The Problem with Marketing Procurement
IT'S NOT THEM, IT'S YOU!
We frequently hear frustration from both clients and agencies that their expertise is reduced to meaningless cost metrics instead of assessing real long-term value generated by marketing investment. Some marketers (and agencies) feel they are answering to the procurement team, instead of being supported by a business partner that understands its objectives.
In some cases, the marketing / procurement relationship had become fraught, with little perceived value to the marketing industry and the relationship had become distorted through the lack of input and management from marketing teams.
Internationally, there are good examples of businesses that are innovating in marketing procurement, led by professionals who are experts in both marketing and finance. What can those who aren’t quite there yet learn from these businesses and what can we do to drive change?
IF WE TAKE PROCUREMENT BACK TO WHAT IT IS MEANT TO DO – IT IS THERE TO ENSURE TRANSPARENCY AND BUSINESS VALUE.
Transparency should be a non-negotiable in any supplier relationship. Allowing situations to evolve where fees, margins and costs are not transparent, has meant that procurement teams have, understandably, become weary of agency contracts and agreements. “The black arts” is a phrase we hear a lot! As an absolute minimum, the first step to solving the procurement problem is to have consistent standards of transparency throughout all agencies in our industry.
When it comes to value, procurement teams look to business functions for guidance. Procurement professionals can often come from a finance background, with no specific marketing expertise – it falls to us to provide reasonable, measurable, defined value. To date, we have failed to define the value of agency and marketing services in terms of simple, understandable business outcomes.
In the absence of reasonable inputs from marketing, procurement can default to an out-dated, irrelevant commodity model and the whole process becomes distorted.
SO, ITS TIME WE GOT OVER OURSELVES.
It is completely reasonable for a business to want to prove transparency and value for one of its largest expenditures and it’s up to us to provide guidance and models that ensure it is done in a relevant, effective way. Procurement is not the enemy, see it as an opportunity to step outside of the day to day and challenge your value in a structured way.
RETURN ON INVESTMENT WITH A CAPITAL’R’
We need to develop new industry norms which define value in terms of (capital “R”) ROI - that is, return on investment in terms of both Efficiency AND Effectiveness. It’s not just about executing well and delivering best-in-class bottom of funnel metrics but also providing metrics that assess long-term business advantage.
In our view, there are six elements to building a new ROI model:
Objectives -Define precisely how we expect marketing activity to improve business performance.
Measurement – Agree a small number of specific, defined, metrics that measure performance against our key objectives.
Toolkit -Have the data, tech and research in place to consistently report on these metrics.
Efficiency – Prove good execution in terms of costs and bottom funnel - (small ‘r’!) rOI. These important hygiene factors remain part of the model.
Capability – Better training and understanding of marketing effectiveness throughout our industry.
Collaborate – Talking the same language - from client CFO to TV buyer to copywriter.
We all know that having a marketing procurement function designed around measuring costs and short term “rOI” is bad for the business, for creativity, for our industry and for consumers.
There’s no point just repeating that we don’t like it – we need to focus on delivering solutions.
Vivien McKechnie is a partner and co-founder of Pt78 - trusted advisors in marketing effectiveness and IAPI / AAI accredited media auditors and pitch consultants.