Do Advertisers Value Supplier Stability?

2 Sep

marketing agency networkImagine if you will a scenario in which a newly hired Chief Marketing Officer (CM)) asks the Chief Procurement Officer (CPO) for their Team’s assistance in conducting a review to replace the organization’s lead advertising agency.  The response of that CPO will provide a litmus test for the extent to which that organization values supplier stability within their marketing agency network and how they view the role of procurement.

Potential CPO responses might include;

  1. “No problem. We stand ready to assist you in any way possible and are confident that we can also utilize the review process to revisit the agency compensation methodology being utilized to generate a reduction in agency fees.”
  1. “What is the basis for your request? Do you have relevant first-hand experience with this agency at a prior company that raises some concern? Based upon your review of the most recent annual evaluations have you observed shortcomings, which you believe cannot be adequately addressed as a result of direct dialog with the agency? Have you had time to adequately assess the risk: reward equation related to a change in agency-of-record for our organization? ”

Which response would you expect from an organization that views its advertising agencies as vendors, not strategic partners and that has tasked its procurement team with aggressive annual cost savings targets?  While the answer is self-evident, the question regarding procurement’s role in fostering supplier stability is much more complex… particularly as it relates to indirect procurement in general and marketing specifically.  

Collaboration between the marketing and procurement functions and the challenge of fostering a productive working relationship between a function focused on demand generation and one primarily measured on expense reduction has been thoroughly debated over the course of the last decade.  “Marketing is different” has been a common refrain from marketers seeking to limit procurement’s involvement within their agency and third-party vendor networks. 

Thus it was with great interest that I read the results of a recent survey conducted by The Hackett Group which focused on “How World-Class Procurement Organizations Outperform.” Of note, the survey found that top procurement organizations employed a handful of strategies, which distinguished them from their peers:

  • Being a trusted advisor to the business
  • Driving suppliers to innovate
  • Providing analytics-backed insights
  • Protecting the business from risk
  • Agile staffing

Respondents employing the aforementioned strategies were able to forge stronger relationships with their internal clients and with their suppliers. This in turn allowed them to proactively understand the needs of the business unit, as opposed to simply “facilitating the buying process” and to work collaboratively with each stakeholder group to both “reduce costs” and “create customized and unique breakthrough solutions.” 

Intuitively, it would seem as though this approach would go a long way in establishing a performance-oriented, stable marketing agency network that operates efficiently in support of an advertiser’s business objectives.  At the very least, the approach employed by “world-class” procurement organizations in the Hackett Group study could serve as a compelling basis for dialog between marketing and procurement.  A dialog focused not solely on cost reductions but on the goal of improving an advertiser’s return on marketing investment.  As the old adage goes; “Teamwork divides the tasks and multiplies the success.”

 

 

 

 

 

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