Marketing Procurement

How procurement can take a front seat in a post-pandemic world

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“Let’s not waste the opportunity of learning from last year. Because change is accelerating. It’s not going back, either the economy or consumer opinions, so marketing procurement and marketing’s relationship should also evolve” – Patricia McGregor, Managing Director (Canada)

Firm Decision’s “Marketing and procurement after COVID—it’s your business to know” report analyses the transforming relationships, resources and priorities for marketing teams in a post-pandemic world.

Speaking with Christine Moore, Managing Director (North America) and Patricia McGregor, Managing Director (Canada), we get their key insights, followed by the seven key takeaways of the report.

Looking at the short-term impact of the last 18 months on marketing-agency commercial relationships, Firm Decisions along with WBR Insights surveyed 100 procurement and sourcing leads from organizations across the United States and Canada to generate a series of insights.

Within the survey, there was a balanced representation of respondents with a marketing spend under management between $100 million to $250 million (33%), $250 million to $500 million (33%), and more than $500 million (34%), totaling over $26.5 billion.

The rise of Procurement

In the conversations with procurement leaders, FirmDecisions saw first-hand that, the pandemic has brought procurement to the forefront. Not only is there a raised appreciation from both the marketing and organisation  side, but it has also provided the momentum of how they can work together. 

Christine Moore, Managing Director (North America), says that marketing procurement traditionally had a “backseat”; they were either brought in later in the discussions to get pricing and contracts agreed, or were actively avoided.

However, the pandemic showed to marketing and company leaders that procurement was an essential partner in making things happen – including renegotiating contracts, organising staff plans, changing payment terms and media spends. The pandemic brought a tight timeline – and procurement delivered against it. As McGregor says, “they were able to bring their different strengths together and have conversations they hadn’t had before about what they could do to help each other”.

For procurement, it meant actually being able to provide the full insight: “they can be someone who gets to play the full game and be on the field”, Moore says. She continues, “It is important going forward that relationships stay intact and do not disperse with everyone going back in their corner”. This alignment will ultimately come down to the CMOs and CFOs creating similar KPIs and “leading by example”.

Respecting each other 

Essentially, McGregor believes that a strong marketing procurement lead should have a “healthy respect” for marketing more generally; this will help foster a healthy relationship.

She explains, “Often you will hear marketing people lament the fact that marketing is seen as an expense rather than an investment. We therefore need to work out a relationship where both sides feel appreciated”. 

Procurement must understand that because marketing spend is not as precise or quantifiable as other forms of procurement, it must be treated as a different beast. Equally, marketing must appreciate that procurement aren’t just the “gatekeepers”, but as McGregor believes, “they can actually help marketing make better decisions”. 

This makes procurement the “jack of all trades” in Moore’s view. They need to be business astute, but also know how to think outside the box, and truly marry this “art and science” mindset.

Procurement making the effort and driving effectiveness 

Moore and McGregor are realistic about the climate and the fact that there is a lot of work to be done if procurement wants to stay at the forefront.

Moore says, “It’s going to take a lot of keeping up with relationships and I’m not sure whether marketing is going to put as much effort into it. It’s up to procurement to be the bigger person”. 

With procurement having “more to gain” in her view, there needs to be an active effort to keep up these stronger relationships. 

In McGregor’s view, “Procurement has a short window in those companies that are pivoting to change”. They need to show how they can provide transparency and drive efficiencies in a way that resonates with marketing and their overall objectives.

She continues, “Let’s not waste the opportunity of learning from last year. Because change is accelerating. It’s not going back, either the economy or consumer opinions, so marketing procurement and marketing’s relationship should also evolve”.

The seven key takeaways

Firm Decisions summarises their key findings in seven focus areas. As Moore explains, “It is a good agenda to have between marketing and procurement because there are no questions that marketing shouldn’t be able to answer or wonder what the answer is. If they had these seven objectives achieved, then both marketing and procurement would be in a much better place”.

The agenda includes:

Following the trend of increased focus on online marketing, over one-quarter of procurement leaders will prioritize SEO and web development (28%) and programmatic advertising (27%) in the next 0 – 6 months.

Nearly half of procurement leaders are reconsidering how they use three of those marketing partners: branding (45%), market research (40%), and social media marketing (40%). Priorities will be wide-ranging and diverse.

Commentary

Priorities is something that Moore says is one of the most compelling findings from the paper. She predicts that marketing and marketing procurement’s priorities will be more aligned moving forward. 

Moore says that they have seen marketing procurement’s priority be, for example, taking the agency environment or supply base from say 1000 creative agencies to ten, which is obviously a long term and strategic goal. In procurement’s eyes, according to Moore, that would be a high priority project. However, prior to COVID marketing probably wouldn’t have seen the value in that project. “But now I think they all realise with a thousand agencies, we are probably only working with half of them, with liabilities with a couple of hundred of them”, Moore explains 

She continues, “I think marketing is going to realise that the things that marketing wanted to work on which sounded like a “nice to have” is actually a “need to have”. This is because the pandemic demonstrated the practicality of a lot of procurement’s goals.

Among organizations that have changed their marketing relationships, nearly half (47%) stated that their agency teams led discussions with clients to identify better ways of working together and nearly half (42%) said their client procurement teams implemented changes in their ongoing relationships with agencies. 

The key sentiment across respondents was that stakeholder collaborations drove big things to happen more quickly, suggesting that Procurement had, in these cases, successfully worked with agencies and marketing divisions to implement tactical changes to marketing relationships.

While commercial relationships were under scrutiny due to COVID- driven pressures, organizations continued to see the value in their Agency relationships. Among those organizations that changed their marketing relationships, very few shifted any services they procured from agencies to internal teams.

There is a general urgency to update contracts across all areas of marketing. Most commonly, procurement leaders expressed an intention to update their contracts for SEO and web development (37%), market research (36%), e-commerce (33%), affiliate & influencer marketing (31%), social media (30%) and email marketing (31%)

Among organizations that have renegotiated their contracts, most (58%) renegotiated agency contracts in terms of remuneration (both model and levels of remuneration); 51% switched talent and capabilities (e.g., more digitally focused staff) as well. A third of respondents indicated that they had also re-negotiated payment terms and scope of work details.

In each case, most procurement leaders said that in the next 12 months, their organizations would consider the following services to optimize their spending on external marketing services: (a) media performance auditing and ROI monitoring (54%); (b) marketing effectiveness forecasting and optimization (51%); and (c) auditing and compliance management for contracts with agencies (42%).

Commentary 

McGregor believes that optimisation is the most important finding and will be key moving forward. As not only does that align with the increased emphasis of data and digital, but it also feeds in to how procurement can help tighten marketing’s commercial relationships and ultimately work closer with marketing. 

Crucially, optimisation can help boost transparency and thereby optimise spending in a meaningful way. 

However, this is a two-way street: “If marketing can give more context to procurement, and procurement can show how they can best provide transparency to their decisions, then I think that could be really important to the relationship”, she says.

Most procurement leaders stated that their organizations have used contract compliance as a source to validate that commercial, legal, and operational obligations are fulfilled from the agency and client-side (61%). 42% to 52% of procurement leaders have already audited some areas of their marketing spend. 

Most procurement leaders who haven’t audited their marketing spend plan to do so in the future. There is acknowledgement that compliance allows organizations to be more responsive, and make decisions faster while reducing risk.