Advanced Operating Models
Dec 06, 2017

Procurement and marketing:  it's time for a new approach

When businesses treat indirect spend as a cost center, procurement teams are incentivized to push for savings and reduce suppliers' prices. This holds true for marketing procurement, too. The focus ends up on the lowest common denominator: the price quoted across day rates, number of people, or hours.

But the metrics that matter to most marketing stakeholders are completely different. They want to improve cost per lead, brand awareness, or website conversions. Given the major disconnect between the teams' objectives, it's no surprise that marketers actively avoid procurement.

Procurement's emphasis on cost savings to the detriment of other measures also impacts the services that marketing receives from its suppliers. Agencies get demotivated. They don't put their best people on the job. And they certainly won't go the extra mile for those inevitable last-minute changes that marketing teams often need.

And just as procurement is navigating a new world of sourcing with digital, marketing is also confronting a new landscape. The last few years have seen a proliferation of digital marketing and technology offerings from a number of new service providers. With such complexity, the lines between what each vendor offers are often blurred, which creates a number of challenges:

  1. Deciding which marketing activities to perform in-house or give to a third party
  2. Choosing the right provider
  3. Aligning the performance of the vendor to business and marketing objectives
  4. Managing the increasingly high turnover rate of talented marketing procurement professionals

What other indirect categories face such challenges? Finding a way to overcome them requires deep knowledge of both functions. So how can procurement and marketing get better aligned?

  • Align your procurement objectives with the CMO's objectives, and work out how you can suppport marketing to achieve them
  • Consider marketing spend an investment where you can quantify success through an ROI approach, not price benchmarking. Use marketing-mix modeling, an analytical method that identifies and quantifies the marketing elements that affect consumer behavior. This helps you not only measure the impact that marketing is having, but also pinpoint which activities are actually influencing sales
  • Procurement must work with marketing and finance on a zero-based budgeting plan, focusing on what's needed rather than historical spend
  • Treat your marketing agencies as partners, not suppliers, and align their objectives to your business goals, such as sales targets. Create performance-by-results agreements to keep your partners motivated and focused
  • Encourage your marketing procurement team to broaden its traditional scope and challenge the status quo. For example, are the agency's plans agnostic towards earned, owned, and paid media? Is the agency doing what's right for the company's brand or simply proposing a solution because it gets higher rebates from a particular media owner?

Making these changes will have a profound impact on marketing procurement:

  • Procurement will be brought in, proactively, at the early stages of sourcing to help shape business requirements and enhance the return on investment
  • Focusing on ROI will bring greater value than simply reducing a supplier's rates
  • You will have more opportunities to consolidate vendors, reduce tail spend, and manage strategic partners
  • Greater alignment will create a more enjoyable environment to work in with lower turnover of top talent

By customizing how procurement works with marketing compared to other categories, you will make it easier to partner with marketing and make a strategic impact.

About the author

Darin Crosby

Darin Crosby

Assistant Vice President, Source to Pay

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