We’ve seen a recent trend of Fortune 1000 companies reducing their agencies by almost half to optimize spend and increase productivity within marketing. This has been a gradual, strategic consolidation effort to improve the effectiveness of their investments.
Although marketing budgets are experiencing significant cuts, it is critical to understand marketing is a complex—arguably THE most complex—spend category, and procurement must not treat it the same as other spend categories. As Jon Moeller, CFO of P&G explained about its consolidation efforts, “we are not looking for cuts, but to shape spend to increase efficiency and effectiveness.” This statement may beg repeating as 94% of procurement professionals continue to focus on cost-cutting metrics as the key measurement of success, according to an ANA survey. A cost-only focus may significantly reduce marketing ROI and deliver poor brand performance. To maximize the benefits of both departments’ strengths, marketing and procurement have to focus on ONE underlying theme: teamwork.
We have all heard the advice before: procurement must align with marketing to understand their needs and requirements. One would hope this advice to be a simple and easily implementable solution. However, historically the real-life scenario looked more like this: the creatives in marketing viewed procurement as pedantic, regimented policy-pushers, and their pragmatic and systematic counterparts in procurement viewed marketing as chaotic, flippant day-dreamers with little regard for responsible budgeting. Sound harsh? It is. The relationship between the two has been much maligned, as neither sought to understand the value the other brought to the table. Rather than working together, marketing and procurement begrudgingly tolerated one another and tried hard to limit their interaction. To put it in the context of a sports analogy, until recently the two were more like individual competitors sharing the same end goal—big wins for the company—with very disparate game plans.
Reframing the concept of competition; a new meaning to ‘us versus them’
More than a decade into working with each other, the worlds of marketing and procurement are becoming more collaborative. Procurement continues to learn the nuances of the marketing category, and is focused on demonstrating value. In essence, the two are playing on the same team, recognizing their common interest—big wins for the company—and aligning their game plans. The relationship has transitioned from competition with one another to a unified long-term strategy, a relay in essence with various hand-offs to secure the top spot in the industry.
As with any successful initiative, both momentum and sustainability are required to lead the pack and stay there. As idea generators, marketers increase brand visibility by developing impactful, lasting relationships with the intended audience. A company is only as successful as its brand and associated reputation. Ultimately, the brand recognition and loyalty harnessed through marketing is the momentum needed for a successful business strategy. So, marketing creates the momentum to drive brand awareness and strategic growth, but how does a business sustain this growth? By leveraging their procurement team. From a strictly financial perspective, procurement optimization allows for immediate, upfront cost savings, but the benefits of a successful procurement department go well beyond cost savings. Procurement has the bandwidth and expertise that marketers may not. Acting as an intermediary, procurement can establish a level of objectivity in reviewing agency capabilities and negotiating optimal prices without creating tension in the working relationship between the marketers and current or future agency partners. Even after a contract has been secured, procurement can help manage these agency relationships. Also, as process regulators, procurement allows a business to maintain its quality and consistency. Procurement makes brand awareness and business growth sustainable. Without procurement, marketing has momentum, but no way to drive lasting results. Without marketing, procurement has the ability to add value, but no creative strategy or business initiative to support. The two must work as a team, as two parts of a greater whole, because when momentum and sustainability are realized, the result is impact. A business with impact secures and maintains the top spot in the industry.
Implications: how to continue working as a team
To reiterate, marketing and procurement have seen vast improvements in their working relationship and perception of each other’s value add. For this trend to continue, the critical focus is on facilitating further teamwork and collaboration to get the best results both creatively and monetarily.
Marketing leaders must convey the necessity of engaging procurement stakeholders early on in the process, and help build trust amongst their team that procurement is a key business ally. Since the success of a marketing team is often measured by several intangibles, and procurement is accustomed to hard facts and hard-dollar savings, marketing must consistently communicate their needs in a way that procurement will understand. The onus is not strictly on marketing, however.
Procurement needs to make a concerted effort to align itself with marketing principles by employing the concepts outlined in the book “Buying Less for Less” by Gerry Preece: procurement needs to have the right mindset, the right metrics, the right skills and work on the right assignments. To build trust, procurement must change their verbiage from cost savings to innovation. Innovation implies a collaborative effort with a mutually desired result, whereas cost savings implies a procurement-only driven result. Referring to cost-savings leaves marketing out of any wins, and further perpetuates the stereotype that procurement is only focused on minimizing costs rather than maximizing value.
In part 2 of this series, I will introduce what I believe is a key approach for aligning procurement and marketing’s priorities – the establishment of an agency relationship management program.