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How do you solve a problem like marketing procurement?

September 27, 2017

Well, in all fairness, probably not by starting with an antagonistic headline like this one.

 

Marketing procurement repeatedly seems to comes under fire, being widely criticised for “not getting” advertising, for “hamstringing marketing”, “gutting agencies” of their fee revenues, and so on and so forth. Cost of everything, value of nothing, blah blah and so it goes on.

 

And some marketing procurement folk are reacting badly, even indignantly dare I say?

 

The first smart step when responding to an accusation like “how do you solve a problem like marketing procurement?” is, of course, to not respond emotionally. Instead, it’s better to recognise that generalisations or abstract argument is usually inflammatory, and therefore it’s better to temper your response. If you want somebody to listen, you must de-escalate, not to further inflame.

 

Arguments that generalise an entire category are the business equivalent of “You always …” and “You never …” in domestic arguments. They lack fundamental credibility because there is often more than just the one exception to prove the rule, but rather enough exceptions to disprove the rule and challenge the generalisation. But if those who feel unjustly treated are nonetheless in the significant minority, although it may be a swelling minority, the generalisation stands. Sure, you may put a dent in its credibility where you are concerned, but it is valid just the same in the majority of cases. And marketing procurement has not yet reached that tipping point when it can refute that generalisation.

 

Houston, we have a problem.

 

When it comes to the issues and accusations surrounding marketing procurement, the reality is that there are commonly problems in all corners of the marketing/procurement/agency triangle. There is no shortage of evidence of the dysfunctional relationships on all sides: lower ROI, creative agencies’ poor financial health, high client turnover. Each corner needs to take responsibility for its problems and constructively identify how others can do likewise, while simultaneously resisting the temptation to blame-storm, get emotional and lay the blame squarely with the other two in the triangle (if that’s geometrically permissible). Multilateral problems require multilateral solutions, and multilateral solutions in turn require constructive/productive and not defensive/aggressive dialogues.

 

However, while emotions and righteous indignation still run high in all corners, this unholy trinity (as Giles Lury referred to it in his recent review of my book on the subject), will fail to untangle what is frequently a misdirected, misaligned and destructive relationship between marketing, procurement and agencies.

 

So how should we proceed?

 

The first useful step in the successful negotiation of most conflicts is to thoroughly understand the interests of each party. Better still, in this instance it would be to agree the legitimate business interests of each party. And this is where procurement can often fall down.

 

In many cases in my experience (and I stress here, many, not all), marketing procurement has had an interest which is in direct conflict with marketing and/or agencies.

 

To illustrate this point, here is a short extract from my book How to By a Gorilla. A few years ago I was delivering some training for a group of blue-chip marketing procurement professionals. I started the day with two questions:

 

My first question was this:

 

“Can you please raise your hand if you are personally incentivized to save money from your expenditure on marketing services?”

 

Pretty much immediately ten hands went up around the room. My second question was this:

 

“Could you please leave your hand up if your bonus is in any way contingent on the value of the marketing services you procure?”

 

The second question took longer to answer than the first and needed to be repeated a couple of times. Slowly, but surely, every hand that had been raised by an incentive was lowered by a lack of accountability.

 

As Upton Sinclair put it:

 

“It is difficult to get a man to understand something, when his salary depends on his not understanding it.”

 

But people in marketing procurement have even said to me, to paraphrase:

 

“I know it’s nuts, but it’s what they pay me for. Forgive me but I’m not going to bite the hand that feeds.”

 

Crucially, this doesn’t need to mean somebody in procurement must have a gain share incentive, they only need to be given a directive to “save” money.

 

To get back to brass tacks for a moment, the purpose of marketing investments is to generate a return to the company that is greater than the principal invested. Cash isn’t the value here, a greater return on the cash is the value. So why isn’t marketing procurement incentivised by the return on investment just as marketing and agencies usually are?

 

Make no mistake, I know that this is a short and somewhat superficial analysis of a hugely complicated issue (which is why, in my defence, I have written a book on the subject). But those in marketing procurement who want to avoid the slings and arrows of criticism, and who currently enjoy savings-based incentives or just a directive, could choose to share the business objectives of the marketing category for a start.

 

Shared interests establish trust and trust defines a team. If this unholy trinity wants to become holy, they must have a common interest.

 

As I said before, there are problems on all sides of the triangle. Marketers often exert too much control over their agencies, creative agencies often lose sight of their clients’ business problems and so on. But to start solving a problem like procurement, those who procure marketing services must understand a basic logical argument:

 

Strategic and creative services are problems with

unlimited possible solutions.

 

AND

 

Problems with unlimited possible solutions cannot have quality measures applied before they are procured. Because the solutions don’t yet exist.

 

THEREFORE

 

The fees paid for such solutions represent investments, not costs.

 

SO

 

In marketing - the same as in any other investment – if you reduce your investment you either expect to reduce your return, or you increase your risk to achieve the same or better return.

 

HENCE

 

Unless you want a reduced return on such marketing investment, or perhaps a more predictable lower return, you must have a risk-savvy strategy for your brands, before you cut your investment.

 

 

 

 

 

David Meikle

Author: How to Buy a Gorilla

Company: www.htbag.co.uk

Book: www.howtobuyagorilla.com

 

 

 

 

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