29 March 2007 | Paul Snell
Procurement's influence is damaging the profitability of marketing agencies, the industry has warned.
A survey by the Marketing Communication Consultants Association (MCCA) found that salaries in marketing were failing to rise quickly enough to allow agencies to compete for the best staff.
The report singled out procurement's influence for "eroding margins", leaving agencies unable to invest in current staff or hire talented staff from other agencies. A spokesman for the MCCA told SM
it knew agencies that had stopped recruiting or made redundancies as a result.
"Enough is enough," said Scott Knox, managing director of the MCCA. "Agencies understand the need to take tighter control, but there has to be a break. Procurement needs to be asking how much agencies are reinvesting."
He said agencies had taken steps to get their salaries and account handling costs under control, demonstrating commitment to procurement. But there were still too many purchasers focusing on cutting costs instead of nurturing long-term relationships.
"We do welcome the engagement of procurement to get value for money or return on investment," said Knox. "But cutting costs will come right back to hit the client. Mediocre communications has a knock-on effect on the brand and sales."
He said marketing didn't have a problem with procurement's work on reducing costs on tangibles, such as print costs. But agencies could not afford to invest in creativity without long-term relationships with clients.
Knox said agencies had turned work down, because procurement would be involved with the process and they were concerned about the effect that might have on profitability.
"We don't see procurement as the enemy, but value needs to be shifted," he said. "Training purchasers in buying intellectual property services has to be sharpened."
Knox said good buyers could become "brand guardians", communicating between the client and the agency. But purchasers need to understand that agencies require long-term deals and relationships to develop and innovate.
Some buyers, however, were sceptical about the claims. "The problem is the different drivers," said Andrew Sayers, head of procurement at Abbey. "Boards are interested in annual returns and the opportunity for a long-term relationship is not that wide. You don't pay for the relationship, you pay for the service."
"It should only be about a long-term relationship if it is appropriate," said independent consultant Tina Fegent. "It is purchasing's role to help the agency be transparent about costs. It should manage the efficiency, price and relationship with the agency."