Marketing’s procurement challenge
Media spend is a major expense for many companies. To maximise effectiveness marketing and procurement must work together.
Procurement has often been seen in a bad light among the agency community that helps brands buy their ad space. That’s not entirely surprising because when procurement teams first got seriously involved in marketing about a decade ago, they focused mostly on driving down the cost of media, at the expense of much else.
The result is that we have had a race to the bottom on price with little consideration of what might also get lost: quality of service, access to talent and an increased risk of damage to brand safety.
There are still cases of procurement negotiating contracts without having a full brief as to the scope of the work that the company wants the agency to work on. Recent research from the World Federation of Advertisers found that 24% of the world’s biggest companies only provide a rough outline of the scope of the work to the procurement teams who are negotiating terms with potential agency partners.
Media agencies have not always been angels either – on-going concerns about transparency in their dealings with media owners and others have been a constant issue in the last few years. Many contracts have been renegotiated to protect advertiser budgets.
But it’s also widely accepted that great agencies make a real difference when a client is clear about the role they want media to play. They help brands position media as a vehicle for growth and they provide the talent, insight and execution that can help turn me-too brands into market leaders.
The new focus should be on building a relationship that’s based on value rather than simply cost. That means understanding where media is driving business advantage and tracking the metrics that reflect that success, a big change from simply tracking the price paid for a particular ad spot, banner placement or digital out of home advert.
From our work with some of the world’s biggest companies, it’s clear that smart advertisers know this and work hard to build the best relationship with their media agency.
Achieving that is much more likely when brands can end the divide between marketing and procurement. When the two sides of the equation are split, it creates a Jekyll and Hyde effect, with the agency unsure who to service – a procurement team focused on cheaper media or the marketing team demanding business growth and great ideas.
Agencies have tried to serve advertisers who operate in this way. They’ve split functions, with buying going into holding companies such as GroupM and kept the agency brands to work with marketing. But even this approach ultimately ceased to work once media prices hit rock bottom. You can’t go lower without devaluing the quality of the environments where brand messages appear.
The good news is that today many procurement departments have learnt these lessons. They still keep an eye on costs of course, but they have also worked closely with the marketing team to agree on a common set of KPIs that both teams stick to.
ID Comms 2019 Global Media Thinking Report found that procurement attitudes towards media are improving. Based on responses from 177 Marketing, Media, and Procurement professionals with a range of global, regional and local market responsibilities with a combined global media investment in excess of $20bn, it found that procurement professionals were more likely than to see media as an exciting opportunity and an investment for growth than two years ago.
Getting the relationship between marketing and procurement right also makes an agency’s life so much easier. Even if the marketing and procurement teams have different reporting lines (to the CMO and the CFO, typically), they are at least working to the same common objectives.
We’ve seen a range of approaches to alignment, including the creation of a company council with 10-12 people representing different geographies and functions, all working together to create the common KPIs needed to ensure corporate alignment.
Many procurement teams are also upskilling their knowledge, particularly in the digital media buying space. That makes a lot of sense, not just because it’s useful to understand how money flows through the incredibly complex ad: tech ecosystem.
When they work together to unified goals, marketing and procurement can be powerful allies. When they come to the party with different agendas the likelihood is that everyone suffers.
Both agencies and advertisers win when marketing and procurement find common ground and identify clear roles and responsibilities.