ANA Study Shows Wide Disparity on Procurement Value
NEW YORK (AdAge.com) -- Agencies' exasperation with their clients' procurement departments has been a hot-button topic in recent years, and a study by the Association of National Advertisers makes one thing clear: It's as bad as you've heard.
Or, at least, agencies think so. There's a significant perception gap about procurement's role within marketing departments -- 94% of the 76 marketing-procurement executives queried for the study felt they either met or exceeded expectations when it came to managing agency relationships, while 66% of the 90 agency respondents said procurement departments failed to meet expectations.
Even more worrisome, there's a surprising perception gap within marketers. Only 49% of marketing executives thought their own procurement units were knowledgeable about marketing, and only 54% felt they were communicating honestly with agency partners.
While some tension is inevitable between agencies and purchasing departments, the apparent gap between procurement and marketing departments is a major issue, said Chris Baker, senior director-purchasing at Heineken USA. "You never want to pursue a goal that will surprise your marketing partners," said Mr. Baker. "The process has to be about driving value and recognizing that agencies are in the market for the same things as you."
Good, bad, ugly
The survey of 225 people (76 marketing procurement executives, 59 marketing executives and 90 agency executives) was presented at the organization's recent Advertising Financial Management Conference under the title "Procurement: The Good, the Bad and the Ugly."
Among the uglier findings: A whopping 84% of procurement executives said they viewed marketing as an investment to be optimized, while 74% of agency executives said they thought procurement executives viewed marketing as a cost to be minimized.
"I think we're surprised by the wide gaps between procurement and agencies," said ANA Group Exec VP Bill Duggan, who noted that the ANA is going to be pushing for best practices in procurement in a coming white paper. "It's a surprise and, quite frankly, it's a little disappointing because we haven't made much progress."
Agencies that have long tried to position themselves as their clients' business partners increasingly bristle about being treated no differently than vendors of widgets, custodial services or some other commodity. And financially obsessed agency reviews for the likes of Volkswagen, Group Danone and UPS in recent months have only added to those gripes, as the data makes clear.
Agency executives' responses portrayed mistrust bordering on disdain for their procurement counterparts. Only 14% of agency executives, for instance, said procurement "is knowledgeable in advertising/marketing," and only 29% said procurement communicates openly and honestly with marketing and agencies.
Mr. Duggan said those numbers, while alarming, may be somewhat overstated because several agency executives indicated that they were answering based upon their worst procurement relationships -- and not necessarily their more typical ones -- in order to send a larger message. "One of the fears is you get some bad apples who ruin the reputation of the group," he said.
It's likely that the apparent gap between marketers and purchasers is at least partially derived from the relatively few procurement executives who come from marketing backgrounds. Of the ANA study's respondents, only 38% of marketing-procurement executives were in marketing or agency roles immediately before entering their current positions. By contrast, 43% came from non-marketing procurement jobs, 5% came from finance roles, and 13% came from other non-marketing spots.
Mr. Baker, who doesn't have a marketing background, said that didn't have to be an obstacle, provided purchasers take initiative to understand the marketing process. He said he sits in on marketing meetings that have nothing to do with purchasing in order to better understand how marketing and agencies work together. "I don't think you have to have been a former marketer to be good at marketing procurement," he said. "But you absolutely have to have the same passion for your brands as they do."
ANA Offers These Best-Practices Guidelines for Procurement
Get in Sync
Many procurement horror stories start with a company's marketing and procurement units falling out of sync. The best results require the two departments to have relevant, mutually agreed upon goals, as well as cost savings goals that are appropriate given the scope of work involved.
Does value equal maximum savings or maximum growth? There must be agreement between procurement and marketing on how value is defined -- and that should be shared with agencies.
Procurement should be engaged before agencies are selected or begin work.
It's not widgets
Ideas are definitely not commodities as the difference between a superior idea and a common idea is likely to have a vastly different impact on business results. Agencies -- at least the better ones -- are not commodities as each agency has its own unique offering and cost structure.
The more time procurement officials spend with agency partners, the better they'll understand what agencies contribute. Invite them to attend agency meetings that have nothing to do with purchasing.