Recently, Sir Martin Sorrell at WPP warned that the advertising market in the UK is softening, suggesting this is one of the first signs of Brexit anxiety taking hold of the economy. Future proofing your marketing budget becomes more important than ever for 2017 and harnessing the value of the marketing procurement function will help maintain costs, and over time drive much greater value for money across the business.
Procurement has always been a source of friction in marketing. Marketers don’t like procurement; it’s that simple, we are the enemy. This is also not helped by the industry perception that Procurement as a function lacks agility and creativity, both assets which are central to marketing and all that it stands for. But, with better communication and understanding this can, must and will change, particularly as we move into 2017 and all the uncertain economic changes that are on the horizon.
The pressures look set to increase, following the UK’s vote to leave the EU, with cost-cutting likely to be the first point on the 2017 agency or brand business agenda. Following Brexit, the IPA’s Bellwether advertising spend forecasts were vastly downgraded, with declines of -0.2% predicted in 2016 and -1.3% in 2017. Bellwether had previously predicted 3.3% and 2.7% growth for 2016 and 2017 respectively.
Marketing procurement is relatively new as a function, but it’s been around long enough for it to become an accepted reality, particularly when facing the challenges that we are seeing today. The question now is how can it be used to best advantage and help marketers stay one step ahead?
Marketing procurement – it’s a speciality
It must be understood that marketing procurement is a specialist function and is not to be confused with general procurement. While the overall principles may be the same – the implementation is not. I think PepsiCo made a very bad decision to slash their marketing procurement function (to devolve procurement responsibilities to individual brands) and it will be interesting to see how the decision rolls out, particularly post Brexit. Successful business is all about having the best people who are the most skilled in the right job. Businesses that understand this, in championing people’s different skill sets, diversities and specialisms, succeed. Do we really believe that getting rid of this approach is a good thing?
If we apply this thought process back to the agency/ marketer we can begin to see why having specialisms are important. What if we told the agency to get rid of the creative and then, the designer? Who will now do the work? Someone capable, certainly, perhaps an account manager, but not the specialists that the client are paying the agency for and thoroughly expect to deliver on the brief, i.e. The Don Draper effect. The same applies for specialist marketing procurement, which should be viewed as fundamental to ensuring the success of the department and its financial stability and ongoing efficiency. It’s not just about cutting costs, it’s about adding value. And with tough times ahead, doesn’t it make sense to have that backup and knowledge?
It’s all about Lean Thinking
Lean Six Sigma is a proven, sustainable way for businesses to to reduce spend and increase efficiencies; whilst it’s traditionally been a manufacturing based approach we have been able to reengineer it to delver siginificatnt benefits within marketing and professional services categories with both Marketing Directors and CMOs really seeing the value. This method is built on the core elements of Lean, but with modification shows true value within marketing, whislt preserving the integrity of the marketing and agency functions. It identifies the root cause of the problem, rather than focusing on cost reduction to create better outcomes. In practice, it ensures that relationships with agencies are not only maintained, but enhanced. Some of it might sound dull to creatives – but that doesn’t mean it’s not important. FX hedging, understanding the wider market landscape, choosing the currency, setting the objectives and deliverables, fisxing the process, choosing the contract law and location are just some of the practices that can be put in place.
This type of innovation is delivering massive benefits without disrupting the work of the agency, or marketing department. It’s not for everyone, and CMOs need to see the external challenges ahead, and must tackle them head on.
What can marketers do to forge a better relationship with Procurement?
- Communicate! Try to understand the role of and value of your Marketing Procurement team. Ask questions!
- View procurement as a partner to encourage transformational change and innovation. It is a help, not a hindrance.
- Trust your department. They are there to help drive the value and better business, not to sabotage your agency relationships
- Work together and embrace the diversities.
- Implementing the right tools and processes to enable effective ROMI (return on marketing investment analysis).
By understanding and embracing the value of marketing procurement, together we can make a big difference, deliver better results and achieve a win-win for all.