The Key to Improved Marketing Procurement Practices

16 Mar

marketing procurement

The topic of Marketing Services procurement practices remains a much discussed, often hotly disputed topic within the industry. There are several reasons why differences of opinion exist, however the time has never been better for marketers, procurement professionals and marketing services agencies to establish a mutually beneficial framework for constructively advancing this discussion.

Recently, a number of global marketers including Coca-Cola, PepsiCo, Procter & Gamble and General Motors have made announcements that directly impact marketing services procurement, albeit in different manners. In the case of Coca-Cola, the organization will utilize savings wrung from supply-chain efficiency gains to fuel its investment in marketing. PepsiCo seeks to streamline its global marketing services agency network, with CEO Indra Nooyi announcing that the organization’s beverage division has identified 100 North American agencies that will be eliminated from its agency network. Procter & Gamble will pare back its investment in traditional media to leverage the reach and efficiency of digital and social media. Dan Akerson, the CEO at General Motors, which just consolidated its global media planning and buying with Aegis Group has stated his intent to “reduce complexities and drive efficiencies.“

In addition to the actions and intentions being announced by large multi-national advertisers, there was an interesting study on marketing procurement conducted by Charterhouse at the close of 2011. Entitled; “The Marketing Maturity Index” the organization surveyed 200 procurement professionals from a cross-section of Europe’s 500 largest businesses. The findings of this study reinforce the need for constructive action in this area:

  • A vast majority (88%) of those surveyed felt that current marketing procurement practices are inefficient.
  • 4 out of 5 claimed that marketing product and services could be purchased more efficiently.
  • 4 out of 10 identified efficiency savings as a “significant opportunity” for their businesses.
  • Only 1 out of 5 felt that their organizations were as lean as possible.

The take away is clear, a well thought out marketing services procurement process can play a key role in supporting both an organization’s supply-chain managementand demand generation initiatives.

To successfully create and manage an effective, highly efficient marketing agency network a collaborative approach may be best. Why? As the breadth of marketing agency networks have expanded and the tenure of CMO’s has declined (around 24 months according to recruiting firm Spencer Stuart) a cross-functional approach to the development, management and monitoring of agency performance and contract compliance is required to safeguard the interests of each stakeholder. Further, the marketing agency network is a vital corporate asset that would benefit from the involvement of and access to senior representatives from Marketing, Procurement, Finance and Legal. Let’s face it the cost of changing agencies is expensive in terms of absolute costs, financial risks and demand generation momentum. Thus, an organization committed to a stable, high-performance agency network stands to gain significant value.

Organizations’ can improve their return-on-marketing-investment by optimizing the performance of their marketing agency network by taking the following actions:

  • Stabilize the Marketing Team and marketing agency network. Organizations lose valuable knowledge when institutional marketing memory is not transferred to others. The rate and rapidity of personnel and agency turnover creates risks in this area.
  • Truth, transparency and respect are necessary ingredients for successfully managing marketing agency networks. Implementing contractual, financial and performance oriented controls can safeguard an advertisers marketing investment and establish a sense of clarity among the supplier base as to “what is expected” and the analytics that will be used to assess performance.
  • Reality matters when its insight that you seek. Monitoring and benchmarking agency performance yields knowledge which can be utilized to drive efficiencies and to socialize “Best Practices” throughout the advertisers organization and across the network.

When it comes to marketing service procurement and the benefits to that can be realized by creating and maintaining a high performing agency network, one can take inspiration from the noted Roman poet Ovid:

“Make the workmanship surpass the materials.”

This perspective is as valid today as it was two millennia ago and it has the potential to galvanize each of the stakeholders in this important discussion around the ultimate goal of marketing services procurement. Interested in learning more? Read a summary of the “Marketing Maturity Index” survey.

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