11 - 13 June, 2019
Twickenham Stadium, London
Contact Us: 44 (0) 207 368 9465
Unlocking ROI from Marketing with Smart Procurement
While agencies and procurement eased through cost-cutting exercises over the past decade, it’s the former that managed to laugh all the way to the bank. Never once did procurement realise that the last hurdle impeding its advancement would ironically be none other than, ‘marketing spend’.
Today, procurement as a function has managed to get involved in several indirect categories including professional services, travel management and HR functions. Marketing spend, however, still poses a dilemma. Research reveals that procurement influences 90% of the overall office consumables spending, but when it comes to marketing spend, the numbers barely cross 50%.
So, where is it all going wrong?
Budget-driven procurement officers often tend to consider marketing cuts to be similar to other cost reductions from separate spend categories. But, with marketing, things aren’t that simple.
The function requires qualitative decision-making. It essentially involves creative concepts, ideas and complex integration of branding efforts like media buying, advertising, social media management, promotions and events. And, with the advent of new media consumption channels and digital media buying, marketing has evolved as one of the most complex spend categories.
In order to help marketing realise significant value through costs savings, efficiency and innovation, procurement will have to work in tandem and find satisfactory answers to questions like: what to buy, how to buy and who to work with. Making the right choice isn’t easy, especially in an environment where digitalization is continuously disrupting the way media owners and advertisers cooperate. Helping marketers forge the right agency partnerships will serve as a critical obligation for procurement functions going forward.
Bridging the Gap between Marketing and Procurement
Often serving as a middle ground between agencies and brands, procurement plays a critical role to balance the sourcing requirements of the marketing team while driving cost efficiencies. Despite sharing such an important affiliation, procurement and marketing have not always been so closely aligned. From a marketer’s perspective, much of their skepticism is a result of grueling experiences that they have had with people trying to put creativity on a chart with numbers against it.
It’s this continuous tussle between the functions which has at times, forced companies to take definitive steps towards embracing client-agency relationships that focus on creativity and value and not solely on cost efficiency. In 2015, for instance, PepsiCo scrapped its marketing procurement function and handed the responsibility of controlling agency remunerations back over to individual brand teams.
Such decisions might not hold substantial value in today’s business landscape, where marketers need newer capabilities to expand their outreach. They require sharp analytical skills to derive actionable insights from massive data sets. They need to assess the potential of new service providers and channels. And, they also need to determine new ways to quantify how effectively and efficiently they can utilise the budgets which must now stretch into newer avenues.
For marketers, this situation calls for targeted fact-based data analysis and decision making abilities that an efficient procurement function can provide. Since marketing serves as the largest indirect spending category for any business, procurement specialists should pounce on the opportunity to help them cash in on newer sources of value.
Creating New Milestones of Collaboration
There’s no denying, strategic decisions including the selection of partner agencies and campaign designs should rest firmly in the hands of marketing. However, building that critical link of collaboration should begin with a clear understanding of how a procurement function can help marketing achieve its objectives.
Starting from managing suppliers to finding the right capabilities, there are several ways in which marketing and procurement can build closer working relationships to drive value and innovation. To understand how such collaborations can work, consider the example of Unilever, a multinational CPG company which conducted a review of its entire agency ecosystem and media-buying activities, last year. The evaluation not only helped the company to locate the right agency with the best cultural fit but it also helped it to curb unnecessary media spending and fees.
For years, Unilever nurtured long-standing relationships with several media agencies. With rising media spends, the company wanted to consolidate its purchasing and ensure that it was getting the best prices and capabilities for its media budget. To help the company achieve its objective, the marketing and procurement team got engaged in a collaborative five-month long pitch process which eventually became a huge success.
Today, the company seeks to gradually move away from its agency-hire model. It is more inclined towards roping in start-ups like Vidsy and Mavrck which can help it gain capabilities in user-generated content creation and influencer marketing.
In the near future, such tectonic shifts in marketing procurement will only increase, as changing consumer preferences persuade companies to chase value and not cost efficiency. At surface level, companies will have to forge collaborative relationships between both the functions to rapidly contribute in a dynamic, fast-evolving business environment.
Make sure to download the ProcureCon Marketing agenda to check out all of the great activities, speakers, and sessions planned for this year.