NEW YORK (AdAge.com) -- Unless you've sat across from them in an agency pitch, procurement executives remain the nameless and faceless parties accused of everything from grinding the margins out of agencies to driving them toward marginalization.
In hundreds of articles, including some appearing in these pages, procurement executives have been maligned for the growing role they now play in the agency-marketer relationship. That role includes everything from initiating agency reviews to acting as contract negotiator. Yet despite the ceaseless bashing they take from the industry, procurement executives prefer to fly below the radar and not take part in any finger-pointing.
That's why Ad Age wanted to get their side of the story. We talked to Lisa Martin, chief procurement officer at Pfizer; Craig Brown, VP-director of materials at Intel; and his colleague Ian J. Crisp, Intel's sourcing manager.
LISA MARTIN, PFIZER
Ad Age: Is there an educational curriculum on marketing for procurement people?
Ms. Martin: Yes. But we also hire people who know the sector. We have a category-strategy management approach to procurement and many of our colleagues that work in certain spaces within marketing are subject-matter experts, having either worked in marketing organizations themselves or they have done procurement of marketing at other companies. ... Many of our procurement colleagues participate in industry associations like ANA and many of their educational efforts. We are not trying to be the marketing expert but we have to be able to talk the functional language of the business units and the people we are supporting. And that transcends marketing.
Ad Age: Do you feel there is an atmosphere of unchecked spending in the marketing sector?
Ms. Martin: Marketing efforts are very important for the company. The way we market our products is very important but it's more around the value, not necessarily the spend. We're not a company that's going to say: 'Let's go to the low-cost marketing agency because we want to save a few pennies.' It's about wanting to pay for fair value. I don't want to give the impression that I think the marketing sector is the Wild Wild West in terms of spending.
Ad Age: So when looking to cut costs, is marketing a good place to make those cuts? Do you see it as expendable?
Ms. Martin: I don't know if marketing is more of a target -rich area than anything else. But from most companies marketing has been an area where the level of consistent process and rigor has not been as applied as other areas. That's why there's this perception that it's target -rich and I'm not sure that's true. For many companies marketing has not been traditionally as penetrated a space by procurement as other indirect spending areas like office supplies, furniture or IT services.
Ad Age: When you are in pitches what do you want to hear from agencies? What is most important to you?
Ms. Martin: Honestly, I don't sit in that room. But what would happen up front is there has to be an understanding of what the requirement is for the business. The business tells us what they are looking for in terms of the unique characteristics they are seeking from the agency. And our job is to be the objective party sitting there to make sure there is a fair playing field and make sure the process is clear to everybody involved, especially the agencies. The procurement person in the room isn't necessarily looking to hear something different than the Pfizer marketing person they are sitting next to. If we have done our job, the entire cross-functional team understands what the overall requirements are and everybody is listening for the same thing in the room.
Ad Age: Many of the complaints we hear is that procurement doesn't know the first thing about marketing and treats the process of selecting or paying an agency the way they would buying office supplies. What are your thoughts on that?
Ms. Martin: The difference for me is that in complex categories like marketing we are not the decision maker. The difference, when you look at something like buying office supplies, is we are the decision maker for the company and we manage that overall program. There are several programs like that we do manage on behalf of Pfizer. In the marketing space, we're not the decision maker. We facilitate the process and want to ensure that our colleagues working in that space can talk the language and have some level of subject-matter expertise.
Ad Age: What's your take on the perception that you're looking to wring every penny out of agencies?
Ms. Martin: Sometimes I think that's true. In any negotiation you have a good guy and a bad guy and sometimes we are asked to be the bad guy. It's not true in all situations, and knowing and talking to some of our key agency partners, they see the value we bring because we are somewhat objective and not steeped in the day-to-day relationship.
CRAIG BROWN AND IAN J. CRISP, INTEL:Ad Age: It feels like procurement's place within the agency/client relationship has gotten much bigger. What's the reason behind that?
Mr. Brown: Sales and marketing like the opportunity to go out and do all sorts of advertising, but the robustness of their spending, often, wasn't managed that well. They'd get agencies that were creative but didn't deliver on time, didn't reach the contractual obligation or raised prices without much regard to competition and the procurement world latched on to that. One of the things we had to do was say, we add value, so let us help you get more for your budget, not take it away.
Ad Age: What role do you play in any agency-selection process or new-business pitch?
Mr. Crisp: We coordinate the pitch and the supplier selection. When you look at the business, there are three different pockets: operations, which is managing the operations of the agency; commercial, which is focused on financials; and the creative pocket, the Holy Grail when it comes to this business. We never wanted to own any of those and certainly didn't have a significant play in the creative piece of it, but we add a lot of value with regards to the operations and commercial pieces. So when it comes down to a pitch we work internally with marketing to develop a strategy for selection criteria. Once we have that together, generally, the purchasing organization administrates the pitch, RFP and contract.
Ad Age: How large of a say do you have in marketing/agency decisions?
Mr. Crisp: Let's be honest, at the end of the day, if it's a significant agency pitch, the CMO is going to make the decision, and we don't have any issue with that. ... We don't need to own the outcome but we certainly want to be in a position where we can influence it.
Ad Age: Influence it in what way?
Mr. Crisp: If you don't pay attention in the marketing space, the review ends up revolving around the creative. But there are so many pieces that go into creating a good relationship with an agency and, quite frankly, it's about the financials, operations, compensation and the contract.
Mr. Brown: Left alone these guys go wild on creativity at any cost and we try to get more accountability in there about meeting all the vectors of success.
Ad Age: Over the last year a lot of agency people have described pitches as procurement-driven reviews. Is there such a thing?
Mr. Crisp: Procurement can't do these reviews on our own. It has to be a partnership. ... Keep in mind, that's another value procurement can provide, we can be the bad guys and allow our sales marketing folks to keep their relationships whole with the agency. We can deliver the bad news and do all the performance-management stuff. That's OK by us. Once marketing realizes we can do that and they trust us to do it, quite frankly, they appreciate it.
Ad Age: How have you changed compensation policies with the increasing importance of media in marketing and growing complexity of the media landscape?
Mr. Brown: We really wanted to move it to a pay-for-performance model because one agency would be on top for a while and charge a lot and then, for whatever reason, fall and then you'd have low-quality work but pay a premium for it. You want to get the A-team on your account because the creativity often comes from that 5% to 10% of the agency's population that has the whizzy brain idea. So you want to be careful you're not just paying for warm bodies, that you actually have an alignment of the quality and creativity. That was a wake-up call to me. I didn't see it as extensive with some of our other contracts as I did in the agency world.
Ad Age: How can agencies reconcile the contradiction between brand people wanting the best and most cutting-edge work from agencies, which can be costly, and procurement people looking for better pricing?
Mr. Crisp: Good procurement organizations aren't into price -- they are into value. And it will be a misnomer for anyone to think that a good purchasing organization is all about the price. At the end of the day, it's all about the value. The biggest mistake an agency can make is bid a business based on price hoping they will be the lowest bid on the table, and then promise a different level of service.