Procurement Execs: Cost Shouldn't Be Main Thing, But It Is

ANA Survey Finds Big Gap Between Ideal Metrics and Real Ones

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For the past couple of years, there's been a lot of discussion around the education of marketing procurement -- and how many are focused on much more than just lowering cost. But that's still a top factor in evaluating agencies and other companies, according to a survey by the Association of National Advertisers.

The survey of 113 procurement executives -- taken in December and January and released at the ANA Financial Management Conference in Scottsdale, Ariz. -- found cost reduction and avoidance are the top two metrics by which their work is judged in companies now.

Top Metrics Now Used to Evaluate Marketing Procurement
Cost reduction: 94%
Cost avoidance: 84%
Agency/Supplier Performance Improvements: 72%
Process improvements: 62%
Risk mitigation: 56%
Internal stakeholder (marketing) satisfaction: 55%

Meanwhile, the survey showed those procurement exes believe, at least by a narrow margin, that the two most important things to measure should really agency/supplier performance improvements and process improvements.

The longer a company has had marketing procurement in place the more sophisticated its success metrics are likely to be, the survey found. For example, among organizations using marketing procurement five years or less, only 19% listed "innovation" as a measure for success, compared to 63% for organizations that had been using marketing procurement for 15 or more years.

Similar if less-pronounced differences could be found in using market-share increases, brand-health metrics, marketing return on investment and risk mitigation as measures for success, with the most mature marketing-procurement groups most likely to rely on those metrics. The most mature marketing-procurement groups were somewhat less likely to use cost reduction, though that remained a high priority among all experience levels.

More mature marketing-procurement organizations were also more likely to have their success metrics aligned with those of marketing departments, with 88% of executives in 15-year-old-and-up organizations saying their goals were closely or moderately aligned with marketers, double the rate for organizations five-years-old or less.

Metrics Procurement Executives Ideally Believe Ideally Should Be Used
Agency/Supplier Performance Improvement: 84%
Process improvements: 82%
Cost avoidance: 81%
Cost reduction: 81%
Risk mitigation: 75%
Innovation: 68%

"The survey shows the more sophisticated metrics, such as driving marketing ROI, were more common among the more mature organizations," said Bill Duggan, group exec-VP of the ANA.

Terri Burns, strategic sourcing consultant for Aflac and chair of the ANA Procurement Task Force, believes the survey results are reflective of "the journey that marketing procurement is on at most organizations." She added: "Ultimately we want to embrace a more strategic role in our companies and we want to align our metrics with the growth strategies of our organizations."

Speaking May 6 at the conference, Sopan Shah, global leader of advertising and marketing procurement at Nestle, outlined steps he's taken to make procurement there less about simply cost cutting and more about "strategic sourcing."

Among those things has been focusing on innovation by forging a deal four years ago between the Juicy Juice brand and a startup that let people tweet hashtags directly from display ads. Later he helped implement a common augmented reality platform for use by Nestle's brands. Neither had any appreciable cost for Nestle, he said.

To align with marketers' priorities and build relationships, he said he watches for new hires and then arranges meetings to buy breakfast or lunch for the new marketers, he said.

"What he talked about is the direction we're all trying to go," Ms. Burns said. "We're all trying to get beyond the simplistic cost-cutting mindset."

To help the process along, the ANA Procurement Task Force has formed a mentoring program where more experienced executives will work with less experienced ones across companies.

The conference drew a record 650 attendees this year – more than a quarter from the client side -- with the rest coming from agencies, consulting firms and other vendors.

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