Marketing Procurement’s Transition from Cost Savings to Value Generation
As marketing procurement teams begin the transition from cost savings to value generation, they can play an even larger role in helping marketing departments realize their goals. Overall, marketing procurement has taken on an increased responsibility in driving value from agency relationships, as well as a greater understanding of the value that must be generated for each project.
The relationship between the marketing department and marketing procurement has also improved. According to Marketing Procurement IQ, a 2022 study by the Association of National Advertisers (ANA) found that 57% of procurement respondents and 59% of marketers say the relationship is either extremely or very healthy.
In this blog post, we'll explore how these teams are positioned to have a more profound impact on total organizational success.
The Value Marketing Procurement Can Bring to Marketing Departments
Marketing procurement has historically been overlooked as a center for cost management, but it can bring tremendous value to the organization through its ability to negotiate and manage agency contracts. By effectively managing supplier relationships, marketing procurement can set clear standards for agency relationships, including the scope of the work to be done and what results are expected from the partnership.
For example, agencies have an incentive to sell companies a product or a service rather than results. According to Forbes, "Clients that enter into agreements with agencies end up taking on 100% of the risk." When results don't materialize, "There’s little recourse for advertisers when that happens; they’re expected to take the financial hit and file it under lessons learned."
Marketing procurement can step in to negotiate contracts based on results, rather than the fulfillment of specific marketing tasks. This ensures the company sees results from its investment and gives the company more control over its marketing budget.
Additionally, procurement can facilitate innovation and bring fresh ideas to the table, helping marketing departments to stay competitive in an ever-changing market. By developing a strategic partnership between marketing and procurement, companies can ensure that they are getting the best value from their suppliers and maximizing their marketing investment.
Data-Driven Insights Ensure Agency Performance
Companies can use data and technology to ensure their marketing agencies perform and deliver value. Data-driven insights into performance metrics, customer behaviors, and other key factors allow companies to track the effectiveness of their marketing efforts in real time. This allows them to make timely adjustments or changes to maximize ROI or reach other desired outcomes.
On the procurement side, real-time data allows marketing procurement leaders to monitor agency results and ensure partners are living up to value-based agreements.
Companies may expect their agencies to engage in this step, but it is often overlooked. According to the Forbes article, "Once a campaign has concluded, many agencies don’t take the time or effort to review the details that drove performance in the first place." This type of analysis costs the agency time and resources, which could otherwise be spent on other work.
This doesn't mean that the marketing department and marketing procurement must pay the price for this type of monitoring. Marketing procurement could include campaign and performance monitoring as a binding requirement of the agency contract in its, for example.
Procurement Develops Clear Guidelines and Policies for Agency Selection & Management
Marketing procurement entails the complex task of selecting and managing agencies that best serve an organization’s interests. However, without clear guidelines and policies, this process can be painfully slow and inefficient.
The marketing department will have its own criteria for assessing agencies, but these criteria will often be based on the agency's results with previous clients, case studies, industry recognition, etc. They may not be assessing agencies based on cost-effectiveness or performance guarantees.
This is why procurement teams must develop clear policies for the marketing department that aid in its selection and management of agencies. This not only expedites the process but also ensures that the selected agencies align with organizational goals for optimal results.
A well-defined procurement policy also helps to build a transparent and ethical marketing procurement system that reduces risk.
Marketing Procurement’s Role is Expanding
Many organizations are now reassessing their agency relationships thanks to the help of their procurement teams. For example, L'Oreal recently awarded Omnicom Media Group its U.S. media account following a formal review, replacing its previous agency, GroupM’s Wavemaker.
The company did so "After recently completing a strategic assessment of the media agency landscape."
By understanding the value of marketing procurement, establishing partnerships, leveraging technology and data-driven insights, and developing clear guidelines for both agency selection and management, companies can cultivate an efficient and effective marketing and procurement relationship and deliver more value from their agency partnerships.
To learn more about the role of marketing procurement in agency management, 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.