Managing Marketing Service Providers During Times of Inflationary Pressure
As businesses grapple with inflationary pressures, marketing procurement teams are faced with the challenge of developing long-term agreements with marketing service providers that can provide stability economically. However, they also must ensure those agreements have flexibility, should demand change over time.
Working with marketing agencies can be complex as marketing initiatives often require multiple services and providers, and the procurement team must contend with agency push-back and negotiations on specific terms. By understanding the current market and leveraging long-term agreements, marketing procurement teams can ensure their company is able to manage costs while still providing the necessary services to meet their marketing objectives.
Inflationary Pressures on Marketing Procurement
Inflationary pressure can be a significant challenge for marketing procurement, as it can lead to higher costs for services and materials. As the cost of goods and services increases, the need to negotiate long-term agreements with marketing agencies and other service providers becomes even more important.
Inflation can have a significant impact on marketing agencies as well. Rising prices for goods and services can impact their operating costs, while inflation can sometimes lead to higher turnover rates. Additionally, higher costs of materials may lead to agencies having to pass along increased costs to their clients to remain profitable.
As a result, procurement teams may find that agencies and other providers are raising their rates to keep up with inflation.
Negotiating Long-term Agreements with Marketing Agencies
Marketing procurement teams are tasked with negotiating long-term agreements with marketing agencies. This can be a complex process, as marketing agencies are typically a large expense for companies, and the cost of services can increase significantly over time.
When negotiating with marketing agencies, companies should consider various options to mitigate the risk of inflation. This could include price caps, flexible payment plans, and the ability to renegotiate terms at regular intervals.
Additionally, it is important to review the scope of services and ensure that the agreement is structured in a way that allows for the addition or removal of services as needed. Some agencies accommodate this need by incorporating flexibility into their contracts, such as by using point systems. However, others may be more rigid in their terms and will require incentives for change, especially when they are feeling the effects of inflation.
For example, marketing procurement teams can offer agencies incentives such as longer-term contracts for driving tangible results, such as ROI. They could also set conditions to purchase additional services based on performance.
Questions to Ask Agencies During Times of Inflation
The marketing department will likely have its own criteria for assessing agencies and the viability of long-term contracts. Marketing procurement must also take steps to ensure any agreements are cost-effective and adaptable.
One good way to start is to ask specific questions of the agency, such as the following:
- What strategies do you have in place to manage inflationary pressures?
- How often do you review your pricing structure?
- Are there any incentives or discounts for longer-term agreements?
- Can we negotiate a price cap as part of our agreement?
- Is there any flexibility built into the terms and conditions of our contract?
- Do you offer payment plans that can be adjusted over time due to inflationary pressure?
- Are there any additional services or materials that could help us better manage costs during periods of high inflation?
The company must also set expectations when negotiating contracts.
According to HubSpot, one of the best ways to achieve this is using the S.M.A.R.T. method. This is a goal-setting method that involves setting goals that are specific, measurable, attainable, relevant, and timely for the company.
Build More Constructive Agency Partnerships
Inflation rates can change significantly in a short period of time. According to Forbes, inflation rates hit a two-year low in May 2023. However, some experts are still wary of a possible recession or higher rates of inflation in the future.
To manage costs and ensure results, it is essential for procurement teams to understand the implications of inflation and negotiate long-term agreements with marketing agencies that provide both stability and flexibility.
If you'd like to learn more about managing your marketing partnerships during times of economic strain, don’t miss the next ProcureCon Marketing event. It’s happening from November 6th through November 8th at the Hilton Tampa Downtown in Tampa, Florida.
Download the agenda and register for the event today.