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Purchasing power

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As U.S. businesses continue to identify opportunities to reduce costs by streamlining purchasing systems and procedures, marketing spending is coming under increased scrutiny. While many managers are reluctant to target marketing costs because they worry cuts will dilute brand identity, others are finding they can preserve-and even enhance-the integrity of a brand by gaining greater insight into the marketing budget and efficiently controlling it.

U.S. businesses spend more than $260 billion annually on marketing, advertising and printing, making these expenditures a prime target for cost controls. However, implementing a workable strategy can be a challenge because marketing decisions are often made outside the control of procurement. There are a number of reasons for this, one being the tendency of marketing professionals to work directly with favored vendors out of fear that any interference in this relationship will result in diminished brand quality.

Aberdeen Group's recent benchmark study revealed that firms with centralized and standardized marketing purchasing processes perform better, on average, than firms with little or no formal purchasing processes. Many best-in-class companies have found that applying traditional procurement management strategies not only results in better prices but also better overall support of the brand itself.

Furthermore, measuring brand success and ROI in marketing dollars can only be done from a position of clear understanding of spending commitments and relationships. The first step toward achieving this understanding is analyzing purchasing data and finding ways to streamline the procurement process. The next step is to replace paper- and spreadsheet-based processes with technology solutions that automate data collection and routine work flows. It is also important to leverage marketing spending as widely as possible across the company, finding opportunities to aggregate purchases and achieve vendor discounts.

Companies with standardized, centralized procedures and systems for marketing purchases are being rewarded with significant hard and soft dollar savings. On average, they have improved the relationship between marketing and procurement and are experiencing hard dollar savings of 14% in their marketing budgets, as well as a 12% savings in their marketing purchasing processing costs. These savings dramatically illustrate the benefits of breaking down the wall that traditionally exists between marketing and procurement for the greater good of the company.

Christa Degnan is research director, supply chain research, Aberdeen Group. She can be reached at christa.degnan@aberdeen.com.  To read a full copy of the Aberdeen report, Category Spend Management:Advertising, Marketing and Printing, visit http://www.aberdeen.com/summary/report/other/CSMMarketingReport_092904.asp

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