Half of Global Marketers Say Procurement Execs Get Marketing
LONDON (AdAge.com) -- Marketers don't see procurement officers as cost-cutting villains. According to research by the World Federation of Advertisers, their No. 1 goal is to build relationships, and the idea that procurement focuses only on cost is out of date and inaccurate.
The WFA surveyed 85 marketers responsible for spending a total of $50 billion on communications each year. They were asked to rank their procurement priorities from a choice of four criteria: building third-party relationships, optimizing processes, managing money well, and driving learning and improvement.
Respondents were given 100 points to allocate; most gave 32 points to building relationships and then split the other 68 points fairly evenly across the remaining three categories.
Steve Lightfoot, communications procurement manager at the WFA, said, "Procurement is not going to go away. If agencies stick their head in the sand about it, then procurement is going to walk all over them. If you want to feel part of a client's business objectives, you need to engage in procurement."
Marketers like Procter & Gamble and Unilever do it well, according to Mr. Lightfoot, but many companies admit they still have a lot to learn. Only 49% said their own procurement units are knowledgeable about marketing. This is partly because the discipline is still relatively new: Five years ago, half of WFA marketers had procurement departments; now 95% do.
Mr. Lightfoot said, "We are keen to push forward the benefits of what procurement can be, and we wanted to wade into the debate because we have authority. It's not about cutting costs, it's about maximizing value."
The WFA offers two important tips to help companies do procurement well. The first is to hire people with marketer or agency experience. "You can't buy what you don't know," he said. "You can't expect someone to move from tin and steel into buying advertising. Job specs are increasingly asking for agency or media auditing backgrounds."
The second tip is to involve agencies early in the process. He said, "Procurement has to be embraced by all parties, otherwise you get a good cop/bad cop scenario between procurement and marketing. You can't give [the agency] a carrot and then beat it over the head with a stick."
Without naming names, Mr. Lightfoot offers a case study of a big brewer who started off with a heavy-handed approach to procurement, but has matured into a more-balanced perspective.
"They started out by relentlessly driving down costs," he said, "but if you keep making savings you find that you end up with only a few ads showing at 2 am. They realized you have to spend a certain amount, and now they are thinking more strategically about resources vs. savings. They have come to a full understanding of what an extra 15% on the budget can achieve."
Hamish Pringle, director general of the Institute of Practitioners in Advertising, has spoken out against the tyranny of procurement in the past, but agrees that the discipline is evolving. He said, "In the early days of the procurement assault -- and it was an assault -- on the marketing citadel, there was an alarming tendency for CMOs to lay down their arms and retreat to neutral ground, leaving their agencies to negotiate the truce on unfavorable terms. More recently the marketing people have reentered the fray, realizing that they are the ultimate custodians of the brand, and that they need to work closely with their colleagues in procurement to achieve not just lowest price but best value."
The more sophisticated procurement departments understand that their job is to not to over-complicate the process. Mr. Lightfoot said, "I've seen some Excel spreadsheets with massive lists of criteria for success, but procurement should be looking to simplify and to find the right ways to reward agencies for good performance."
Mr. Pringle added, "The more sophisticated companies are structuring their performance incentive programs to include marketing, procurement and agency to ensure they all have skin in the game, and thus an aligned agenda."
Procurement can even help agencies improve internal processes, such as helping them with the bidding process for suppliers such as production companies, Mr. Lightfoot said. "Procurement can manage the nuts and bolts, providing a structure and framework so that marketing and agencies can get on with the best strategy and creative."
Despite trumpeting the benefits of procurement, Mr. Lightfoot admitted, "There's always a sense that procurement is just there to look at costs, and agencies are looking to get extra. But when the two are on opposite sides of the fence, the product can end up as the gooseberry in the middle."
The WFA's membership includes major marketers such as McDonald's Corp, Kellogg's, Coca-Cola Co., Unilever, Procter & Gamble, Kraft Foods, Microsoft Corp., L'Oreal, and Nestle.