How to Maximize Marketing Value through Smarter Alignment with Procurement
In many companies, the relationship between marketing and procurement is often cool at best, if not positively acrimonious. In 2015, consumer goods giant PepsiCo even went so far as to scrap its marketing procurement function altogether, handing the purchasing responsibility to its brand teams instead. The company said that the move would enable PepsiCo to work with greater speed and efficiency.
The decision, no doubt, arose from the far-too-common dissonance that far-too-often pervades the space between marketing and procurement. “Conflicts arise,” Ken Roberts, CEO of market research firm Forethought, told CMO in an interview last year, “because procurement wants to drive cost down, while marketing wants to undertake value-add. If marketing can’t give evidence of their value-add activity, they must expect that the ‘night watchman’ will shine their torch on them.”
Such conflicts – essentially between marketing goals and procurement goals – give rise to a lack of trust between departments, which can lead to poor communication, lack of transparency, inefficiency, and wasted spend. Perhaps more pervasively, these ongoing tensions foster an underlying dread surrounding the involvement of procurement in the marketing supply chain.
And so the question has to be – What’s going wrong?
Much of the difficulty stems from mutual misunderstandings. Procurement is often seen as a barrier (as opposed to an enabler), perhaps because it’s not always communicating its capabilities clearly enough. On the other side of the fence, marketers fail (or refuse) to recognize how their procurement colleagues can best assist them, and so occlude all input until the final negotiating and contracting stages of the purchasing process, missing crucial opportunities for procurement to add value.
Such problematic relationships clearly cannot be left to smoulder for evermore, for they will inevitably ignite into more PepsiCo-style decisions being taken. It’s time, then, for a new start.
The Need for a Mutual Embrace
Today, marketing is often the largest indirect-spending category for many organizations. Modern marketers know that they must build a presence and offer an innovative brand experience across an increasing proliferation of digital channels and devices that their customers are engaging with – all while ensuring that they don’t lose grip on traditional media as they do so. What’s more, they want to innovate and stay one step ahead of the game, exploiting new channels and new solutions as they emerge.
But this means that marketers have crucial choices to make – about what they buy and which solution providers they work with. These choices aren’t easy, and so, indeed, marketing will clearly benefit from the precise, experienced and fact-based decision-making capabilities that a well-equipped procurement function exists to provide. But the trouble persists – procurement is viewed as the “spending prevention” department, standing in the way of innovation and growth.
Roland Tam, Co-founder of self-storage solutions provider Spacer, puts it thusly: “Marketers are by nature risk takers, trying to generate an edge by predicting the next trend before it happens. Sometimes the result is binary. This can be difficult for procurement to manage, who prefer certainty of demand in their forward planning models.”
What’s needed is for marketing and procurement to have a better understanding of each other, a better appreciation of the other’s unique skillsets, and a better working strategy where the two can more meaningfully integrate and align. Marketers need to be able to evaluate the potential of new service providers and new channels before they commit to a partnership. They need analytical skills so that they may effectively evaluate how they use their budgets, which, in the digital age, need to stretch further and further than ever before. And while it’s true that marketers know their customers best, and are indeed best-placed to identify the best partners that will help target them, they also need the best support in these efforts. In short, they need procurement – but they need the relationship to work.
In order to maximize marketing value through smarter alignment with procurement, organizations need to identify the ways in which procurement can help fulfil marketing needs. But the process must begin by breaking down the walls between the two departments. This will require a review of current processes, and, with strong support from senior leadership, a roadmap to ensure that marketing buys into procurement objectives and vice versa – only this way will the goals of both groups be achieved.
Although no two businesses are ever the same, there are nonetheless some important areas of focus where procurement should already be ideally placed in a lot of instances to help marketing manage its objectives. The first is with supplier management. Marketers need to negotiate good rates and secure robust contracts in order to ensure that suppliers (often agencies) deliver what they have promised and that they are paid on time. They also need to verify that these suppliers are financially viable in the first instance – all of which should be second nature to procurement.
From here, efficiency monitoring can easily be handled by procurement. Agencies need to be held accountable for their performance, and marketing needs to understand the efficiencies of their agencies. Procurement knows how to track and monitor both, as well as the media agencies are responsible for deploying. If an agency is performing poorly, procurement can step in to lead the difficult conversations, allowing marketing to maintain its close working relationship with the agency without embarrassment.
Procurement can also be enlisted to scan the industry for agencies with new competencies, such as progressive programmatic-buying capabilities, enabling marketers to keep at the cutting edge of efficiency and innovation – exactly where they want to be. In turn, procurement will be able to create more value by identifying the agencies that can deliver these best-fit capabilities at the best cost.
As marketers continue to strive for the most innovative solutions to engage with an increasingly digitally-savvy and sophisticated consumer-base, the challenge for today’s CPOs is to demonstrate that procurement can drive additional value in helping them achieve these goals. Better communication and collaboration between marketing and procurement is not simply useful, but essential to achieving higher-value business outcomes, and the sooner these groups can be aligned, the sooner this value will be released.
The last word goes to Joanne Werker, CMO and COO for customer experience rating software company TruRating.
“Some of the strongest marketing and procurement intercompany relationships I have had the pleasure of being a part of, are where there has been real collaboration from the moment marketing strategy and planning kicks off – not at execution, and where procurement is integral to setting the vision," she said. “If you get them involved on what marketing is trying to achieve, you open the door to creativity. You allow them to have a voice and in my experience, they often shine.”
Strategies for better marketing and procurement alignment is set to be a hot topic at this year’s ProcureCon Marketing conference, taking place this November in Los Angeles, California.
Be sure to download the ProcureCon Marketing 2017 Agenda for more top insights and challenges facing the industry today.