Marketing Procurement

Perfect fit: The value of preferred vendor relationships

Preferred Vendor Relationships

“Pull Quote”

Above all, make sure you weigh value and cost carefully. Cost savings comes primarily from consolidating the work, commoditizing the spend, and developing a more efficient process.

Preferred vendor relationships have primarily been viewed over the last five to ten years as a vehicle for indirect procurement departments and cost consultants to wring out savings from the marketing production process. The logic has been that vendors will offer advantageous pricing in the expectation of gaining access to a sizeable amount of work from a particular brand.

However, success has been somewhat mixed because these efforts are generally directed at a group of vendors who are;  a) already getting the work, b) reluctant to alienate agencies by circumventing them in the process, and c) reluctant to negotiate with themselves to do the same work for less.

To date, there has been a lack of innovative thinking about how to define the scope of work on offer, how to identify the universe of potential vendors, and a lack of consideration of the broader value beyond cost savings. In fact, the notion of preferred vendor relationships goes far beyond cost savings.

As change in the industry is thrown into hyperdrive by the global pandemic, brands would be wise to consider how direct partnerships with creative vendors build long term creative relationships and ensure stability in the creative execution process, while still looking to their agencies for high level creative and strategic ideation.

Direct partnerships should be viewed from the vantage point of how to support the business needs, streamline production, raise the quality of production, create consistency, and increase opportunities for innovation.

Potential benefits of establishing preferred vendor relationships

Upgrade creative resources

1) Secure access to a bigger, and potentially better, universe of creative resources that would have otherwise been out of reach because of your price point. When you define a larger universe of work that you are prepared to commit to in advance, higher level vendors will be interested in competing for the work because it represents a stable workstream that they can staff against and the opportunity for a guaranteed revenue stream.

Streamline the upfront engagement process

2) Most large companies are challenged, if not unable to engage new vendors on a time schedule that satisfies the requirements of creative production because the process of setting up new vendors is typically quite involved and can be quite difficult for smaller vendors to navigate. The opportunity to streamline engagement of creative vendors and management of contracting and payments by creating a roster of approved partners with pre-negotiated terms, Managed Service Accounts (MSA’s), SOW’s, and payment mechanisms in place will be a huge advantage for the creative process.

Quick Turnaround

3) Create a nimble execution process by providing vendors with style guides, messaging plans, and other relevant marketing information up front so that you can get teams up to speed on projects quickly and engage in creative problem-solving without extended time wasted in the briefing and cost estimation process. Bring creative partners into the planning and ideation process to provide accurate input on cost and feasibility of projects at a time when the information can actually be useful.

Examples of how to commoditize the spend

Look at the type of work your brand produces and find the areas where there is a consistency to the genre of work or the type of deliverables that have to be produced at scale.

1) Technology clients typically produce a lot of CGI which requires standardized wireframes of phones, computers, or other devices and can usually identify a need for this type of work that can be commoditized. This opens the door to establishing a relationship with one or two vendors that can provide the specific service on a continuing basis.

Even high-level post-production vendors are highly motivated to compete for these kinds of engagements because they provide a stable source of revenue. There may be a need for more than one vendor, depending on the channel delivery or lines of business (more on this later).

2) A Quick Service Restaurant client who produces a large volume of food photography would develop a calendar for the year identifying requirements for product shooting and time schedules for when those assets need to be delivered. This makes it possible to create a production schedule for the year, define what shooting is required and when, block out time with predetermined vendor(s) and plan and estimate cost with plenty of lead time for prep and production.

3) Versioning and localization are another unique opportunity to commoditize work, as this type of work is essentially executional as opposed to creative. Believe it or not, there are still agencies that will include easily commoditized versioning or localization work in a production estimate from a high-level creative production or post-production vendor.

Easily commoditized work like tagging, versioning, translation, etc. can be executed by specialist agencies and vendors at a price point far below creative agency or vendor rates because they are specifically set up for execution of a large volume of relatively simple deliverables.

Here is a look at how to approach preferred vendor reltionships in order to get the most value out of these partnerships

RFP for a Defined Scope of Work

In order to commoditize a particular spend, such as CGI for tech or device shooting, first do an internal needs analysis to determine which internal stakeholders or lines of business will participate and contribute to the spend. Figure out approximately how many products per year will be included in the scope and how many assets will be required, which will define the overall universe of deliverables.

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Best practice is to aggregate the existing spend information to have a basis for comparison when you review new pricing. Once you have defined the overall spend, and what type of deliverables are required, determine whether you are interested in creating a roster with a choice of vendors or the simplicity of preferred vendor relationships, the difference being that a roster by definition has a universe of partners with standardized terms whereas a preferred vendor relationship can encompass only one vendor and each vendor can have different terms.

The importance of pre-defining the scope of work is to enable the vendor to accurately staff the account, define for the marketers when they will be using that vendor, and make sure the agency, if there is one, can understand which work has already been assigned to that partner.

Make sure you look beyond the obvious work streams and consider all the divisions that can participate in this kind of work. For instance, product and packaging, .com, print, and video should all be considered for a CGI deal. Typically, we find that companies use different photographers and videographers to recreate the same product for channel specific needs when in fact, they are all creating the same images, just with different angles and delivery in varying formats.

Consider this an opportunity to consolidate all the internal needs, define the requirements ahead of production, and centralize the production process. In our experience, you may even be able to predefine the angles needed by each division which will also make it easier to negotiate a clearly defined rate card.

After you define the requirements and identify the potential partners,  invite them to an RFP process. This is most successful when you have clearly defined criteria for how to judge the best partner. For instance, do you need global capabilities, is it important to have an account manager in place at the vendor, what capabilities do you need (CG models, still images, moving imagery), will you need asset storage or upload and tagging to your own DAM system?

It is also a good idea to quality test the vendors and consider paying them each a small fee to   produce a representative asset to demonstrate the quality of work they will deliver.  This creates a benchmark to judge their performance going forward if you award them your business.

After you identify the players and define the scope of work, pay particular attention to the details in the price negotiation. There will typically be rush work, overages, weekend work etc. Pre-negotiating these costs in advance will help everyone know what to expect and will contribute to defining the value of the partnership.

One of the many advantages of entering into this type of RFP process is it will force your internal teams to define their upfront needs, which makes it easier for production when the time comes.

Above all, make sure you weigh value and cost carefully. Cost savings comes primarily from consolidating the work, commoditizing the spend, and developing a more efficient process, not grinding the vendors in the final negotiation.

It is easy to default to cost only as a means of evaluating vendors, but value and quality are essential features as well, especially if you want buy in from the people responsible for delivering the creative. If internal stakeholders (marketers, creatives, internal agency) are on board with the universe of selected vendors, the project will be successful, and that depends on service and quality as much as cost. If the cost negotiation with the vendors is overly aggressive, you could be hit with unexpected overages as the vendor will be looking for ways to make up the lost revenue and that will affect service and availability.

The key to success is consensus between all the players on creative capabilities, cost, quality, and service.

About the authors

Alex Blum and Andrea Ruskin are partners in Blum Consulting Partners.

The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of Marketing Procurement iQ or imply endorsement from the publisher