Marketing Spend — The Straight Dope From the Spending Culprits (Part 3)

In Parts 1 and 2 of this series, I looked at a number of observations from a recent Advertising Age article examining how the marketing and agency world is looking at procurement's involvement in marketing spend with equal degrees of fear, cynicism and acceptance. In this post, I'll continue on with this analysis, looking at ways procurement is getting involved in tackling marketing spend while taking full consideration of price and other factors. I'll start by sharing one example from the article of how P&G has put in place a new executive to tackle marketing spend -- one with a direct materials background -- and then I'll expand the discussion by offering up additional tips for how procurement organizations can most effectively tackle marketing spend. Let's begin.

P&G, the CPG provider perhaps best known for leading edge brand management not to mention the strengths of its own brands, is no stranger to spending big bucks on advertising. According to Advertising Age, P&G spends $7.5 billion each year on advertising, approximately $1 billion of which goes to agencies for their fees. This is the "biggest media outlay on earth," the story suggests. To reduce costs in the category and get better value for what its marketing buys, P&G recently appointed a new category lead for the area, who observes in the article that successful marketing Spend Management is "really about the value that gets created, and that starts with how you're able to out-innovate the market". What is his company doing to create this value? Their most recent focus has been on "centralizing and streamlining how P&G purchases shopper-marketing displays, programs and agency services, including customization by retailer and chain".

Going beyond this area and extrapolating some of P&G's experience to the broader marketing spending segment -- which most likely does not have the volume leverage of the CPG giant -- a few things immediately come to mind. First, it's essential to segment marketing spend by sub-category, realizing that certain areas of spend are more ripe than others for direct cost reduction while others might benefit from better cost management and agency direction, coaching and relationship management. It's also important to put technology in place that can help manage marketing spend effectively. While Ariba, IQNavigator and others have experience tackling the lifecycle of marketing services spend from a category management perspective, the visibility that these providers deliver alone is not enough. Omniture (recently acquired by Adobe) and some of the agencies are beginning to deliver a new generation of marketing Spend Management technology that provides complete cross-channel visibility (e.g., digital, print, etc.) into not only where dollars are going, but spending effectiveness as well. They're also helping with agency collaboration and optimization as well.

Marketing Spend Management must go beyond just effective technology deployment and use. It's critical for those managing the categories to become expert enough in the business side of the marketing world to deploy the best possible supplier management and negotiation strategies. After all, even if savings is what we're after at the end of the day, there are effective and ineffective ways of getting it. But regardless of the approach, if you're not tackling marketing from an approach that prioritizes complete transparency and visibility into what you're buying and how it's working for you, then you won't be prepared to deliver the types of results that top performing procurement organizations are getting from pursuing marketing as part of a broader cost reduction and Spend Management strategy.

Jason Busch

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