Gerry Preece at ProcureCon Marketing – The End of Marketing Procurement?

At the recent ProcureCon Marketing event in London, there was an absolutely first-class keynote from Gerry Preece, titled “Marketing Procurement 3.0 - What’s Next?”

Preece is the author of “Buying Less For Less”. Before he became an author and consultant, he worked at P&G for many years, including roles where he led agency strategic sourcing and marketing operations activities. As we all know, P&G are one of the very biggest marketing firms in the world, with billions of dollars spent annually across their portfolio of well-known brands.

Preece got straight into the issues. We are maybe at an all-time low for trust between marketing and procurement (and the supply side). So what role can and should procurement play?  The world is technology- and content-driven, that won’t slow down, and both agencies and marketeers are experimenting with different structures and models – but there is a general sense of dissatisfaction on both sides.

Global GDP growth paused in 2015, and there are significant market pressures; it is tough to sell branded products, and achieve the price premium brands require. Marketing heads and CMOs are being asked to justify their existence, and we are even seeing “zero-based budgets” where any expenditure has to be justified.  AI (artificial intelligence) is really taking off too – aspects such as voice recognition, text recognition, and the ability to communicate directly with individual consumers.

Moving on to agencies, margins in that industry are pretty much in line with wider business averages. Firms aren’t making huge profits. And agencies are struggling to attract the best people – maybe partly because procurement has driven down margins?

Preece suggests that agencies need to introduce professional sellers to face off to professional buyers, and this is starting to happen. Just as McKinsey, IBM and others in that consulting world have professionals who sell to clients on value not hourly rates, agencies are going to go down that route. But those sales folks are going to demand much better ROI information from their organisations to help make that sell.

So what’s next for procurement? Preece took us through 10 ways marketing demands a different approach – for instance, cost versus maximising the investment. Clearly, this should be about value and return on investment, yet some professional buyers are still trying to minimise cost e.g. by inappropriate use of reverse auctions.

Also, in this category, we don’t (and cannot) define quality in the specification – it is a variable. It is not healthy for procurement to ignore this, because “every time we fiddle with price we mess with quality too”. So, procurement must fully embrace the concept “investment to be maximised” concept.

Then Preece really made the audience sit up and listen. He suggested that “organisations need to fire Procurement 1.0 groups” – those that don’t embrace this goal. He said that PepsiCo, which has got rid of its marketing procurement team, won’t be the last to do that.  He sees CMOs saying to procurement, “you are hurting my agency so you are hurting me”.

We must have ROI-type metrics. In a clever analogy, he explained that we don’t buy a share at £20 instead of one at £25 because it is cheaper!  So in procurement, we need skills; a business owner mindset, understanding of ROI, of cost benefit, of incremental returns. We need a good broad understanding of marketing; he does not think it is OK for people to come into marketing procurement for 2 or 3 years. Rather, it should be a career path in itself.

So in his view the procurement function has done a lousy job in this area, in terms of helping staff develop the right skills and gain understanding of metrics and key issues.  So, he thinks ”procurement people are going to walk into the CMO’s office and ask to move into the marketing organisation”.  Category experts will, he believes, abandon the procurement function, and we will see the emergence instead of “Marketing Investment Management”, sitting inside marketing, not procurement.

We’ll be back with more on this challenging view at some point, but what do you think?

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Voices (2)

  1. Mark McPhee:

    I’s difficult to understand the full context of the speech, however, what has been reported in the article would have been sound advice 10 years ago. My view and experience is that Marketing Procurement has moved on significantly from what is being quoted and I am sure a number of those professionals are fully embedded with their Marketing teams and agencies driving value in this space not just cost. There may be some traditionally focussed companies still out there just looking at cost when dealing with agencies, but I don’t think these represent the Marketing Procurement profession as it is today,
    My other observation is that Marketing Procurement is an enabler of commercial value in their organisation often siding with their Marketing function to respond to the cost challenges laid down by their Finance departments. It has always amused me that over the years Marketing Procurement gets the bad reputation on focussing on costs, when in reality they are responding to the corporate challenges of their business.
    I do concur with the final point of where this commercial expertise will sit in the future, as it not only about doing a deal and proving the value but also continuous management of the investment dollars as well, which means forging close relationships with agencies similar to what Marketing has traditionally done.
    The big challenge touched on in the article, which is fundamentally faced by the Marketeer as well, is fully understanding the current technology impacts in all industries impacting consumer choice and decision making. The 3.0 Marketing Procurement professional needs to understand the commercial opportunities of these disruptive technologies and how they can translate them positively for their business. There may be a merging of skillsets between traditional IT and Marketing procurement people and those who can combine these will be the ones who will drive the greatest benefits for their organisation.

    1. Peter Smith:

      Excellent comment Mark – we’d be delighted if you want to write a guest article for us! Your final point is very well made. It is amazing how in my working life marketing has gone from a non-anaytical, creative somewhat “fluffy” function to one that is more driven by and involved with absolute leading edge tech than perhaps any other part of the business!

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