With procurement rapidly on the rise in the North American media business, agencies need to learn what pitfalls to avoid if they want a productive relationship with marketers, according to a study commissioned by Donovan Data Systems and carried out by Douglas McArthur of Planning for Results, an independent consultancy.
The study, which will be made public at this week's Venice Festival of Media, interviews nearly 20 procurement directors at blue-chip marketers like Coca-Cola, Merck, Diageo, Mars, Nokia and Pepsi, along with 20 media-agency professionals.
It finds issues in the procurement/agency relationship that are ready-made for Freud. For instance, according to the study, the relationship between procurement and agency is more like that of a parent and child. "When [procurement] arrives, they arrive like domineering parents, and because the agency doesn't like this, they regress to being rather petulant children," Mr. McArthur said.
But it's also like a suspicious marriage in which both parties feel the other is being unfaithful. Media agencies are threatened by procurement officers, whom they suspect of commoditizing their business by looking for the cheapest prices possible, as well as angling to get rid of them altogether. Meanwhile, procurement officers are often mistrustful of the close relationship between media buyers and sellers, the study says.
What's more, there's a disconnect between the two parties about goals, terminology and business processes, the study finds. For instance, most procurement officers focus on profitability, while agencies concentrate on billings and revenue. Procurement officers also say that agencies, with their full-service background, tend to give work away because they are so service-driven.
One procurement professional said agencies are "really hard in negotiations, but as soon as it's done and the job goes to the team, they are extremely soft," Mr. McArthur said. "If I were a CEO of a media agency, I would want to instill a profit-awareness culture and not just a service-support culture."
What each says is the problem
Both parties were asked to identify what makes for a bad relationship. Procurement directors identified a lack of transparency as the main issue.
"When media buying was in the '70s and '80s, it was all gut feel and personality." Mr. McArthur said. "Now it's very rational, numerical, data based. Procurement people want data. The biggest mistake is to argue for things without support."
From the agency perspective, what spoils the relationship is dealing with procurement directors who don't understand marketing communications and treat media buying as a commodity that is only about price.
In an interview, one media executive said procurement officers need more education about what media agencies do and how they should be compensated for it.
"We have to stop being [compensated] based on how many hours we work," the executive said, adding that agencies are "trying to get more to a value-based compensation, based on driving brand-health metrics. Agencies could have more courage and say this compensation structure is broken."
Education about marketing services produces better results and a more cooperative relationship between procurement and agency, one consultant said.
"[Advertising] is an art and a science, and [procurement] is primarily a science," the consultant said. "We've found over the years that when we get to know the procurement people and teach them about the qualitative aspect of the business, they'll learn. And they can become advocates for the agency."