Why Marketing Procurement Still Has a Place

New developments have seen procurement functions turfed out of certain marketing departments, but does that mean the function no longer has a role to play? Milan Panchmatia, Managing Partner, 4C Associates, a leading procurement consulting / outsourcing services provider, discusses.

Towards the end of last year, PepsiCo sent shockwaves through the business world when it announced the dissolution of its marketing procurement department. Responsibility for agency spend and other fees now sit with the business’ individual brands.

Many in the marketing industry have welcomed the change. Some see it as a means to bring in creative agencies and new ways of thinking that would otherwise have struggled to get through an inflexible procurement process.

Others see it as an opportunity to take full advantage of new technological solutions. The issue here being that as new opportunities open up, the level of knowledge required to fully understand them goes beyond that of a non- specialist. As a result, some have argued that procurement is not well placed to judge the value of certain solutions.

There are certainly some valid points raised, however, that does not mean procurement and marketing should go their separate ways.

An uneasy relationship

In many businesses marketing and procurement have long avoided working together. This antiquated system sees responsibility for the financial aspect of the category in the hands of procurement and the workload element dictated by marketing.

Agencies have the unenviable role of sitting in the middle of these cross-purpose teams. A situation that often leaves all parties unhappy and affects productivity.

On top of this, new technologies are opening up a multitude of channels for the modern marketer to reach potential customers. The huge increase in the amount of data available has led to the refinement of systems such as programmatic ad buying and refined targeting.

These rapid changes mean it is becoming more difficult for procurement to stay on top of the latest developments and consequently to maintain the level of knowledge needed to deliver value to marketing across the board.

So where can procurement add value?

An evolving role

Whilst there is an argument to suggest procurement professionals cannot and should not invest time in developing expansive knowledge of the latest marketing technologies, there is a version of this conversation that would suggest this continuing professional development is important if they are to support the marketing function, even if it is in a different format.

So where and what can procurement do to evolve the role and maintain credibility and deliver real results that are valued by both the business and the marketing function in particular.

Negotiations

The function’s well-honed skills in this discipline can prove invaluable when it comes to sourcing a product or agency within a limited budget. Do not underestimate the value of having someone there to play ‘bad cop’ when speaking to an agency. Keeping the commercial side of the relationship with procurement can help your marketing colleagues manage some of the softer relationship-based elements, this ‘ying and yang’ approach allows everyone to play to their strengths.

Contracts

Agency contracts can be particularly badly written, one-sided and sometimes structured so as to really focus on what the agency wants and not what the client needs. Having procurement add best practice to this mix and ensure that both terms and conditions are right, but also that the commercials are clear, balanced and fair will help enormously in the running of the agency over time.

Process

There is a high-percentage chance that your marketing department has come from a wide variety of other different organisations, or you may even have some home grown talent as well. What this typically means is that everyone works in different ways. Added to this your multiple agencies will also have the same problem and will work in their own way. What this normally suggests is that communication flows aren’t great and that there is likely to be lots of miss communication and therefore repetition in the work that is done.

Helping your marketing department look at the process in a more structured fashion (we at 4C use a lean Six Sigma methodology), allows not only for the reduction in this inefficiency but also will highlight other areas of savings and potential opportunity for procurement to add value to the marketing function.

Specialisms

Whilst we’ve focused on why procurement can’t know everything, and it is very difficult to keep up to date on all the areas marketing is moving into, you can try. Taking an in depth look at a couple of core areas and keeping yourself up to date on these will really help bridge that gap between you and marketing as well as you and the agencies. As an example, if your marcomms is focused on de-coupling or programmatic buying then really getting into depth on these will likely make the commercial agreements much tighter, better value and structurally sound.

An alternative to understanding all of these areas yourself is to ask people within the wider procurement community for help. These could be consultants or even through networking to see what other people are doing and leveraging their experience. Bringing in external help where there is a specialist need is not a sign of weakness, if anything it shows that you really are looking to spend your company’s money wisely.

Modern procurement departments need constantly to re-assess how and where they can deliver the most value to a business. This is particularly vital within a category as dynamic as marketing. Industry developments do not affect what the function does well: maintain a holistic view of the business, facilitate supplier relationships and ensure value is tracked and delivered.

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