Developing an Effective Scope of Work Program with Marketing Suppliers
As marketing suppliers become more specialized, it's more important than ever for procurement departments to develop a scope of work program to manage costs. Here's how some experts are handling the scope challenge.
Nobody likes scope creep — not procurement departments, and certainly not agencies.
As with other professional services acquired through the procurement process, scope of work (SOW) is becoming ever more important in marketing procurement as organizations attempt to optimize their marketing spend and boost ROI.
Organizations can no longer sustain an ad hoc process for planning and communicating with their marketing suppliers. Instead, they must develop an effective scope of work program that makes the extent of any signed agreements clear.
There are numerous benefits to developing a robust scope of work program to govern marketing relationships. For one, it enables the organization to specify what outcomes they expect from the marketing supplier's labor. It also proves the supplier with clear guidance around what work it so to be performed and, perhaps more importantly, what work is not to be performed.
Finally, it gives procurement and finance departments the benefits of increased transparency into the organizations marketing spend. With a clear SOW, agencies can more accurately provide quotes for projects, and procurement departments will be met with fewer surprise charges and fees.
The question is, how will organizations establish scope of work programs moving forward? The world of marketing is constantly shifting, and the roles of agencies and other marketing services suppliers are evolving.
To stay relevant, agencies and other marketing suppliers are trimming the fat of their operations and becoming more specialized.
In a recent blog post, Ian Kaplan, Senior Director of Client Services at BrandActive, wrote that "it certainly appears the days of the 'one-stop-shop' have been sunsetted in favor of niche, agile and nimble agencies. Companies need resources who bring unique creative prowess, experiential ideas, and strong data and analytics."
Instead of pursuing a "one-stop-shop" agency externally, more and more organizations are instead developing their own internal, or in-house agencies to handle much of the heavy lifting. Like any other agency, an internal agency does advertising and marketing work. But being within the organization, it's easier for marketing leaders to be more hands-on in their direction of the agency's actions.
According to an article in the Wall Street Journal, a 2018 study of 325 companies by Forrester revealed that 64% said they had internal agencies and only 30% said they did not. Although many companies cited cost savings and efficiency as the reason for their in-house agency investments, 20% said the greatest advantage of investing internally was that their teams had "knowledge of the brand."
With more marketing dollars being diverted to internal agencies and other investments, procurement professionals must establish their Scope of Work requirements within an even narrower framework.
Many consumer-facing brands are rethinking their marketing structures in the face of changing demographics, new regulations, and an uncertain global economic future.
Multinational food and drink conglomerate, Nestle, recently decided to narrow the scope of its marketing spend and trim some of the agencies it partners within North America.
According to a recent article in Marketing Dive: "Nestle's decision is primarily a cost-saving measure, as Adweek notes, but other motivators could include a desire for transparency, more control over creative, quicker responses to consumers' needs and adapting to digital disruption."
In a memo to Nestle executives reported on by AdWeek, the company wrote, "The overall [agency] selection process is a collaboration between marketing, procurement, the communications and digital centers of excellence. We aggregated agency assessment data across brands to have a full picture of agencies with multiple brand assignments... Ultimately, marketing's overall assessment of capabilities and performance drove decisions."
As the marketing procurement landscape continues to shift, more and more companies will likely bring some of their marketing capabilities in-house and narrow the scope of work they provide to agencies. Most agencies will need to specialize, abandoning the full-service model of the past and finding new ways of generating consistent revenue.
Meanwhile, organizations will need to develop stricter scope of work processes to better manage their marketing spend.
With a clear process for marketing, procurement, and the marketing supplier to follow, all three parties can make more informed decisions and build a more effective relationship. It will be interesting to see how organizations manage their relationships with marketing suppliers as the marketplace becomes more niche and specialized.