Procurement Are Crossing The Media Value Divide
The world of procurement, their role in marketing and how to work with procurement leaders in a productive way: The source of much perspiration and insomnia amongst media-agency leaders these days.
We believe there are a set of procurement leaders about to change the way we think about procurement. They are crossing the divide between managing costs and value adding; the same line that separates finance from sales and marketing.
Most agency heads will privately conceded to a general dislike of marketing procurement because they claim that procurement have "infected" media and caused it to become a commoditised resource.
We believe there are two types of procurement when it comes to thinking about media spend. Perhaps there can, by definition, be only two types in theory. The reality of course exists somewhere between these two extremes.
The first group, lets call them Type A, will see a media budget as a very powerful lever for company growth, full of opportunity. The second group,Type B will see a media spend as a business cost to be managed. Downwards, naturally.
For one, the Type A, the media budget represents an investment in growing the company's sales and future profitability. For the other, Type B the budget represents a liability and cost which needs to be reduced to improve the company's profitability.
The Type A is mainly concerned with top line growth:
"We should invest in media to drive growth"
Whilst the Type B is predominantly focused on bottom line:
"We should reduce our cost of sales by negotiating down supplier costs"
Both of these approaches are of course completely valid, despite what the agency CEO bemoans. The Type A skills and the Type B skills are correct, legitimate and rightfully required by a diligent corporation looking to be profitable. So what's all the fuss about then...?
When it comes to media, the ideal approach is to have a healthy balance of both:
PRICE - The costs of media need to be managed carefully because there are huge discounts out there and many deals to be done and as a client you need to know that you're getting what you've paid for. This is what the traditional auditors do pretty well and it might find you a few %.
VALUE - In addition, the (Type A!) procurement leader needs to see media as a lever for growth and know that the marketing department are briefing the agency to deliver a sales uplift and use media in smart ways to find new sources of value. This is called strategic media management or "Media Governance" and could double / triple the value of your media budget. Seriously.
This is why being a Procurement Type A is such a potentially powerful and influential role in the marketing value chain. The trouble is that, in our experience, the Type A procurement is still a small (although rapidly growing) subset of all marketing procurement.
*The WFA have produced some good resources on this, notably Steve Lightfoot's white papers, available from his LinkedIn page.