THE BUSINESS REVIEW FOR PROCUREMENT LEADERS
by Marilyn Baxter
The history of procurement’s dealings with marketing services agencies
has not been a happy one. In fact, for many agencies, coming to terms with procurement
has been a very painful process. Much of this pain was down to agencies themselves.
Going in to look at them, procurement people found companies that were not well
run, not on top of their finances, with few principles and some decidedly opaque
practices. And all of this in a sector that was oversupplied and highly price
competitive. It was an easy win to pressure agencies on price.
Some of the pain was due to procurement’s lack of knowledge about how creative businesses work, inappropriately applying manufacturing procurement principles to agency services, and to overly heavy negotiating tactics. The result was not only an unproductive relationship with agencies, but also a strained relationship with marketing departments, since many procurement people were thought not to “get” marketing or add any value to the process (although some have made good progress here in recent years).
It was to help resolve these tensions and spread best practice that three UK trade bodies – the Institute of Practitioners in Advertising (representing the agencies), the Incorporated Society of British Advertisers (representing the client marketers), and the Chartered Institute of Purchasing and Supply (representing procurement professionals) – joined together to try to find common ground and a better way of working that would create what each partner wanted: ideas from agencies that would make a profit for both parties.
The three bodies commissioned me to interview leading practitioners from among their members to find out which of their practices and processes contributed to their success.
The result is some challenging recommendations on what the professions need to do to adhere to best practice in managing their own contribution and their relationship with the other two, recently published as a report entitled Magic and Logic (magic being the creative ideas that agencies generate to grow brands and profits; logic being the part of its business concerned with good project management, financial discipline, and so on).
How should advertising and marketing agencies rise to the challenge?
The key message to agencies is: you don’t have to be chaotic to be creative.
Agencies are challenged to be more business-like and efficient. In addition,
they need to adopt more formality of process between themselves and their marketing
clients (working more closely with procurement), and to be more focused on
evaluation and results. If agencies want to avoid the “unbundling” of
services they have traditionally offered, they need to demonstrate their competence
at purchasing, be more transparent about their suppliers’ production
costs, and be better at articulating where they are adding value.
What should marketing professionals do to improve their contribution?
As the report says: “Agencies cannot create more profitable ideas for
clients without best-practice performance from clients.” Marketing, too,
needs to be more business-like in its dealings with agencies, be better organised,
more honest and more disciplined, in order to help agencies to be more efficient.
Marketing is also charged with the responsibility for finding budgets to pay
for better evaluation, remuneration methods that will incentivise the agency
to produce profitable ideas for them, and a better way to select agencies than
the traditional competitive creative pitch.
How can procurement people help to ensure their organisations
get both value for money and first-class ideas?
It is clear that procurement has the potential to make a huge contribution
to ensuring that what is produced by agencies and marketing departments are “ideas
that make a profit for all”. Procurement brings analytical skills and
commercial processes to both marketing and agencies that are often missing
in their relationship. These can play a major contribution in ensuring fair
play and more efficient working, including at their agencies.
However, to do this effectively procurement people need to understand and respect what it takes for agencies to produce profitable ideas, realising that focusing only on the cost of the inputs without understanding how great ideas are produced can damage the value of the end product, as well as the relationship.
Free copies of “Magic and Logic” can be downloaded at www.magicandlogic.co.uk
Marilyn Baxter (marilyn-baxter@btconnect.com) is an advertising research consultant and a former vice-chairman and executive planning director at Saatchi & Saatchi
