‘You can’t save your way to growth’: How marketing procurement is trying to fix its image problem
Long referred to as corporate bean counters who can’t see the forest for the trees, marketing procurement execs are trying to redeem their bad reputation.
Moves are being made to change those perceptions as procurement execs come under more pressure to help marketing teams balance the need for commercial prices with the need for effective ads. Perhaps nowhere is this more obvious than at those advertisers where procurement execs have the ear of the C-suite and aren’t just brought in to dot the i’s and cross the t’s at the 11th hour of a deal.
“The perception of marketing procurement has changed somewhat at my organization, though the wider procurement function is going through a transformation,” said a marketing procurement exec at a global advertiser who spoke on condition of anonymity. “We have visibility at a senior level, but outside of the savings, the additional value they see is in terms of innovation, connecting teams and being a business partner.”
Marketing procurement for business growth
Some of the department’s most experienced figureheads are starting to make a lot of noise about the value they can add to how marketers buy media. They argue that when procurement gets it right — seeing media as a way to grow sales or change perceptions rather than a cost to be beaten down — then the results can be transformative.
“We see much more focus on true quality instead of vanity metrics as a result of the increased influence of procurement, which is key, as the amount of waste that can be reduced especially in digital media is monumental,” said Ruben Schreurs, CEO of digital media consulting firm Digital Decisions.
Hearts & Sciences had been using a quality cost per thousand impression metric for several years but it wasn’t until they pitched it to the procurement execs at their clients that they saw its adoption take off. The media agency used the metric as a way to show those clients on procurement teams how to better balance the need for competitive prices with the need for effective ads.
“A lot of the challenge for media agencies is how we’re incentivised, which is based on whatever deal is in place with the procurement department – and often that is based on price vs effectiveness ,” said Megan Pagliuca, chief data officer at Hearts & Science.. “Bringing the quality CPM into those discussions changed the dynamics of that relationship. It’s a metric that we use to get to efficiency and waste.”
Moving beyond cost
Some procurement executives are realizing that if they continue to squeeze agencies on cost, they will get cheaper media, which may not align with the needs of the wider business, said Phil Smith, director-general of advertiser trade body ISBA. “You can’t save your way to growth, and that quest for growth has become more high profile around the industry as a whole,” said Smith.
It won’t mean the end of savings targets for procurement execs. It will, however, mean they will move from using a primary, single cost metric as a proxy for marketing services to something that resembles a measurement of success that both procurement execs and marketers can agree on. Finding metrics to agree on can be hard for marketing and procurement execs that report into different parts of an organization. Diageo, for example, has a global marketing procurement team of execs who sit within marketing departments, while Unilever created three separate marketing procurement teams for its personal-care, home-care and food categories earlier this year.
“Some procurement leaders are still mainly focusing on aspects like agency fees, hourly rates and rate cards,” said Laura Forcetti, global marketing sourcing manager at the WFA. One reason for this is probably because picking a provider on cost is easier to do than looking at how what they do impacts the business, said Forcetti.
“What really matters is to have a look at the bigger picture and to see the marketing or media spends as business investments, not commodities or pockets of money to be cut year-on-year and try to impact or optimize the return that these investments can deliver,” said Forcetti. “The majority of our members are now aware of this, but not all of them know how to do it.”
Old habits die hard
For procurement to work on value rather than a cost basis, it needs advertisers to measure the performance of their marketing budget rather than just the cost of it. Adidas, for example, has started to do this for influencers, which is why its procurement execs are used to helping put commercial deals for them together. Without that crucial performance data, procurement execs revert to what they know best, even if they know it’s not the right way to approach marketing. Consultancies like Aperto One and Tina Fegent have emerged in recent years to plug that knowledge gap, and essentially advise procurement teams on the right questions to ask agencies and other marketing service firms. Other procurement execs have taken matters into their own hands in order to better understand how advertising works.
“I spent six months working at a marketing agency last year as their commercial director and it was really hard,” said a global procurement director on condition of anonymity. “You learn very quickly it’s not all about people in hipster clothes flouncing around drinking coffee.”
Comments like this should be music to the ears of agency execs. And yet, for some, it just shows how procurement execs, like marketers, often say one thing and do another.
“I haven’t seen a single procurement exercise that’s been seen as a growth driver other than through the means of reducing costs to make growth look better,” said Henry Daglish, founder of The7stars media agency startup Bountiful Cow. A recent pitch saw the independent agency go up against one of the larger media networks, which meant it was never going to be able to compete on price. The agency went on to win the account, but it was the behavior of the larger network agency that made Daglish realize that when it comes to agencies, advertisers care more about costs.
The larger agency refused to sign a contract that would give the advertiser a clear view of where they were making margin on their money, said Daglish. The fact that the agency challenged so many elements of the contract shows that there are advertisers out there that would be happy not knowing about the margins being made on their money, he said. “Those procurement execs are probably happy to present back to an internal team that they’re paying an agency a 2% premium as opposed to making a business case for why they should pay the full 5% premium and have a transparent perspective,” he said.
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