Marketing Procurement — Building trust and transparency via strategic partnerships

The procurement services industry is on an upward growth curve at the moment. According to our analysts more and more organizations are recognizing the value of partnering with all types of service providers of all competencies to help them formulate and execute business strategies, grow their business and their integrity with it. Partnerships, it seems, are becoming the way forward, not just to fill the gap an organization might have in its own armory of skillsets, but for mutual growth and to better serve customers.

The procurement services space is evolving into an ecosystem that can be harvested for value if buyers know what to look for. For that reason, we talked to an expert in the field of marketing procurement services to understand better why you might need a partnership, how to recognize a good partner, and what they can offer you.

George Roumanis is Global Partner with marketing procurement specialists RightSpend, an online platform and consultancy, which provides fact-based insights into marketing agency fees, costs and relationship development.

“The sourcing of agencies is of course something that procurement can do in-house,” he explained, “and many do. But getting a better deal for your money, more ROI from your agency and for your brand, and to enhance your value proposition to the business, is more achievable when you have not only expert advice, but insights from real-world data to back it up.”

Why would marketing procurement need a strategic partner?

Roumanis explains that while marketing procurement often has its own data on hand, like how many agencies are on its roster or how its own agencies rate cards compare for similar roles against each other, this is not enough to enable an organization to make good spend decisions in this area. Internal data assumes your baseline of internal spend is competitive to begin with. Internal benchmarks are moving targets, and organizations can always drive agencies to agree on the price of a particular role or job, making it look good against those internal benchmarks. But what if that benchmark price externally is actually lower?

“Using internal benchmarks only,” he says, “means you are likely leaving something on the table, because you are not leveraging real-time data that comes from a multitude of sources, multiple clients and industries. A wider lake of data gives you a more accurate basis for comparison.”

The ability to benchmark, when going to market, doing the research, sourcing an agency, creating a shortlist of providers, selecting an agency and contracting with that agency right through to maintaining relationship expectations, is critical to making the right decisions. And this is where a specialist third party is of enormous value.

So what makes for a good benchmarking tool?

The answer to this question is data. Data is the crucial element here, because it adds a layer of clarity and trust to your marketing procurement decisions. The right benchmarking tool that gives not just transparency but accuracy enables marketing procurers to take a value-based approach to their negotiations.

“Traditionally, agencies have not been very transparent in the way they structure their marketing costs to their clients,” explains Roumanis. “What marketing procurement people need is a way of seeing those costs in an aggregated and anonymized way, whether that be hourly rates or any of the other components, like overheads and profit margins that go into agency fees. This way they can understand what a fair market rate should be for the elements of a particular project they have tasked agencies with carrying out.”

Clearly, a project doesn’t end after the negotiation. Procurement needs to continually benchmark scopes of work to make sure their agency is retaining the competitiveness it brought to the table in the first place.

“A good tool will allow you to take a view that is not only rate-based but scope- and deliverables-based,” continues Roumanis. “For the work you are asking your agency to do, it should clearly indicate what the costs should be, which people should be working on which project, how many hours it ought to take, and so on. When you can see all costs through one lens, you can rightsize accordingly.”

Ideally your tool will provide data from many different types of agencies, from traditional creative ad agencies to media planning and buying agencies, to promotional, PR and digital marketing.

“This is really important,” he explains, “because agency structures differ: their overheads, how they structure their bonuses, how they pay their executives and so on. It may all vary significantly according to agency type. And it should also have visibility into regional and global markets because fees and costs will differ according to country or even by city, so a good benchmarking tool will take all those factors into consideration, including economic ones.”

How do we know we can trust the data? …

It’s all well and good acquiring tools to help marketing procurement organizations make solid decisions about their spend. But how do we know we can trust the data on which we are basing our strategic decisions?

“To make data-based rather than emotion-based decisions, you need data that comes from the people in the field who are actually using the tool,” he explains. “What makes this kind of tool unique is that its data comes from world-class brands who input their anonymized data on what has already been negotiated, agreed and finalized between clients and agencies. You don’t want data based on surveys of rate cards, or RFP submitted rates before negotiations have happened, or off-the-shelf rates from an agency to a prospect. The real data that is the result of all the hard work that has already been carried out is the most valuable, providing aggregated and anonymized benchmarks that are proven to be achievable.”

… and how do we know we can trust our partner?

Partnerships come in many forms — whether that be a database of insights to help with your strategic decision-making or a team of professionals to advise on what to do with that data, both deliver value that results in better outcomes for your marketing spend.

Some partners will have the ability to manage the platform on your behalf, taking your scope of work and outputting analytics-driven reports that fuel good decisions. This can help prepare you fully for that across-the-table discussion with agencies. A good partner will also have the ability to help you negotiate, explain what to look for when assessing a particular scope of work, and highlight the key drivers of any variances.

By way of example, Roumanis explains: “Let’s say an agency proposes a million-dollar fee. Real benchmark data may indicate that the fee for that should actually be $900,000. So look for a partner that can work with you and your marketing stakeholders to identify what is driving that $100,000 difference between agency quotes and the benchmark. It might turn out to be salaries, or number of FTEs on the staffing plan, or higher-than-average overheads.

“The point is, whichever type of partnership you opt for, the offering needs to be backed by real-time learnings from the industry’s world-class marketers.”

It’s the people-machine mix that provides the real clarity and trust

Whether an organization has had a marketing procurement team in place for decades, has just launched the department, or simply does not have the capacity for one at all and shares that responsibility among its pool of procurers, third-party marketing procurement expertise is something that can make a huge difference to marketing, procurement and finance.

“When looking for a good marketing procurement partner,” explains Roumanis, “it’s advisable to find a firm whose staff come from a marketing procurement world. It’s that simple. You want people who have first-hand experience of your market. They’ve seen it all before, bring credibility to your team and they understand the issues you and your agencies are facing. They will have been in that negotiation situation; they will know what the agency talking points will be; and they will know what your response should be. You know you can trust them because they’ve walked in your shoes — they’ve got the experience, but importantly they bring clarity. And that clarity comes from the real-world data they can tap into to make sure those negotiation points are based on the most up-to-date benchmarking information you can get.”

The best results come from both human experience and machine intelligence. That mix is the most valuable.

The RightSpend platform, for example, assesses over $10 billion in agency spend a year, with data defined from the top marketers and brands globally covering 75 global markets and 10 agency disciplines, it is anonymized and blinded and contains real-time information that is regularly updated on which to base impartial decisions.

“It is this machine-driven clarity, coupled with human insight that makes for a powerful combination,” he continues, “the machine gives you the data, the people give you the interpretation of what that data is telling is you.”

But as he adds, with all clarity and non-bias: “Benchmarks are directional, they are intended to give you guidance. So look for a partner you can trust because their insight is based on transparency and solid data from which you can make your own informed decisions.”

This Brand Studio article was written with RightSpend