Procurement of Marketing Services – Consider the Sub-Categories

We enjoyed this article on the Spend Matters USA website. Written by Peter Portanova, senior project analyst for Source One Management Services, it is provocatively titled “5 Reasons your Marketing Procurement Strategy Is Doomed”.

He talks about why marketing services is so often the “last bastion holding out against procurement’s advances”, and why it is such a tricky spend category for procurement professionals to address successfully. He lays out the five top preconceived notions procurement has about marketing “that most often land them in hot water”, and they are all very pertinent and strike a chord with us too.

The first issue arises when procurement thinks marketing is “just like any other category”. But it is not. It is volatile and is more directly correlated with wider business growth and success than pretty much any other spend area. Procurement needs to understand this and show we’re aware of the impact of marketing.

He goes through other points, including the danger of taking a cost reduction approach to the category – “while lower rates have their place in negotiation, marketing is about delivering results, which may include paying for the expertise of a more costly partner”. As we’ve said before, you can always find a cheaper graphic designer, copywriter or brand strategist. But they might just be useless.

It is a good read, and recommended if you have any interest in that topic. However, we might add one other important point. “Marketing” as a category heading is an incredibly broad church. Within a single organisation it can encompass everything from direct mail to sponsorship of sporting events, from digital or SEO marketing to in-store promotions, from agency consulting-type services to branded T-shirts or beer glasses.

These are hugely different sub-categories, and require a very different approach from procurement in terms of how value is sought and the skills that procurement people need to bring to the table. It may be in the case of direct mail for instance that a pretty tactical, cost reduction approach is entirely appropriate – you can imagine a reverse auction working here. If you want to sponsor your local soccer team this is going to be a very different matter. Procurement may well be able to add value through commercial nous and negotiating skills – but it will be different.

So for larger organisations, it is worth looking carefully at how the marketing portfolio is addressed in terms of sub-category strategies and plans, and at how responsibility is allocated to procurement team members. Different approaches require different skills, as we say, so perhaps it is worth putting a tough negotiator into those areas that will respond to that and someone who is more creative and quietly persuasive into those sub-categories that require a more nuanced approach.

But going back to the US article, as Portanova says, the key point is that it’s vital to understand the complexities of marketing services. We would add that is also essential to understand the variation of activities, markets and approaches needed within the category too.

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