Procurement: Friend Or Foe For The CMO?

Focusing on the financial aspect can be viewed as putting cost above value and thwarting chief marketers. Or can procurement actually be a force for good?

Procurement has been a contentious issue in marketing for several years. While senior executives may find it useful to have financial colleagues play “bad cop” in agency renewal negotiations, the role they play has the potential for scope creep.

Rather than delivering value, could it be that marketing’s wings are being clipped by a focus on saving money? Or does procurement have a positive long-term role to play?

Paul Bay, founder of branding consultancy CitizenBay, has certainly seen procurement become a more prominent fixture within agency negotiations over the past handful of years. The former director of consumer communications at Levi Strauss and international media director at M&C Saatchi revealed it is a major issue that keeps coming up in his conversations with clients, past and present. “What I’m picking up is a lot of senior marketers are feeling over-policed,” he said.

“When procurement’s not done well, it feels like everything’s reduced to cost and a spreadsheet. [Senior marketers] are often frustrated at how many reviews are taking place way before current deals are due to run out. It’s starting to get better as both sides get to understand how the other works a little better. However, some marketers have a nagging feeling they’re being held back by accountants who are out there just making work for themselves.”

Stages Of Maturity

As with any aspect of marketing, it is too simplistic to say an entire process is helping or thwarting every CMO. Simon Francis, CEO at Flock Associates, said he believes attitudes can often vary depending on the maturity level of a brand’s procurement process. His marketing transformation agency, whose clients include McDonald’s, offers procurement advice as part of its service, and the key to success, he said, is always ensuring the process is focused on delivering strategic goals rather than budgetary savings.

“Procurement has had three stages of maturity, and it can depend on what stage you’re at whether you feel it’s beneficial or holding you back,” he said. “There was the first stage of the accountants getting a better set of agency deals, then the second of just whittling down a bunch of agencies to, perhaps, just one. Although many brands may still be in either of the stages, the smartest brands are moving beyond cost to [a third stage of] using procurement to achieve wider strategies through integrating agencies both within and outside of marketing, taking in communications and PR. It means you’re aligned around a common strategy and you’re not paying multiple agencies to do similar work.”

Communicating Value

Procurement might not always get the warmest reception among those who fear a creative industry is being reduced to a spreadsheet where cost trumps value. However, for Marc Lawn, founder of strategic marketing agency The Business GP, there is a bigger picture. A marketing background at Britvic and BP has proved to him that, although teams may feel their aspirations are curtailed, each executive’s long-term career prospects could actually be given a boost by the accountants, even if it does not always feel like it right now.

“Procurement is a wake-up call for marketers,” he said.

“When you go back to the 1980s, most boards had marketers. But now the vast majority don’t, and that’s because marketing has not been very good at communicating its value to the wider organisation. That has meant it has had a pretty easy ride for too long, sometimes wasting money on vanity or ineffective projects. So, if procurement has been called in, it’s a prod, and if it has been given the final say on a deal, then it should, at least, serve the purpose of prompting marketers to ask why.”

The act, then, of accepting more financial oversight and being seen as embracing more responsibility can only strengthen marketing’s cause to get more of its own promoted to board level, Lawn suggested.

Rogue Treatment

Marketers will obviously be at different stages of accepting the role of procurement, but one fear they may rightly share is that it can sometimes leave a bad taste in the mouths of the agencies they work with. The Marketing Agencies Association’s commercial director, Andrew Reeves, revealed new unwelcome practices are a major issue for members who accept procurement but dislike how it is sometimes done.

“We obviously have the dreaded e-auction, which is not only a race to the bottom that serves nobody’s interests, but it has led to even worse,” he said. “A couple of huge brands have begun using the process to let agencies outbid each other over payment terms to see how much over 90 days they are willing to go. We’re even starting to hear of brands extending payment terms but then allowing agencies to draw down money earlier, for a fee. They’re basically allowing agencies to factor their own invoices to be paid at would what normally be considered a reasonable time frame.”

Flock Associates’ Francis agreed that this is the area where CMO can unwittingly be thwarted, expected to work well with agencies who have become disillusioned with what they perceive as poor treatment. Better education of how marketing works at its best, he feels, will help heal wounds.

However, for CMOs who may not welcome procurement with open arms, he poses one telling question to discover if the alternative could be a lot worse.

“If your agency has four big clients and three use procurement,” he asked, “which do you think will end up with costs going up to balance out reductions being made elsewhere? Which accounts, do you think, will get their best people?”

Answer this, and, he surmised, most CMOs would have to admit that, although it is not obvious in their everyday lives, procurement can be a useful watchdog, ensuring they work with the smartest people for the keenest price.