The Age of Procurement

It’s often painted as the digital media era. But for agencies it can seem like the age of procurement. The days of client-agency “partnerships” appear to be something for an episode of “Mad Men” as corporations look to tighten the pursestrings on what they pay service providers. And most corporations, to agencies’ never-ending chagrin, believe their advertising agencies are vendors.

The Association of National Advertisers backed this up with a survey of its members that confirmed procurement’s role in marketing is stronger than ever — and appears unlikely to change. Three quarters of respondents said procurement plays a significant role in managing agency relationships. This was the first time the ANA did the global survey, so there aren’t prior results to compare that figure to. Even more troubling, 47 percent said procurement is leading the agency-compensation process while 28 percent said it’s a marketing-led endeavor.

The bigger the client, the more likely procurement is going to be in charge. Of those reporting annual marketing budgets over $100 million, 67 percent said procurement led the negotiation of agency fees. Over a quarter said they want to reduce agency fees in the next year or two.

That means bashing procurement will remain a staple of any respectable agency gathering. Asked yesterday to name his least favorite part of advertising, newly minted McCann Erickson chief digital officer Mike Parker identified procurement. It is not uncommon for procurement departments to demand to know what agencies pay each employee, setting fees that give agencies minimal margins. In the ANA survey, over half of the respondents said they asked to know agency profits.

The argument is this approach ends up leading to bad advertising, since it takes what’s in essence a creative partnership and boils it down to a cold calculus used to evaluate the provider of styrofoam cups. Inevitably that means a focus on which agency can do the work cheaper.

Despite the profession focus on the bottom line, clients aren’t rushing to tie agency compensation to sales. Just 47 percent said sales goals were the basis of incentive metrics, trailing far behind the 81 percent who identified agency performance reviews.

The ANA polled 80 clients, with 61 percent having marketing budgets of over $100 million.