’s no stranger to the digs at procurement as a stuffy profession from all corners, and began her own consultancy to help clients understand marketing procurement. But over the past 18 months, it’s gotten to a tipping point for her.

“Two weeks ago there was a cartoon about procurement buying soybeans, and it’s like, what?!” she said when we spoke recently.

Source: marketoonist.com

Then she saw a trade press article about the U.S. Army dropping McCann Worldwide as their go-to agency, in which the author wrote the following:

“Does this show that the biggest clients are becoming more bureaucratic, procurement-driven box tickers? Probably. Does it show that they’re not very good at it. Almost certainly. It probably also shows that such contracts these days are in the hands of the procurement department who tend not to be the sharpest knives in the box.”

That really got Tina’s goat. So she she came to Ask Spend Matters and asked us a question:

“Do other areas of procurement get as much negative press from suppliers as marketing procurement do?”

First, let’s take a look at where this could all be coming from.

Why Would Agencies and Other Suppliers Bad-Mouth Marketing Procurement?

As almost everything does, it mainly stems from procurement’s cost-cutting mandate.

“Marketing is an extreme example of a category where cost reduction is a ‘stupid goal,’ so budget holders have resisted particularly strongly when procurement people with these types of goals get involved,” said Peter Smith, managing director of Spend Matters UK/Europe.

GRAB THIS FREE WHITE PAPER: Three Occasions When Procurement Should Spend More

Marketing services is one area where there are many more qualitative considerations than strictly quantitative. Marketing sees procurement holding up their initiatives and client relationships in an increasingly fast-paced digital world as short-sighted. Typically, it’s a function responsible for topline revenue growth, which is often incompatible with procurement's charge.

On the other side of the coin, marketing and their suppliers’ reputation for being too quick to spend too much, the perception of being thin-skinned ‘creatives,’ and their less-than-stellar track record of transparency are anathema to cost-conscious procurement folk.

For a procurement team swoop in and expect to work with marketing the way they work with, say, IT, may pose some problems (and should be approached strategically). After all, marketing is certainly one of most recent major categories for procurement to get involved with — a notable factor.

“I remember 20-30 years ago IT managers weren’t very keen on procurement getting involved in their area,” said Smith.

In many cases, marketing has already established a lot of agency and freelance relationships on their own. “Frequently, procurement is entering the picture and trying to play a greater role, so naturally there’s resistance,” said Andrew Karpie, research director of services and labor procurement for Spend Matters. “If you compare that to the contingent workforce space, for example, procurement has been involved in temp labor [for a while]. Maybe not a few decades ago — but it is already institutionalized.”

Perhaps the biggest faux pas is procurement’s natural knee-jerk approach to treat marketing services as any other sourced commodities, such as corrugated cardboard, Bic pens, or Brent crude.

“If contingent labor is less of a commodity than goods and materials, then creative outputs are much less of a commodity!” said Karpie. “I understand the procurement folks also understand that, but it’s an enormous complexity to deal with because there’s so much subjectivity involved.”

Throw in the dizzying number of marketing services sub-categories — media buying, advertising, print, research, data, design, CRM, etc. — and you have a complicated stew of issues regarding the ways in which procurement should add value to services-supplier relationships in the marketing game.

What Other Areas of Services Procurement Get a Bad Rap?

The legal services sector is one area in the running. Namely, law firms are generally still not super keen on procurement ‘getting in the way,’ as they see it, of their corporate client relationships.

“Procurement gets quite a lot of negative press in the legal community, certainly,” said Smith. “I did a workshop for 30 CFOs from big London law firms a few years back, and was lucky to escape with my life!”

“E-auctions were their particular hate,” he noted.

Law firms, much like ad agencies, are not typically fans of e-auctions (especially reverse auctions and blind auctions). Lee Garbowitz, managing director of Procurement Managed Solutions for HBR Consulting, agrees.

“When it comes to e-auctions, there’s disdain, because those bring it down to the lowest common denominator — price,” said Garbowitz. Many do recognize that several other attributes are being considered in the buyer’s final decision, but when the auctions themselves are happening, it’s all about that one thing.

And that gets lawyers’ hackles up, as it would in any sector that’s heavy on the intellectual capital. For corporate buyers hiring a law firm, Garbowitz says, you obviously want to make sure that you have the most capable subject matter experts working on your account when you have the need.

“The inherent reality is these are highly skilled individuals that can charge good rates for the work they do and they provide a whole lot of value,” he said. “And when a company takes the stance that says, ‘Hey we’re only going to buy on lowest price,’ you have this disconnect between what that talent can obtain for other clients versus what’s asked for that company.”

Garbowitz also noted that internal audit and finance are other areas in which procurement’s presence and role is seen as perhaps unnecessary.

But does that mean they get bad press in the trades?

The Trade Press’s Role

Tina posed a good sub-question: what role does the industry trade press play in generating negativity between buyers and the supply market?

“Well, it’s more fun to read something that says ‘Procurement Sucks!’ versus a procurement success story,” said Bill Duggan, group EVP at the Association of National Advertisers (ANA), and former VP at Grey Advertising. “So the headline grabbers are [always going to be] the war stories on procurement,” he added, noting that while AdAge seemingly ran that type of story every other month, in his view it’s “not like it used to be” these days.

On the legal side, Garbowitz concurred. “Overall I think the trade press presents a balanced view of the synergies and disconnect between buyers and the supply market,” he said.

Indeed, to that point, the strongest worded phrase this reporter came across in the legal trade press was, “Finding a value-based fee arrangement that works for both law firm and client can be tricky…” Whew. Barn-burner. And there’s also this guy (FYI, he’s a ‘Legal Rebel.’) So to be fair, the legal sector has its own hemming and hawing about procurement finally permeating the pages of ABA Journal and others, but they just seem to do it in a more understated, buttoned-up and, well, “lawyerly” way. Like Jordan Furlong does, as quoted in this article.

“That said, it seems that the exceptional stories — ‘Everything is Really Good!/Bad!’ — get the most attention,” Garbowitz said.

Part of that is just human nature — which, incidentally, is the very reason that the marketing function exists. Any marketing procurement story would be remiss if it didn’t mention the PepsiCo Incident of 2015, in which the global firm cut their entire marketing procurement team (and proceeded to make terrible decisions, ahem Kendall Jenner ad, ahem).

But is this type of move a continuing trend? “I heard it two years ago with PepsiCo and haven’t heard about another company doing it since, so [there you have it]” said Duggan. “What the trade press does is just helps to get healthy conversation going,” he concluded. 

What Marketing (and Legal, and Other Services) Procurement Can Do to Improve Supplier Relationships

As to future trends in marketing procurement, folks such as Duggan, Garbowitz and Gerry Preece, former marketing procurement head at P&G, all note that much of the speculation surrounds a new hybrid marketing procurement professional.

At minimum, each and every procurement person needs to be educated on what’s different and special about marketing, Duggan told me. But Preece takes it a step further. According to Spend Matters UK’s coverage of the recent ProcureCon Marketing event in London, “category experts will, [Preece] believes, abandon the procurement function, and we will see the emergence instead of ‘Marketing Investment Management’, sitting inside marketing, not procurement.”

That may indeed come to pass, but in the near term, improving the relationship between services suppliers and procurement comes down to a couple key things: creating value in strategic partnerships and teaching value in broader education efforts.

On the former, Garbowitz provided an example. When he served as Cadbury’s CPO for North America, a big brand for them was Trident chewing gum. They ultimately discovered that two things sold gum: slick packaging and great flavors. “Everyone was heading for the next great flavor,” he said.

In collaborating with the head of technology, his team established some key partnerships with a number of flavor houses that basically paid them to give Cadbury the best flavors compared to anyone else — they would share in the revenue growth that those flavors created. “So we created a strategic partner model linked to revenue growth,” Garbowitz said. “We paid more to get more.”

Inherently, his procurement team was invested in revenue growth as the primary measure. He sees creating the culture that allows for that type of approach as essential for procurement organizations to progress beyond focusing on cost reduction alone.

Creating cultures of value is central to educational efforts within trade organizations such as ANA as well. In helping those efforts along, Duggan believes that the image of marketing procurement has improved over the past five or so years.

“We [ANA] have done an admirable job educating our members about creating value rather than cutting cost, which is a big difference,” he said. When pressed to give an example of how ANA is teaching its member companies, he used an analogy on me that he uses as a teaching tool.

“There are relationships in life that are not just based on cost,” Duggan said. “Do you, personally, have a financial investment advisor?”

“Yes,” I answered.

“Is it the cheapest one you found?”

“Actually...no.”

I had made his point.

“That is often the example that we give to highlight the expertise that comes with marketing,” Duggan said.

To circle back to Tina, she had written a post on marketing procurement myths several months ago that she shared with me, and one of them was, “Marketing procurement doesn’t know the marketing category.” Her answer: “The good ones do, AND there are many keen to learn. Are you doing your bit to help educate and inform?”

We hope this article will make her, and others, feel less alone in the world.

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Voices (4)

  1. Serge Milman | Alldyn:

    To say that ‘cost reduction is a stupid goal’ guarantees inefficient budget management and extremely happy (& fat) vendors. Cost reduction should ALWAYS be a goal.

    Bring this back to your life, isn’t cost management a top priority for each of us individually, based on a given set of requirements? Why should it be any different for businesses?

    The problem in marketing and many other sectors of professional services, is that Procurement has chosen to look the other way, in large part, because sourcing marketing is extremely complicated. Yet, we found very high level of savings – often more than 25% – based on very specific requirements and SLAs.

    It isn’t surprising that Marketing (or any other business unit) should be upset with most Procurement teams … after all, who wants to go through endless paperwork and RFP process for every single creative or production event, or advertising campaign. We can all agree that this event-driven approach, while easy to execute, is tired and ineffective.

    Instead, Procurement and Sourcing teams should source products and services on a consolidated basis once every 3-5 years. Period. One 3 – 9 month sourcing process is sufficient to source a broad category from spend analytics through contracts.

    But this approach demands requirements gathering (or development) and detailed analysis of past initiatives and (in)formal future demand identification. It requires disaggregating rate structures so that the premium paid to talent doesn’t carry over to commoditized work product. Among other factors, generating savings while preserving or improving quality requires moving away from rate cards to project or work product deliverables.

    Unfortunately, we find that few Procurement groups have sufficient requisite skills to support these activities … which results in caricatures such as that listed above.

    Creating tangible value is difficult; asserting value creation without data is much easier.

    1. Taras Berezowsky:

      Interesting points indeed, Serge, especially the assertion of value sans data. If you’d like to submit a guest post on a particular angle of your viewpoints, we’d welcome it!

    2. Peter Smith:

      I’m afraid that only someone who works for a cost reduction consulting firm could say that “cost reduction should ALWAYS be a goal”! No, it shouldn’t. Please take a look at my paper which explains more. http://spendmatters.com/research/three-occasions-when-procurement-should-spend-more/ I do think you make some good points and marketing is a huge category with many sub–categories, some of which respond well to an analytical, cost analysis type approach. But other aspects of marketing don’t fit that. Would you rather pay £1 million for work that drives £1 million additional brand sales or profit, or pay £2M for work that generates £10M?
      I have to say that I also disagree with “Procurement and Sourcing teams should source products and services on a consolidated basis once every 3-5 years”. That seems like a very inflexible approach – I would suggest that different markets, customer organizations and situations might require different approaches.

      1. Serge Milman | Alldyn:

        Should you always pay less, for a given set of requirements? Why would you pay more?

        The argument Peter makes confuses payment for services in absence of requirements and SLAs. Unfortunately, this is not an uncommon issue in procurement / sourcing…

        The issue facing procurement is not a binary decision of paying $1 for $1 of benefit or $2 for $10 of benefit. In the real-world, the benefits are often very difficult to define (just try to base pricing of marketing services based on revenue growth, shareholder value or any other quantifiable benefit factor). But it is possible to define work requirements, assess the costs associated with those requirements, and establish SLAs. Based on this information, an experienced team can determine if such effort is worth $1 or $2. Theoretically, this is very simple; practically, this work is complex and requires significant expertise.

        The reason for sourcing every 3-5 years are many-fold, but I’ll articulate just two of them here:
        – first, sourcing is difficult, time and effort intensive effort. Business partners don’t want to go through the same exercise annually. And frankly, if you are sourcing more than once a year, it is more than likely that your effort is leaving significant value on the table.
        – second, aggregating spend volume over 3-5 year period typically results in unprecedented level of savings.

        On the other hand, sourcing episodically (annually or event-based) results in significant busy-work and lack of value creation, as demonstrated by multiple studies that show that an average Procurement / Sourcing team generates just 3%-4% in annual savings (review of P&L data shows that actual savings are much closer to zero).

        PS: The paper you link above deserves a detailed rebuttal — which I’ll write when time permits. One thing is clear, this is a topic that would make for a great debate.

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