Marketing and procurement – fight! fight!

There has been a lot of comment recently around procurement / purchasing involvement in Marketing Services spend and how organisations ensure they get value form their investment in this area.  This is not new of course – in 1980, I was a Mars Confectionery graduate trainee (in the Operational Research team), researching advertising effectiveness.  I moved into Purchasing a couple of years later and was somewhat involved as we started getting to grips with marketing purchasing.

Anyway, Spend Matters has had a series of (as usual) insightful articles about the subject.
Various marketing folk have also been getting excited about the impact procurement is having on their margins.  They accuse us of not understanding their business, being overly focused on cost, and not understanding their true genius / need for vintage champagne and honey-coated virgins (of both sexes) in order to stimulate their creative juices.  Here’s a recent quote from Supply Management magazine:

“Meanwhile, speaking at another event - the Association of National Advertisers conference last week - Ad Age editor Jonah Bloom said Purchasing’s increasing influence on marketing spend and "obsession" with securing return on investment cannot be ignored.”

And when you get into the detail of his speech, the top 100 advertising agencies, in the heat of the biggest economic downturn of our generation, have seen their margins drop from 12.2% to 10.5% (as reported by Procurement Leaders Blog). So...an obsession about return on investment because margins are almost down to 10%?  Whatever next?  Cancelling the winged chariots on which the advertising people fly to work?  What world do these people live in?

Now, to be fair to Mr Bloom, he has written an excellent rebuttal of the Procurement Leaders piece (see ‘comments’ on the Procurement Leaders blog page linked to above) and has been supportive of procurement involvement in marketing spend.  His biggest beef is with procurement people who have no experience of marketing, and firms which are driving down price with little consideration of value and service.    Which is fair enough.  So...accepting that procurement professionals have every right to provide input to this spend area, as long as their organisations want them to, let’s not have closed minds as to why we might be partly responsible for this outburst of hostility.  How can the purchasing profession make sure we are doing the right things?

The fact is that too many procurement people do approach complex categories like this with an attitude of arrogance, fear or naivety.  This makes them act too aggressively or defensively, neither of which are appropriate.  People who believe their ‘usual’ procurement processes will work fine in this category.  People who don’t feel it is necessary – or who don’t have the skills – to really engage with a complex market.  People who don’t listen to what their colleagues – or their suppliers - are telling them, and measure their success by simplistic ‘savings’ measures.

So don’t be one of those people...here are three things, just for a start, that procurement people can do to be successful in this spend area (and indeed in other specialist spend categories).

  1. Make sure you really understand the category; research the market. Who are the key players? What are their strategies?  How do they manage their supply chains? What does the P&L for an agency (and different types of agency) look like?  How do they measure their performance?
  2. Understand what your internal stakeholders want from the category.  How do they perceive value? And even more importantly, how will they measure it and know it has been delivered? What information do you have (or do you need) to support this?  (And don’t believe the marketing person who says measuring marketing effectiveness is impossible – Mars were doing it 50 years ago).
  3. 10 years ago I was a CPO trying to get us a role in marketing procurement.  The most powerful thing my excellent category manager ever said to the Marketing Director was this; “you can choose the suppliers”.   But the deal is ...procurement will help you to define a fair and competitive process, set the parameters for evaluating suppliers, and draft the contract.  But marketing - as long as you work within that framework – you get to choose.  If this supplier really can offer better work and therefore more demonstrable value, then we will pay them more.  (And yes, ability to form a good working relationship can be an evaluation criterion within our supplier assessment process).

When supply-side people see that procurement folk understand their business, understand value, and know how to work with their own internal marketing teams...then we have a deal, and no more apoplectic agency guys getting irate with purchasing!

Voices (4)

  1. Simon Thornton-James:

    I certainly didn’t mean to suggest that you had said it – I happened to read it somewhere – either on this site or perhaps indeed in Supply Management as you point out. Apologies if you thought otherwise! I look forward to reading your comment on that POV!

  2. Simon Thornton-James:

    Speaking as someone who “transitioned” into procurement some years ago following twenty plus years in managing and delivering marketing services on both sides of the “fence”, I can only concur.

    To gain the confidence and buy-in from your marketing stakeholders necessary to the role, you have to display your category knowledge, to speak the same language and to empathise with your customers. If you’r perceived simply as a cost-cutter without an eye for quality and value for money, you’ll be in a no-win situation with both your customers and your suppliers. A good category expert should welcome profitable and successful suppliers as long-term, mutually successful partnerships which I believe is key to the sustainability of the supply chain.

    I have read an article elsewhere on this site which more or less states that category expertise has had it’s day. Marketing services is not (yet) a commoditised category – perhaps with the exception of certain print elements and heaven forbid it becomes one. We should not dictate the choice of the suppliers – we should help identify, negotiate, add value and objectively manage these these relationships at a professional level.

    I am not convinced however that is procurements responsiblity to measure ROI against specific campaigns or programs. Good marketers should effectively know how to spend their budgets and what outcomes they expect and demand from their suppliers. Procurement should provide the tools, analysis, risk assesment and where appropriate, the negotiating and relationship management skills to get best value – whether by gain-share agreements or other means. That is not the same as measuring ROI.

    Procurement and marketing have never been natural bedfellows but my experience shows that’s things are changing. Everyday, suppliers and marketers are having to get used to dealing with the procurement teams across larger organisations and embracing this tripartheid realtionship will mean that all parties can gain both in terms of increased value and just as importantly, respect.

    1. admin:

      Simon
      An excellent comment thansk you. I may use it in a new post because comments on older pieces don’t get seen that much.
      I don’t remeber saying “category expertise is dead” though – unless i was being deliberately contrary somewhere! There is an article saying that in Supply Management this week though and I am about to comment on that – I don’t agree at all !

  3. flyingfly:

    I want to quote your post in my blog. It can?
    And you et an account on Twitter?

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