As we began outlining in the previous installment of this Spend Matters Plus series, better RFX management and, in particular, better modeling and cost analysis are just the beginning of the value good procurement platforms and processes can bring to marketing. The next level of value is in what procurement, and marketing, can do with the data collected not only from the RFX but also from deliverables and metrics throughout the creation and implementation of the campaign the agencies are engaged to support. With the unprecedented spend detail that a good procurement platform can capture, a good analytics and business intelligence platform will provide marketing with visibility into actual costs and comparisons with benchmarks, analytics by spend type, project type and agency, and cross-correlation with sales for insight into value-generating spend. Letting the light shine in through marketing-specific spend analytics capability represents a huge opportunity. But this is nearly uncharted territory for far too many organizations. The first place to start is investing in the time and effort to capture sufficient detail in all transactions so that you can create meaningful reports and trends. Join us as we conclude this series, outlining how to tap into the intelligence, visibility and value-add training that could ultimately help procurement get marketing spend under management this year.
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RFXs are expensive to run on either side of the fence, for marketing and for agencies. Granted, the bulk of this expense comes in the form of soft costs. But the undertaking is considerable and carefully vetted among agencies. Spend Matters has learned that some agencies estimate their total cost, when all hard costs and revenue losses – from assigning talent to proposals instead of projects – are factored in, to be around $200,000 per RFP, on average. This point is important to emphasize: agencies are quite picky about the clients and projects they bid on. So if the RFP does not grab their attention quickly, it will be dismissed, and so will your organization. Thus, if you can convey to marketing that your vast experience with services RFPs can help marketing get a better response rate, and better responses, it is more likely to be receptive to your words. So how do you go deep on RFX support messaging? In this installment of our Spend Matters Plus series, we outline seven focus areas that will help procurement practitioners guide marketing through the RFX processes.
Offering Agency Management Support: How to Get Marketing Spend Under Management in 2016 (Part 4) [Plus +]
Marketing is all about generating demand for the organization’s products. Thus, value to marketing is any activity that has the potential to increase demand. The primary activity marketing undertakes to increase demand is advertising. This activity is primarily accomplished through contracting agencies with the creative talent (the “magicians”) that marketing believes has what it takes to produce the magic that will increase demand with the fresh and innovative campaigns and messages these creative types will generate. Thus, a big part of marketing is agency management. Often the greatest value that procurement can bring marketing, at least in marketing’s view, is any process, methodology, technology or resource pool to help marketing better manage its agency relationships. If marketing already thinks those relationships are good, procurement can still help foster more successful agency relationships. How will procurement accomplish this? In this installment of our six-part Spend Matters Plus series, we take procurement practitioners through how to clarify and pitch the value message of certain management processes for marketing, ultimately helping marketing close the loop between what was created and what was delivered.
How best to connect with the marketing team? As a procurement professional, you probably hear this over and over again from bloggers, analysts, consultants and even vendors who stress that a new initiative will not be successful without executive support, and engaging with marketing is no different. Even if you talk the talk and walk the walk (as we analyzed in the first part of this series), and come bearing great suggestions to address marketing’s value drivers and increase the overall return from the marketing spend (our point in Part 2) — even if you can use this newfound knowledge to get marketing to lower the drawbridge and invite you into the foyer, it doesn’t mean the wizards of wondrous words are going to take you seriously or invite you back to dine in the great hall. One has to remember that marketing has a right to be cautious, and maybe even distrustful, of your new value-generation messaging because the last time procurement came knocking, it was to cut costs, which is not necessarily beneficial to marketing. Thus, it’s only reasonable that they would want some c-suite assurance that this time it’s different. So how do you get the right executive support? That’s what we’ll tackle in our third installment of this Spend Matters Plus series.
In the first installment of this Plus series, we discussed how, despite the fact that we have known for almost a decade that the marketing category contains significant value that can be unlocked with good procurement practices and processes, in most organizations, marketing is still a “sacred-cow” category that is out of procurement’s reach. In these organizations, marketing still insists that it cannot be constrained by procurement logic in its quest for the best agency magic and that it’s not how much you spend but how much business value you generate. And while this is mostly true, it’s not entirely true. It’s about spending wisely so that every additional dollar of spend generates additional, measurable value for the brand. Marketing’s entire purpose — increasing sales and brand value — cannot be done without spending hard dollars, and, generally, success will correlate with how much is spent. As a result, the goal is to always increase, not decrease, the available marketing budget. This is one category where it’s not about savings but about value delivered. As a result, the money needs to be spent on agencies that produce campaigns that generate results, and on third parties that provide the products and services that support the campaigns (print, digital media, etc.). However, one cannot even begin to contemplate who the right parties are until one understands the value drivers that need to be considered and addressed. So how to make logic + magic = profits? First, in this installment, we will discuss the four biggest value drivers to marketing — understanding those will be key to gaining their trust and getting their spend under management.
Much like packaging, logistics and maintenance, repair and operations (MRO), the marketing spend category straddles the boundary between direct and indirect. And we all know that it has a substantial impact on sales and revenue — allegedly, at least. The reality is that, while every marketing dollar spent can have a huge impact if spent appropriately, the direct commercial impact is notoriously difficult to assess, and the value per dollar spent even more difficult to quantity. However, organizations can no longer afford to ignore this “sacred spend cow” category, as every dollar spent needs to count in an inflationary market. Marketing needs procurement to squeeze every penny of value out of agency spend to not just lower total costs but also maximize revenue uplift and brand enhancement. However, this won’t happen as long as a moat separates procurement from marketing. Thus, in this series, we have distilled the approaches and practices we’ve seen adopted by leading practitioners and present a step-by-step plan to help procurement gain marketing’s ear, trust and support in helping marketing manage its spend for maximum performance. In this first installment, we break down why you need to walk the walk, talk the talk, get educated and “live the marketing life” — all of which should help loosen marketing’s drawbridge and ease it down across that moat.
In this latest installment of our six-part miniseries on spend compliance, we take a look at how spend data, and more importantly, process data related to the “process of spending” starting with sourcing into buying and paying, can give indications not only of regulatory non-compliance but also of policy non-compliance, as well as other risks that may exist even if not tied to a regulatory mandate or internal policy. So, spend data can highlight both reward and risk — and non-compliance, which is only one type of risk.
In the previous three installments of our miniseries on spend compliance, we introduced an overall framework for spend compliance analytics and then dove into contract compliance, payment compliance, budget compliance and process compliance. In this edition, we’re diving into supplier compliance and how to unlock some latent value there. We’ll assume you’ve already done some basic spend analysis to identify when you’re paying different prices from the same supplier for the same item, but obviously supplier compliance runs deeper. How? Read on.
In the last installment of this miniseries, we explored spend compliance through the lens of contract compliance, payment compliance and budget compliance. In this edition, we dive into the topic of process compliance. If you can create smart controls in the right processes, you can eliminate the most frequent root causes to spend non-compliance. Since the source-to-pay process has three concurrent value streams of cash, information and the physical goods and services, there are multiple ways that incorrect process management and information can impact spend performance and value chain performance. So, follow the process errors, and you’ll follow the money left on the table. Let’s take a look.
In our previous installment of this miniseries on spend compliance, we introduced a framework for developing a spend compliance strategy and a way to use spend analytics to support for components of the strategy. In this installment, we will dive into the first aspect of spent compliance that relates to contracts, payments and terms, and budgets. We’ll also use proven best practices based on research conducted earlier this year. This miniseries is also written to a broader audience beyond procurement so that procurement readers can forward the series to their counterparts in accounts payable, treasury, controllers, internal audit, risk management and the budget owners. Let’s dive in.
Economists like to point to the German Mittelstand as an example of how manufacturing and export economies can thrive without necessarily depending on the direct support of larger companies and conglomerates around them. But what fascinates me about the Mittelstand is not looking at this group of middle market firms as an archetype overall for manufacturing renewal in the West generally but rather specific procurement lessons we can learn from it. What I found when investigating this wide range of organizations during a recent trip to Germany took me off guard. In short, the Mittelstand in Germany is generally more advanced and standardized within procurement. There are both general procurement lessons to be learned from this group as well as technology-specific lessons, the latter of which we’ll focus on today.
I recently spent three days on a scouting and fact-finding mission in Munich and Frankfurt. During the trip, I had the chance to talk to a broad range of organizations — technology vendors, consultants, practitioners, financial services firms — about the current state of procurement and supply chain in Germany. In particular, the lessons I learned about the state of the Mittelstand, or what we would term “middle market” procurement organizations in the U.S., really took me aback in a positive way. For the sake of argument here, let’s define middle market as ranging from $250 million to $2.5 billion in annual revenue. On the flight back, I jotted down 10 lessons from the Mittelstand I thought would be applicable to procurement practitioners everywhere. Today we start with 5 general procurement lessons. In the second installment of this PRO series, we’ll cover technology lessons.