Tag Archives: marketing procurement

Can Treading Water Be Considered Progress?

31 Jul

Treading WaterThis is certainly one question that could be asked after reviewing the Association of National Advertisers (ANA) 2022 report,Procurement: The Good, The Bad, and The Ugly.”

After twelve years since the ANA’s initial report on this topic, marketer and agency perceptions of the role, performance and acceptance of procurement have shown little improvement. While there is a grudging sense of “we’re in this together,” according to this report, client-side and agency stakeholders have not fully coalesced around a common set of goals. Thus, it is no surprise that success for this triumvirate remains elusive:

“Coming together is a beginning. Keeping together is progress. Working together is success.” ~ Henry Ford

Even within client organizations, while most of the marketing and procurement respondents felt that their relationship was “extremely” or “very” healthy, the perception gaps between these two groups when it comes to procurement’s role and performance relative to both its responsibilities and within key disciplines was alarming. Contrasting views in these areas would suggest that the “relationship” between the two functions is more superficial than meaningful. If there was objective, candid communication on these key variables, one would expect a more unified view of procurement’s contributions among team members.

The other striking observation was the continued negative pre-disposition toward procurement held by agency respondents. Most notably, while 54% of procurement respondents characterized their relationships with agencies as “extremely” or “very” healthy, only 15% of agency respondents felt the same. Further, while half of the procurement respondents expressed satisfaction with their marketing and advertising knowledge, no agency respondents shared that point of view. While this perspective may have been justified twelve years ago, it seems unexpectedly harsh and unfair today given the 51% increase in years of “marketing procurement experience” among procurement respondents or that agency personnel are not engaging in meaningful dialog.

Justified or not, agency attitudes in this area will need to be addressed if the relationship between procurement and agency personnel is going to improve. By way of example, commentary offered by select agency representatives and by the American Association of Advertising Agencies (4As) ascribed to the stilted view that to remedy their current perspective, procurement personnel should focus their efforts on “value optimization” versus “cost reduction.”

Newsflash, cost reductions are both an element of an organization’s value optimization efforts and a necessary action during difficult economic times or when performance doesn’t meet expectations. Thus, it is unfair to attribute blame to procurement for an enterprise’s expense management initiatives. This is no different than from the approach taken by agency holding companies and independent agencies when dealing with their suppliers, employees, advisors, and landlords during times when fiscal tightening is required.

Based on our experience, assuming marketing is motivated, we believe marketing is perfectly positioned to take the lead in breaking through the current malaise. Given their P&L responsibilities and attendant responsibility for effectively stewarding their organization’s marketing and advertising investment, they are uniquely qualified to drive stakeholder understanding and respect for procurement’s role and responsibilities.

To this end, the ANA report offers several meaningful recommendations for progress, which are centered on the need for all parties to work together in a more collaborative and productive manner. Importantly, the ANA rightly suggests that this begins with a focus on the relationship between marketing and procurement to gain alignment and present a “unified front” to their organization’s agency partners.

There is much at stake for each of the parties and mutual success is achievable. However, this will require an attitude reset and a renewed commitment to respecting one another’s unique roles and contributions.

“We may have all come on different ships, but we’re in the same boat now.” ~ Martin Luther King, Jr.

 

Marketing Procurement Delivers Value

31 May

Value IA decade ago, agencies and marketers winced at the idea of procurements involvement in their space. The relationships between stakeholders were often contentious. Stakeholders on both sides felt that procurement was singularly focused on cost reduction, did not understand the marketing space and was unable to comprehend, if not measure the quality of outputs delivered by high performing marketing/agency teams.

Have these sentiments changed? Yes, for the better. Have advertisers and their agency partners fully embraced marketing procurement? Yes, in many organizations. That said C-Suite executives at most marketing organizations are comfortable with and comforted by procurement and its role in providing oversight for and optimizing marketing spend.

The good news is that marketing procurement teams have done an excellent job evolving their subject matter expertise and furthering their understanding of the needs of marketing teams and their agency partners. Coupled with procurement’s expertise in all facets of supplier management including sourcing, onboarding, contracting, negotiation and risk management, procurement teams deliver significant value to their marketing peers.

Out of necessity, marketers are increasingly focused on brand building and demand generation. For those fortunate enough to have access to a developed marketing procurement team, the opportunity to drive efficiencies while strengthening relationships across their agency network is significant.

According to the Association of National Advertisers (ANA) better than 80% of marketers utilize procurement to review agency compensation. However, that is just scratching the surface of successfully deploying marketing procurement.

In our agency contract compliance practice, we have seen the benefits to marketers of collaborating with procurement. These include support in the following areas:

  • Supplier sourcing, RFP management and on-boarding
  • Supplier diversity management support
  • Agency performance monitoring and financial management support
  • Contracting and annual statement of work support
  • Deduping of agency roles and overlap across agency network members
  • Agency service consolidation including digital asset management and studio
  • Decoupling of production
  • Fostering enhanced collaboration between network agencies and in-house resources

From our perspective, the success realized by marketers and their peers in procurement is greatly enhanced when the procurement team has direct interaction with agency finance personnel. This must go beyond contract, SOW, and fee negotiations to include ongoing interactions regarding monthly fee and budget tracking reporting and the preparation for quarterly business reviews (QBRs).

In the end, all stakeholders desire the same outcome, attainment of the organization’s marketing goals with the greatest efficiency. Achieving this aim is best done through open, transparent supplier relationships, which the successful marketing procurement teams recognize. As American businessman Harvey Mackay once said, “A smart manager will establish a culture of gratitude. Expand the appreciative attitude to suppliers, vendors, delivery people, and of course, customers.”

ANA’s Advertising Financial Management Conference

2 Apr

The ANA in conjunction with this year’s conference program chair, Sopan Shah, Group Manager, Marketing Procurement for Nestlé USA have done a great job in assembling a thought provoking line-up of topics and speakers.  From global procurement and agency compensation best practices to insights into the expanding digital media segment and lessons from advertisers that have conducted media audits there is much to be excited about if it is knowledge that you seek.   Whether you work for an advertiser, an agency or a marketing services supplier and regardless of what your functional roles and responsibilities are this year’s “Advertising Financial Management” conference will provide an excellent opportunity for knowledge sharing and dialogue.

While there is guarded optimism that global markets will break through the economic malaise which has plagued the business sector for the last few years, there remain challenges for firms seeking to increase sales and market share.  One thing is certain, the time is now for Marketing, Finance and Procurement to work together more closely to drive cost savings, increase marketing ROI and deliver extraordinary value to the organization.  A balanced approach will clearly be required to achieve enterprise expense reduction initiatives, without jeopardizing demand generation success.

For advertisers interested in learning more about achieving this balance, AARM, North America’s leading provider of Marketing Agency audit and consulting services would like to extend a special offer to this year’s conference attendees.  We are offering a complimentary, no-obligation consultation on the role of compliance auditing in building a high-performance marketing agency network to anyone attending this year’s conference.  Simply click here to answer a few questions and sign up for your free session.  We shall look forward to seeing you in Boca Raton on May 5th.

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.

Can Procurement Add Value by Focusing Solely on Cost?

26 Nov

improved agency performanceWhen it comes to Marketing Services sourcing, the short answer is no. Driving costs down is an important element of strategic sourcing but not at the expense of brand building, customer acquisition and revenue growth.

Procurement professionals must take a broader view of their role in the marketing services supply chain if they are to optimize their enterprise value in this important area. Yes, there are a plethora of opportunities for improving an advertiser’s cost basis, streamlining vendor networks and enhancing their agency stewardship controls through the application of sound procurement practices. However, these efforts must be complemented by pragmatic processes designed to leverage an organization’s marketing resource investment in driving the demand side of the business. For example, contracts which provide the organization with the requisite legal, financial and intellectual property controls, creative remuneration systems which incent extraordinary effort, vendor performance monitoring systems which provide transparent reporting on a near real-time basis and the use of an analytics based vendor network benchmarking program to gather intelligence on time and material costs at a task level across the supplier network to inform future resource allocation decisions.

Further, as advertising agencies look to evolve their own procurement efforts, advertiser organizations can realize significant value by providing assistance to their partners in collaborating to determine how strategic sourcing can drive cost efficiencies across the strata of 3rd party vendors that represent an important element of an advertisers marketing supply chain. Remember that while an advertisers marketing services vendor network might number a few to a few dozen agency partners, those agencies represent the advertisers interest to thousands of 3rd party vendors ranging from illustration studios to talent agencies to production houses to media properties. By focusing efforts in these areas Procurement will realize their near-term cost reduction targets and build a system for driving marketing performance for many years to come.

As the old Chinese proverb goes; “Give a man a fish and you feed him for a day. Teach a man to fish and you feed him for a lifetime.” Interested in reading more on this topic? Check out the article by David Rae on the Procurement Leaders Blog

The Time is Right for Procurement & Marketing

6 Nov

time is right for marketing procurementToo often brands change advertising agencies like politicians change their stance on key issues. Debating the efficacy of this dynamic is a topic for another time. The issue which I would like to address is how Procurement can assist their Marketing peers in mitigating the risks associated with the revolving door approach being employed by many organizations when it comes to their marketing services vendor network.

Building brands is expensive to be sure and there is no guarantee that if a company invests the marketing funds necessary to launch and sustain a portfolio of brands that its efforts will yield the desired results. However, successfully building brands can create tremendous asset value for an organization which in turn can deliver superior returns to its shareholders year-in and year-out. Given the size of the budgets involved and the relatively thin margin between success and failure, it behooves an organization to optimize each and every marketing dollar invested.

To this end, the Marketing Team is perfectly capable of assessing the competitive landscape, positioning the organization’s brands for competitive success and determining the appropriate strategies for driving sales and market share. Proficiency in these areas will drive sound resource allocations decisions with regard to target penetration, market support, media selection and messaging. Marketing should “own” these areas and should be held accountable for the impact of their decisions and the resulting return on marketing investment.

So, where does the role of Strategic Sourcing come into play? In assisting Marketing with the procurement, stewardship and evaluation of its agencies, thus leveraging their processes, tools and expertise to aid marketing in the following areas;

  • Managing the vendor selection process
  • Development of agency remuneration programs
  • Best practice contract development/ negotiations
  • Improved reporting and transparency
  • Ongoing monitoring of agency performance
  • Independent auditing of agency contract complianceand performance
  • Securing and providing performance and relationship feedback to all stakeholders

With Marketing focused on the demand generation side of the ledger and Strategic Sourcing on procurement best practices, the organization stands to benefit both in terms of in-market performance and in maintaining the appropriate controls, transparency and benchmarking data that can drive marketing vendor sourcing and performance management.

The old days of decades old agency relationships are not as prevalent as they once were. Therefore, advertisers must confront the impact of the growth in the number of marketing services vendors and the frequency with which this roster of agencies changes. With change comes opportunity to be sure. But change also increases the risk quotient. With Procurement and Marketing working together the opportunity to effectively manage the risks associated with these changes; improve vendor network performance and the organization’s return-on-marketing investment increases exponentially. Interested in learning more? Check out the article by Paul Broeren, Managing Partner of Quadrivium BV on how to enhance to effectively involve procurement in the marketing services procurement process at Procurement Leaders.

 

Collaboration Enhances Marketing Procurement Process

21 Jul

marketing collaborationMuch has been made regarding the expanding role of the Strategic Sourcing Group in the selection and or negotiations with Marketing Service vendors and the strain it places on both the process and the relationships between the Marketing Team and their resources. This scenario can easily be avoided if Marketing and Strategic Sourcing work collaboratively.

The following tips will enhance the level of cooperation and increase the chances for a successful process:

Overall

  • Both the Marketing Team and their vendors must recognize and respect the Strategic Sourcing Group and their assigned role in helping the enterprise manage their sourcing initiative.
  • All parties (including the vendors) must move beyond the notion regarding the “uniqueness” of Marketing Services and the fact that because these relationships often create intangibles that cannot easily be valued, they should somehow be exempt from the procurement process.
  • Clearly define roles, responsibilities, timelines and desired outcomes and communicate these to everyone involved in the process.

Procurement

  • If you do not have Marketing Services subject matter expertise on your Team, consider the use of an outside procurement consultant or independent contractor with experience in this area to assist your group.
  • Provide a clear process overview to the Marketing Team and their resources prior to the onset of the review and or negotiation activities:
    • Timeline
    • Desired Outcomes
    • Scoring/ Valuation Criteria
    • Roles & Responsibilities
  • Establish compensation methodology guidelines upfront (i.e. value based, project based, fee based, etc…) and the benchmarks that will be used to assist in setting compensation levels.
  • Lead the contract and compensation negotiation process, relying on the Marketing Team for feedback and insight into the impact of the negotiation outcomes on their deliverables.
  • Work diligently to ensure that there is a level playing field for all participants.

Marketing

  • Remember, you have been charged with managing your organization’s Marketing Service vendor network. As such you should work diligently to support the efforts of your partners in Strategic Sourcing throughout the entire process… whether you lobbied for their involvement in the process or not.
  • Clearly communicate your expectations of the process:
    • Desired Outcomes
    • Capabilities/ resources required of the vendor or prospective vendor
    • Clear and concise scope of services
    • Method and criteria that you will employ for evaluating the performance of the vendor
  • Quantify the potential risks/ costs to the organization in the event that a change in vendors occurs and the impact on the roles and responsibilities of the other firms in your Marketing Services network.
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