(5/13/2014) Increasing Success in the Strategic Sourcing of Marketing Spend
Source One Management Services recently released a Marketing Insights Report that covers the benefits of bringing strategic sourcing in to work with marketing groups and the budgets they oversee. The report illustrates the benefits through a variety of charts, diagrams, and case studies. You can download a full copy of the report on Source One's site.
There is no question that gaining access to marketing spend can be an uphill battle for procurement. Procurement and marketing have different approaches to reaching their goals and – if we are honest – have very different goals. Marketing is top line focused, while procurement traditionally focuses on guarding or growing the bottom line. As Source One points out in the report, “Marketing has pushed back on any outside interference handling their supplier relationships over the years, deeming it too risky in effecting top-line revenue growth.”
That being said, no part of a competitive organization is exempt from the pressure to do more with less while still creating sustained value. In response to these challenges, marketing may be more open to working with procurement now than they have been in the past.
I recently had the opportunity to speak with Kathleen Jordan, Source One’s marketing spend category manager, about the insights report. My primary take-away from our conversation is that in order to build a bridge to marketing, procurement must understand a few dynamics that will either work for them or against them. Jordan emphasized the need for flexibility when working with marketing groups, stating that “Procurement should expect for its role to be tailored in a way that allows for flexibility and adjustments to the typical RFP process and standard strategic sourcing approach. Procurement should position itself as decision support for marketing but still offer up suggestions in the form of best-in-class methodologies. Marketing may be open to procurement’s way of carrying out a sourcing process and delivering other support services. In most cases, it all comes down to the parties communicating with one another and understanding each other’s needs, roles, and culture.”
Understand (and Embrace) Marketing’s Culture
Merriam-Webster defines culture as “a way of thinking, behaving, or working that exists in a place or organization.” Without labeling either party’s culture as good or bad, I believe it is fair to say that marketing and procurement have different cultures. Understanding those differences is the best way to make sure issues such as terminology, work patterns, and turnaround expectations do not get in the way. “Strategic Sourcing should remove the words ‘cost cutting’ from its vocabulary when interacting with Marketing and replace it with ‘value’” (p. 6). Making such changes is not ‘selling out’. To the contrary, it is evidence that procurement can speak the language of marketing stakeholders. And since we are constantly trying to prove that we are value creators, we can hardly shrink from the opportunity to stretch beyond discussions of savings and spend consolidation.
Have the Right Executive Involvement
The active role played by executive leadership is a critical factor in the success of a healthy marketing-procurement relationship. Many executives don’t want to get into the middle of tensions between procurement and marketing. “Senior involvement lends credibility and respect to the engagement, motivating all groups to contribute to a more productive collaboration” (p. 12). That truth is a validation that very real challenges exist between procurement and marketing, particularly when no corporate sourcing policy has been implemented. If the culture of the organization says “If sourcing wants to be involved, they have to show what value they bring” then having backup support at an executive level is going to be required. Someone, somewhere has to want to solve the problem for the good of the whole organization. As such, organizational policies and expectations about strategic sourcing have to be communicated in such a way that they do not single marketing out, but treat all departments equally.
Get Tactical to Be Strategic
In our quest to create value, procurement has gotten into the habit of holding tactical efforts at arm’s length. But if the strategic sourcing of tactical marketing spend categories such as print materials and promotional items build trust with marketing, it improves our standing against the higher level strategy of bringing marketing spend under management. “Providing value at this type of entry point will help Strategic Sourcing to build relationships with Marketing teams that will grow in value and trust as the departments continue to collaborate on larger, more strategic projects” (p. 5). Never pass up the opportunity to address any marketing spend, no matter how tactical it seems.
Internalize The Nature of Agency Relationships
Once procurement and marketing have worked together on tactical spend categories, the opportunity may present itself to address agency spend – by far the largest and most critical spend Marketing owns. Due to the creative and strategic nature of the work, marketing needs to have a close relationship with its agency partners. The intangibles are the most important in the comparison and selection of agencies, with particular focus on strategic thinking, creativity and innovation, the account manager role, and the ability to execute a campaign successfully. Because agency work is outcome focused, procurement should think of these contracts and supplier relationships as more like complex outsourcing agreements than other services contracts.
Procurement Methods that Have a Place in Managing Marketing Spend
While we may need to explain ourselves a little differently, or bide our time before jumping in, procurement is already well qualified to manage marketing spend and offer decision support through different approaches.
Spend consolidation – Many marketing teams are organized around brands. These brand teams operate independently, and may have the authority to sign their own agency contracts. When procurement can leverage better rates with the same agencies simply by combining the budgets of multiple brand teams, marketing gets a budgetary win without having to change agencies.
Specification rationalization – The tasks handled by an agency range from basic to advanced, and true agency partners will optimize the assignment of tasks to get the work done right and on time at a reasonable cost to the client. If billing is not reviewed in detail, more senior level agency staff may handle lower level tasks but still bill at their typical hourly rate. In addition, a core competency may be a service that is being outsourced by the agency and not performed in-house as expected.
Demand management – Spend analysis is a tool that procurement can leverage to help marketing teams see how their spend matches budgets and projections. It can also help marketing leadership compare the spend of independent brand teams to their results.
Supplier presentations – While agency ‘pitch’ presentations are not the same as supplier presentations procurement is used to, they still serve the same overall purpose – offering an opportunity for a potential supplier to explain their proposal and further detail their offering to the decision makers. The elements differ significantly and marketing places much more emphasis on a pitch than procurement would on a supplier capabilities presentation.. Marketing will expect creative concepts to be prepared and presented along with the individuals delivering the pitch to be the core day-to-day team supporting the account. Procurement should observe these pitches in order to gain additional knowledge of the category and offer up feedback during the decision making process.
If you are interested in learning more about how procurement can increase its influence over marketing spend, I recommend you download the insights report. Then you can join the discussion here or on Twitter: @GetSavings and @BuyersMeetPoint.
About Source One
Source One has been a leading Procurement Service Provider supplementing client resources with cost reduction, strategic sourcing services and spend management solutions since 1992.
Source One's experienced sourcing professionals work closely with clients' in-house staff to reduce spend, optimize existing budgets and increase the efficiency of operations by using proven sourcing and purchasing strategies, best practices, innovative technologies, and an unsurpassed database of market intelligence to help clients achieve the maximum level of savings possible. Ongoing monitoring and monthly audit processes further ensure that savings remain competitive and sustainable.
The Source One process develops a secure and responsive supply base that is capable of providing quality, delivery, costs, technologies, flexibility and services to meet the current and future business needs. Source One has strategic sourcing and cost reduction solutions for businesses of all sizes, from the small to the mid-market and including the Fortune 500. More on the web at www.SourceOneInc.com