The focus of procurement professionals for long has been on the supply side of the business, rightly so considering that savings on direct spends have an incremental impact on customer pricing. Over the past several years, companies have begun to wake up to the fact that a better control of indirect spends would generate better bottom line results. A still more recent phenomenon that is gaining increasing foothold within forward looking organizations is the emphasis on marketing procurement.
However, unfortunately the focus due to several reasons even within the organizations that began to implement a marketing procurement process has been largely sharpened towards cost negotiations. This has most often than not led to bitter quarrels and criticisms of the process from marketing teams who most often than not, focus not so much on the cost end of the marketing process but rather on the delivery.
Having been both a buyer and seller of marketing services over the past 25 years, I can unequivocally say that having a focused marketing procurement process that marries the needs of marketing folks with those of the procurement team do lead to higher delivery throughputs as well as cost savings in upwards of 15-20% on an average.
For almost 2 decades I worked on the seller side of the business, both as an employee and later as an owner of an agency working with large enterprises, having had my fair share of interactions in the fine art of ‘negotiations’ both with marketing and procurement folks. I can honestly count on my one hand, the specific 5% cases where I have not walked away from the ‘negotiating’ table with my intended profit margin intact.
In those few instances that I have had to forgo the super normal profits and settle for normal ones were largely due to the process and manner in which the entire marketing procurement process was done as well as the individual managers who were stakeholders in the process.
As a buyer of marketing services, I have had several occasions to implement the same processes that I had seen working on me to extremely good results both from a delivery and a cost saving perspective. Given the fact that the companies I used to work with where marketing spends were a significant indirect spend; the savings that me and my team were able to generate helped us stretch our marketing budget significantly.
I mean, which marketing guy would not want to have an increase of 15-20% on his marketing budget?
What were the processes and challenges that 95% of the companies did or did not do that led me to a better margin? Is there any learning that can be implemented?
A deep understanding of the domain for which you are procuring the marketing service is key to better sourcing and procurement. In the 80’s & 90’s this was easy. You had one Advertising agency that did everything.
Then media get de-coupled from advertising agencies and that threw up a host of specialized media buying agencies. Production got de-coupled next and by the time we reached the early 2000’s marketing folks were dealing with a host of specialized agencies ranging from media, print/production, events, promotions, retail, creative, packaging, exhibitions and what nots. Came the 2010’s and we saw the growth of a host of digitally focused agencies. What started off as a pure play digital agency, has now been de-coupled into super specialized agencies ranging from web development, design agencies, app developers, gamers, social media, content, ORM, SMM, SMO and a host of other abbreviations.
The pace of change in the marketing vendor businesses has been aggressive. Today there are over 60 different kinds of super specialized agency businesses that cater to marketing requirements ranging from the print agency that does all the collateral printing to the super specialized YouTube agency.
Having teams that have domain expertise in marketing operations is the first important aspect in the change process of making one’s marketing procurement more effective. Most companies have tried to solve this problem by hiring agency personnel into their marketing or procurement teams. However this is half the problem solved.
The other half of the problem lies in the rapid change that is taking place in the entire marketing ecosystem. Today’s marketing managers are inundated with multiple forms of marketing opportunities and grappling with creating the right mix that would help their respective brands. Lack of domain knowledge will lead to a less than effective marketing buy. Inability to acquire the necessary domain knowledge will lead to knowledge levels getting outdated.
The 5% cases where I actually had to re-look at my pricing were all caused by organizations and people within them who not only had teams that were from the marketing services industry but also people who had over the years, continuously kept themselves abreast with the changes that were taking place. How did they do this?
Quite simple actually, they invested time in talking to their marketing vendors! Marketing sales folks are among the best source of information that one can gain if you are in the buying position either as a marketing manager or as procurement professional. Marketing vendors are a mine of information when you want to learn of ‘how things work” whether they be relating to competition or they relate to how the marketing vendor executes a particular project.
Here are some ways you can stay on top of your buying curve for marketing services.
- Follow the 80:20 principle in your marketing spends. Understand the agency or marketing vendor business where you’re going to spend 80% of your spends.
- Get your key marketing vendors to hold training sessions for your teams in marketing and procurement. Your marketing vendor would love the chance for some ‘ me-time’
- Read up. Google is free. There is a plethora of informative pieces of information
- Understand the internal processes of your vendor agency. Who does what? How does he do it? What resources do they utilize or value adds into to provide you the service that you’re paying for. Often this will lead to some eye-opening revelations. You will discover hidden buffers of margins that you may not be aware off.
- Understand the value chain that goes into the entire project execution. How many chains does it have? The more value chains there are, the more you’re going to be paying for as everyone in the chain would be making a profit.
I cannot underplay the importance domain knowledge can play in making more informed and effective marketing buys. I have seen it in play and have been a practitioner of it for several years now.
However Knowledge is only one of the several marketing procurement process implementation that can be laid to become more effective. There are several more and in my next piece I shall take them up. Keep reading! And do drop in your comments or your critique in the comment box below. Or better still Tweet this out and share it with your friends.
Coming Up Next: Sourcing Effectiveness in Marketing Buys
About the Author:
Rajesh Menon is the CEO of Agencyonnet, a B2B SaaS tool that simplifies marketing procurement. Using the tool, marketing and procurement teams can collaboratively work towards greater marketing buy efficiencies; tracks spends and drive better marketing purchases.