It’s tempting to reduce challenges to either/or framing in an attempt to keep things simple and identify the best solution. Within corporations trying to reduce procurement costs, this can look like a choice between either reducing rates or reducing turns with vendors. But this is a case where simplifying the choices eliminates the best options.
There’s a better way to rescue your procurement department when it comes to marketing solutions, and it involves (gasp) working together with your marketing department or agency. It involves taking the best of what procurement and sourcing can do, combining it with the best of what marketing can do, and looking at value-based, relationship-based sourcing. The result is a long-term solution that allows marketing to bring their best to each campaign without fighting for budget every step of the way or blowing any budget out of the water.
Rescue Your Procurement: Think Teamwork
Way back in the dark ages (well, in 2010) an ad agency and a client did something very strange: They worked together to create a new system. In an article by Linda Tischler for Fast Company, we read about how Kodak asked Partners & Napier to become certified in ISO 9000—an intense quality management system typically used by manufacturing companies.
The ad agency agreed, taking six months to conduct a detailed review and documentation of every step of an assignment with an out-of-pocket cost of $20,000. Here’s what they found: inefficiencies were leading to massive delays. Cutting those inefficiencies (much of those involving “time wasted in back-and-forths for approvals of briefs, concepts, ideas, and directors”) sped up a typical job from eight weeks to three weeks and saved Partners’ clients about 40% going forwards!
Kodak realized the important role they played in the agency-client partnership, and Partners went on to apply the same approach in the rest of their business (growing billings by 300% in the next five years).
We’re not suggesting clients expect such an intensive response from their agencies. But this example shows that shifting the procurement approach from demands to partnership can create long-term advantages for clients and agencies.
Here’s how the mutual opportunity between marketing and procurement is described in a GEP white paper: “Excellent marketing delivers competitive advantage, price premiums and revenue growth that create opportunities for investment in shared corporate competencies such as procurement. Procurement by helping marketing achieve more value on marketing spend, contributes to what in effect is a larger marketing budget, which is a good way to think about marketing spend optimized by your procurement team.”
The author talked about an instance where marketing and procurement worked together to source print materials, and the “Bottom line was a 25% reduction in printing costs with improved SLAs, including faster guaranteed turnaround on critical jobs.”
Another important aspect of teamwork involves having the marketing department involved in the procurement process. As Odette van der Haar writes for MarkLives, “distancing the very people who are to work with the selected agency is counter-productive.” But this distancing is a challenge that’s common. Cody Butt describes it for McKinsey & Company as “mutual misunderstandings.” Neither group recognizes how the other can help them.
Marketing and agencies need to see procurement as more than just the place that runs RFPs, and provide valuable information that can help procurement conduct negotiations that are in the best interests of both departments. Philip Guiliano’s article for BrandActive talks about how marketing, procurement, and agencies can work more closely. “In the strategic sourcing environment, Procurement, Marketing and outside agencies need to share what they know… One solution is an interdepartmental job exchange program to allow Procurement and Marketing staff the chance to walk in each other’s shoes.”
In this spirit of mutual benefits, Butt explains six ways high-performing procurement function “can help fulfill key marketing needs”: manage suppliers, monitor efficiency, play the bad cop when agencies underperform, find the right capabilities in agencies, create more value using MROI data, and help marketing teams move quickly when it’s needed.
And let’s keep in mind another aspect of procurement relationships: how ad agencies approach and deal with procurement departments. Peter Levitan discusses this with Gerry Preece, ex-head of marketing procurement for Procter & Gamble in his article P&G Procurement and Advertising Agencies.
Preece reminds agencies that procurement individuals have been sent by someone else—they’re not the ones who make the rules. So agencies need to learn what procurement’s role is for their client, determine what the client needs from procurement’s perspective, and then offer smart solutions. It’s taking a partnership approach (how can we get the best for the client) instead of an antagonistic approach (how can we get more money from procurement).
Marketing departments are increasingly asked to do more with less, but Elaine Porteous for procurious sees this as an advantage because “they need procurement’s help, especially getting better value for money and formalising supply arrangements.” Each department has the potential to provide great value to the other. Porteous goes on to remind procurement to “Know your numbers, respect their [marketing’s] skills and ideas and work together to develop solutions that will work for both functions.” This applies in the same way when procurement is working with an outside agency.
Cody Butt summarizes the importance of relationships this way, “The challenge for CPOs is to demonstrate to their marketing colleagues that procurement’s contribution is not only useful but also vital and to forge new, intensely collaborative relationships capable of delivering that contribution in a dynamic, rapidly evolving environment.”
Rescue Your Procurement: Rushing Costs Money
The financially costly results of rushed sourcing probably isn’t a surprise for any department. And in business in general, the cheapest solutions (often what procurement is pushed into during last-minute sourcing) is almost never the best solution over the long haul.
As the GEP paper notes, “Procurement too often gets involved only once a decision has been made by the head of the marketing department to begin the review process for a new agency or marketing resource… [but] studies have shown that the earlier in the process that procurement gets involved… the more it can prove to be an asset and be allowed to be proactive instead of just reactive… they will be in a position to be fully informed when they are called upon to participate in managing the bidding process, contract negotiations, resource selection and other key activities.”
Claritum gives a useful explanation on how marketing and procurement can work together either to their advantage or detriment, depending on marketing procurement maturity. When it comes to producing value, “Sourcing [marketing] properly requires an “investment, value optimization” mindset versus a “cost center, cost reduction, widget” one. If you don’t get this subtlety right, the (Marketing) body is guaranteed to reject the (Procurement) organ.”
It makes sense. More time allows for better communication, better partnerships, better decisions, and better use of money. Agencies can leverage this by proactively communicating their ability to spend carefully and professionally to the procurement department. Preece words it this way, “we run a tight ship when it comes to financial matters and third party arrangements.” So, whether it’s the agency beginning the conversation with procurement early in the process, or marketing engaging procurement long before it’s time to begin the review process, the strategy of planning and engaging early will bring the best results.
Rescue Your Procurement: Think Long-Term
Gerry Preece recommends both procurement and agencies never approaching marketing with the idea of ‘savings’. Spending money on marketing is a choice, so the decision shouldn’t be made based on savings, but based on ROI. That requires a longer-term approach. Ideally, procurement should “rigorously and objectively collect the data and bring it to bear on sourcing decisions.”
Scrambling to procure one point/aspect of advertising forces a single-minded focus on one deliverable, rather than a broad plan for marketing that focuses on long-term results. Levitan has this vision for the process, “Procurement should hold advertising clients accountable for creating clear expectations and deliverables, while holding the agencies accountable for performance, efficiency, and procedures (where appropriate).”
The GEP white paper shares insight from Sopan Shah in his position as global leader of advertising and marketing procurement at Nestle. The entire team “moved from a role of reaction to proactive value creation, creating a relationship between one of their beverage brands and a social media firm to more directly connect the brand with its users. This was accomplished with no appreciable cost.”
Nestle’s approach encapsulates every good strategy for moving away from last-minute sourcing: focusing on relationships, thinking long-term about the value of marketing, and seeing reduce costs.
Thinking long-term takes time and effort. It requires an explanation of how ROI will be measured and what baseline information is needed before decisions are made. Marketing and agencies need to explain how external partners will contribute, and all parties need to agree on their objectives and work towards them together.
Rushed last-minute sourcing isn’t any department’s choice, but when it’s become part of the system, it will need a will to change from everyone involved: marketing, agencies, and procurement. Fortunately, the results speak for themselves, and it’s well worth the initial challenges to create a better system that focuses on beneficial relationships, long-term value, and spending resources in ways that generate the best ROI.