Procurement of Marketing Services – Will It Survive?

I remember having a blazing row with a McKinsey partner about whether 'goods' or 'services' were harder to buy (generally). He said 'goods' – he was a “directs” man by background, and I said 'services,' clearly, because they were harder to specify, more variable, less tangible … Of course, I was right. But that just goes to show that there are different views on what defines a “complex” spend category form the procurement perspective.

There is also a difference between complexity and difficulty from that procurement functional perspective. So buying cars is not the most complex market, I’d argue, by any means, but anyone who has ever had responsibility for fleet buying and management in a firm with a large number of company car drivers will know what a nightmare it can be because of stakeholder attention, stupidity and self-interest!

Anyway, last week we participated in a webinar run by our friends at 4C Associates, the procurement consulting and managed services provider. The topic was “Is procurement of marketing services dead”?  That choice of topic was stimulated in part by Pepsi-Co getting rid of their marketing services procurement team recently, and it is also a hot topic for 4C Associates, who work with many clients in that spend area. (So you might guess that Milan Panchmatia from the firm who participated in the webinar with me thinks it isn’t dead – but more on that later!)

I started my presentation by asking the question –  just what is it that makes complex services spend categories, like marketing, professional services, or outsourced IT, so challenging for procurement teams and individuals? And it certainly is challenging – procurement spend influence in these areas has certainly grown a lot over the past 20 years, but in many firms it is still limited. We ran a quick survey during the webinar and around 50% of the delegates chose “procurement has some influence” to best describe the position in their organisation, rather than a stronger statement.

It is important to think about this because if we don’t understand the likely situation, how are we going to successfully address the challenges and improve? So our analysis suggest that these are some of the key
and their level of difficulty for procurement.

  • Dynamic, often growing supply markets
  • Many suppliers, rapid turnover with constant stream of new market entrants
  • Spend is of high importance to organisation, and to internal stakeholders
  • Nature of work means often personal contact between suppliers and stakeholders
  • Value, not cost, is the watchword for the budget holders

Looking at that list, we can see how well it fits the marketing services category (or large elements of it at least), and it is easy to see why procurement has to work hard to succeed here. It is tough to remain knowledgeable about the market; basic cost reduction is almost immaterial to the stakeholders, and suppliers and budget holders are likely to be close. Contrast that with buying energy for example – for a start, no-one in the organisation really gives a damn who your electricity supplier is, whilst every brand manager is very likely to care deeply about their agency, creative or design suppliers.

We will come back and look at some of the ways procurement can avoid “death” in a further post, but in the meantime, you can take a look at the webinar slides here if you missed it last week.

And if you would like to participte in 4C's survey on marketing procurement, follow this link  http://www.surveygizmo.com/s3/2724001/Procurement-Index-Monthly-Survey

 

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