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Marketing procurement - does WPP news mean we've cracked it?

If there's one thing that has resisted the impact of procurement's influence more than most over the past few years, it's marketing spend. Still an intangible spend area in many businesses, marketing directors also enjoy a position of power, as well as a certain influence over most CEOs.

They also happen to have ownership of a spend area which is notoriously difficult to work out any return on investment or real value  calculations.

But while the "creative" needs of marketing has successfully resisted the march of procurement for some time, there are signs that this is becoming far less true. This story in the Financial Times reports how Sir Martin Sorrell, chief executive of the world's largest marketing agency WPP, has blamed procurement's involvement in contract negotiations for his group's worse-than-expected performance. 

He told the FT that the business environment is particularly brutal and that the increased involvement of finance and procurement is making contract negotiations more "aggressive". 

And so they should be. Let's just hope that when we return to some kind of normality and growth procurement maintains it's involvement in marketing spend decisions.

And, let's hope that the negotiations remain "aggressive".

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Reader Comments (3)

In the survey we conducted with the network members in 2008 (see the survey link at http://www.procurementleaders.com/news/network-research/hh-survey/), the concept and creative category was identified by 64% as having the most potential for savings with procurement's involvement.

The economic downturn has no doubt escalated the involvement of procurement and it will be fascinating to see what best practices and measurements for success not only in procurement performance but also marketing planning will follow as a result.
June 29, 2009 | Unregistered CommenterGunilla Huddleston
I've worked in marketing services procurement and sourcing for more than 10 years. There are three fundamental things procurement people fail to grasp about marketing:

1, marketing is an investment not a cost. However tricky ROI calculations may sometimes be in marketing, the fact that one strives to do an ROI calculation indicates that this is a different form of "spend": you don't generally do an ROI on facilities costs, stationery costs or labour costs. If I'm a shareholder, I don't want procurement cutting marketig "costs" so that budgets can be reduced; I want my marketing budget to optimise ROI and I want procurement to support my marketers in getting as much value from each £ spent as they can. But I'd welcome cuts in facilities, office supplies, temp labour, consulting etc.

2. "Marketing" is not a homogenous 'commodity': it covers everything from the buying - specifying, sourcing, distributing - of retail furniture to complex services procurement (how many advertising agency staff with what skills set are required to provide support and develop advertising campaigns?) to the use of new technologies (digital and interactive marketing) and the acquisition of media airtime, space etc. If you we fail to invest time and money acquiring knowledge in these areas, we have little or no value to add.

3.Much of the success of marketing activity relies on intangible things - "chemistry", an agencies innate understanding of a market, innovative creativity - and these are thing that flourish in the right environment and relationship. To maximise value, one has to work to encourage that environment and engagement between agency and client.

If we procurement people want a seat at this table, we've got to educate ourselves and demonstrate that we know what our marketing colleagues are doing. We have to be enablers and not a blockage in the system, and we have to ackowledge that there is a difference between a critical business partner and a commoditized supplier. Without that, our involvement will rightly be a short one.
I completely agree with Graham McKay. The primary measure of most of the procurement "professionals" we have encountered in our consultancy can and will only measure success based on tangible cost savings. In most cases this single minded approach does achieve savings but usually at the expense of effectiveness and almost never through the improvement in efficiencies. Sad really, because more informed and enlightened procurement professionals have much to offer the marketing category in the form of process improvement, contract and relationship management and implementing meaningful metrics to drive ROI improvement. If you are simply after short term cost savings as part of your harvesting the low hanging fruit then stay away from marketing as almost always you will do more damage than good.
August 19, 2009 | Unregistered CommenterDarren Woolley

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