By Paul Snell
12 September 2013, supply-management.com
How do the best buy marketing services? Paul Snell asks the experts and pioneers in this spend category to share their secrets.
After knocking on the door for some time (and in some cases forcing the way through), procurement’s involvement in marketing is picking up momentum.
A recent survey by FindGood found 42 per cent of companies now use procurement when selecting a marketing agency. And figures from the US Association of National Advertisers revealed 82 per cent of companies use procurement to review agency compensation, up from 56 per cent in 2010.
But, for some, the contribution remains contentious. A recent study by the IPA found while 48 per cent thought procurement’s involvement in pitches was fair and transparent, almost a third disagreed.
So if you are new to this category (or struggling to gain influence), what do you need to know? SM asked 10 pioneers and experts for their golden rules when it comes to marketing procurement.
1. Get the relationship right
Any successful procurement professional will tell you that relationship management is essential in getting great results from any category and they would be right. But if you don’t get this right when buying marketing you won’t even achieve a mediocre output.
The relationship between a marketer and their agency partners can last a career and help both parties in achieving success in their respective companies. Given that is the case, it is not surprising that marketers tend to view procurement involvement with some suspicion.
Recognising the value of strong relationships is essential and focusing on the needs of the marketer is a good way to start building bridges. Make an effort to understand the competitive landscape your product/service plays in and invest time in researching the agency landscape so you can talk with some knowledge when the opportunity presents itself. You are much more likely to build strong relationships if you can empathise with your stakeholders’ challenges and knowing their market is a great starting point.
Once you have built a relationship, it’s vital that you don’t demolish it at the first hurdle. You will naturally have a CPO who is keen to see delivery from the marketing spend, but don’t put yourself in a position where you are making promises without the full support of the senior marketers. If your business is in need of savings, it’s important to have an open and honest conversation with the marketing leadership on how you (collaboratively) plan to find and secure them – this will help strengthen the relationship for the future and build a good level of trust.
Dan Jeffries, owner, Jeffries Consulting
2. Be prepared to take a risk
In the wake of the economic downturn, many brands – and marketers – have found themselves paralysed by fear. Whether it is fear of losing market share to a rival, of alienating consumers or even losing their job, marketers have baulked at taking a risk.
Procurement should help create an environment where they can take risks. We all know “no one got sacked for buying IBM”, but would you have banked on buying an Apple product not so long ago? Invest time in trying new suppliers; look at agency start-ups; try different commercial principles; put a fee with an element of risk and a gain share in place; or invest in technology to drive efficiencies.
On the other side of the supply chain, encourage innovation with the outputs the agencies are delivering for your marketing clients. If agencies have ‘skin in the game’, they are potentially more likely to deliver great work. The natural inclination for many agencies is to do formulaic work that they and the client know will perform, instead of brave, potentially game-changing work with an element of risk associated to the fee payment.
The marketing procurement category is an exciting, interesting and wide-ranging category to work in and procurement should encourage innovation and push the boundaries to achieve better results for all involved.
Tina Fegent, director, Tina Fegent Consulting
3. Know what you are buying. Is it the people? Or are you paying for what they create?
Having recently driven marketing procurement from the advertiser side, I know this dynamic far too well. I get excited about the trends in procurement and the broader supply chain. The best procurement professionals know marketing is an investment to maximise, not a cost to minimise.
To effectively measure quality – which in marketing procurement is as important as assessing cost – procurement needs to know what problems they are trying to solve. Sourcing partners that deliver the best value at the best price is what demonstrate procurement’s expertise and value-adding role. Unfortunately, the greatest challenge facing marketing procurement people today is still that procurement never truly owns the scope of work, nor the relationship of what they are tasked to buy. On behalf of their marketing colleagues, are they buying Full-Time Equivalents, or paying for the creative output?
Choosing the right agency partner is a competitive advantage and the right team at the right investment can dramatically improve strategic, creative and TOI. Once the relationship is established, sticking to the core principles of output and outcome and ensuring real value in your compensation model will keep the relationships healthy. By collaborating with your partners, you can determine the real metrics for efficiency and the real measurements for success. After all, what matters is what should be measured. Procurement that is committed to stable, high-performing partnerships stands to gain significant value, which – surprisingly – can deliver against the procurement targets without always being at the lowest cost.
Brett Colbert, chief procurement officer, MDC Partners
4. Be interested in what you are buying
A typical concern marketers have when working with procurement for the first time is they will encounter the archetypal ‘nuts and bolts’ buyer – someone who will apply the tactics from purchasing a highly standardised and specified product where price is the main differentiator to marketing services.
I have found it helpful to show my interest in the marketer’s work, their challenges and objectives, rather than diving straight into a discussion about suppliers, specifications, cost and savings. There are different ways of doing this and you will want to adjust your approach to your specific situation.
You might ask: “I noticed XYZ in our current marketing communication. What are you trying to achieve with this and why?” or “Can you share with me what is important for the success of your work? What are you measured against?”. If you have a few follow-up questions up your sleeve and you carefully probe some more, you will have gathered valuable information, demonstrated that you are interested in their topic and that you are willing to learn and listen.
You have also, finally, opened the door to explore the topics close to your heart: “How do your suppliers support you in achieving your objectives?; “How is the performance of your suppliers relative to your expectations?” and so on.
Most people like to talk about their work. If you show interest and demonstrate you want to understand it better to help them, you are off to a good start.
Thomas Holzapfel, global category leader marketing, Deutsche Telekom
5. Make supplier communication open and transparent
The days of little or closed communication between supplier and buyer are, thankfully, almost over. Procurement should recognise that for a supplier to be able to produce a real value for money proposal, especially in the services arena, they need to have as much information as possible.
Time wasted on not sharing the business objectives, the concerns on delivery or the appetite for business risk, mean suppliers have to price contingency. Of course, if you are procuring a common good and the spec is detailed and clear, there is little need for more information. But complex consultancy, design, marketing, construction and so on are all areas that are open to a subjective level of interpretation.
Make time at the start of a procurement project to talk to the potential supply base, get its input and expertise, and allow suppliers to advise on the best approaches. This will enable you to include industry best practice, understand recent innovations and to eliminate waste before the project goes live, enabling you to request the right requirements and for bidders to deliver a proposal that you really want to read.
My communication mantra is transparency rather than opacity, clear and open, not guarded and, above all, be honest.
Sarah Billson, director, Tickling the Trout
6. Make the brief clear, insightful and detailed
This is fundamental because an agency or service is only as good as you allow it to be. With this in mind, one of the most significant aspects of the procurement process is to ensure that the brief is clear, insightful and detailed.
The key benefits to this are the marketing team will be happy because the agency is more likely to present the idea or solution they are looking for. And the agency will be happy because marketing is happy.
However, achieving this ideal goal requires spending a little more time up front and really delving into what marketing are looking for, which may not be what they initially tell you. This isn’t because they intend to deliberately mislead, but sometimes they haven’t clearly considered what they are trying to achieve and how to communicate that to the agency.
The buyer’s job may actually involve helping define the need and this is where it is a benefit if the procurement manager is a marketing specialist because they can ask the right questions. Once the need has been defined and a clear brief written, the job is half done. It’s also important to ensure all key stakeholders have been involved in the brief creation, to avoid disruption later in the process. In a pitching situation, it is now possible to identify and approach the correct agencies. Without a clear brief, unsuitable agencies may be approached, which wastes everyone’s time and money, and as we are constantly reminded in the press, pitching is expensive! A good brief plus the right agencies equals a higher chance of success and making everyone happy.
Hazel Cotton, strategic sourcing manager, Procurian
7. Think value over cost
In most cases, bigger companies with significant marketing spend will have already picked the lower-hanging fruit of marketing procurement – decoupled production, established digital asset management, consolidated print buying and so on.
Unfortunately, that was the relatively easy stuff. When you venture into the intangible world of agency fees, the waters can become treacherous – I could easily think of 20 golden rules, let alone 10. But if I could only advocate one, it is this: think about your outgoings in terms of their potential value, not their cost.
Often, too little attention is paid to the lower cost services, such as design, in favour of media investment. But a good pack design for an FMCG company could increase sales by a double digit or even a triple digit percentage if done well and for a small fraction of the equivalent required media investment.
Likewise, if your company is a big advertiser (spending £20 million on media and perhaps around £2 million in creative agency fees), the ‘value’ of the agency isn’t £2 million because its work helps determine the TOI of the £20 million.
When it comes to buying advertising, media, direct marketing, design, digital and so on, it is essential to remember the agencies’ role is to provide ‘solutions to problems with infinite possible solutions’. It stands to reason these solutions also have highly variable value, effectiveness or TOI. The challenge for marketing procurement is to help marketers ensure their agencies are suitably managed, remunerated and incentivised to deliver their optimal value.
David Meikle, co-founder, Red Salt
8. Be careful what (and how) you measure
A Buddhist might argue that you are what you think, but when it comes to procurement, it is evident that you become what you measure.
Let’s agree that reducing costs is generally a desirable thing in business and procurement and supply chain has a role to play in the proper management of cost.
However, the single minded pursuit by procurement of ‘cost saving’ measures over any other more sophisticated or relevant measure of performance has taken a heavy toll on the perception of, and attitudes within, the procurement function. Being a pony with just that one trick is a risk, particularly in marketing procurement where there is huge scope for the value of a marketing service being driven by intangible elements such as creativity or insight.
Creating a baseline from which to measure a ‘saving’ can be problematic, too. Take the situation where a piece of agency work was bought last year for £100, budgeted this year at £103, quoted by the agency at £107 and negotiated down by procurement to £101. We might ask the extent to which there has been a saving.
We might also ask who cares? If the outcome of the work was a disaster, with hindsight we agreed a great piece of work that would have driven the business forward would have cost £130.
Richard Davis, experienced purchasing professional
9. Get to know the people before you buy the agency
The process of finding an agency can sometimes overwhelm some of the more subtle, but nonetheless critically important, aspects of appointing a team of people – which is what an agency is.
The people, what they are capable of as a team and the value they can deliver can become buried in a slew of lengthy RFIs and RFPs covering the required company hygiene factors or the description of the agency’s capabilities on paper. It presents a rather one-dimensional view of the teams whose recommendations you are about to invest significant sums of money behind.
I sometimes see experienced buyers being held at arm’s length throughout the pitch process by the marketing team and then parachuted into the proceedings right at the very end to complete the commercial negotiations with the selected or shortlisted partners. This sets the tone of your future relationship with your potential agency partner from their perspective and removes the opportunity for you to provide a broader perspective on the competing agencies to the brand team who are looking at everything through a marketing lens.
Your involvement with, and opinions on, how the respective agencies are performing as teams, beyond the evaluation of their written submissions or proposals, help the agencies to see you – and treat you – as a key member of the client team from the outset. It also gives you an opportunity to look underneath the bonnet of an agency in a much more intuitive and revealing way.
Kerry Glazer, CEO, AAR
10. Be demanding but fair
Clients appoint marketing suppliers to deliver measurable, business-driving objectives. These will rightly be ambitious, and demanding, but provided the remuneration strategy is right, the agency will work its hardest to reach them.
The payment schedule should relate to clear delivery milestones that reflect the nature and duration of the task and which should be jointly agreed. Marketing agencies are often making payments to third party suppliers (talent, photographers, printers) on your behalf, so recognise your organisation’s scale versus your suppliers’ and pay on time and within fair terms to allow them to do responsible business on your behalf. Poor terms will ultimately lead to the supplier focusing its attention (and its best talent) on its better paying clients.
Occasionally, marketing suppliers offer to (or are required to) heavily discount their fee to secure business. Treat this with caution. If a client is not profitable to the supplier, it will discreetly juggle its best talent to the accounts where the profit lies.
Instead, pay a fair base fee to ensure the best team is committed to your business, combined with a well-structured, motivating performance-related fee (PRF) element. PRF targets should be clear, within the agency’s influence, ambitious but attainable.
There should also be shared risk, offering an upside beyond the agency’s regular margin on stretch targets to reflect the fact the agency is risking margin on a downside scenario, too.
Lucinda Peniston-Baines, managing partner and co-founder, The Observatory International
Marketing procurement resources
● Magic and Logic
A joint industry white paper published in 2006 by CIPS, the IPA and ISBA, on sustainable relationships that remains relevant today.
Website established by ISBA and the IPA with advice on how to improve the pitch process.
● CIPS Marketing Procurement Group
Special interest group with links to useful articles and resources.
● Elevating the Role of Marketing Procurement
White paper published by the US Association of National Advertisers’ Procurement Task Force.
● 25 marketing procurement tweeters you should follow
Annual list produced by Tina Fegent and Jane Beer-Jones listing the top Twitter users with insight into marketing procurement.
● World Federation of Advertisers Sourcing Forum
A forum dedicated to marketing sourcing specialists with advice on compensation models, performance management, RFI formulation and more. Contact Steve Lightfoot.
– See more at: http://www.supplymanagement.com/analysis/features/2013/the-10-habits-of-highly-effective-marketing-procurement-managers/#sthash.dzfzLpZb.dpuf