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18 April 2012 | Anna Scott
The increased involvement of procurement in buying marketing services is saving companies money in the short term, but could be eroding the value of services in the future.
Nearly three-quarters (73 per cent) of senior marketing decision-makers surveyed by consultancy The Observatory International said that they see procurement as getting more closely involved in buying marketing, advertising and PR services.
This has led to improved contract negotiation, which 83 per cent of respondents said was achieved, and reduced average costs by between 5 and 10 per cent in some cases, according to 81 per cent of respondents.
However very little strategic buying activity was achieved, such as agency shortlisting, scoping of deliverables or assessing creative and strategic capabilities of agencies, the survey stated.
“There are mid to long-term implications of simply pushing down prices, with potential damage to the quality of communications campaigns and ultimately, your brand,” said Lucinda Penistone-Baines, co-founder of The Observatory International. “This is a people business. That means there is a real danger if it is wrongly or under-resourced as a consequence of a price squeeze.”
The research, which surveyed 40 marketing decision makers who oversee annual budgets of over £10m, suggests that simplistic cost cutting and over-complicated procurement processes could be eroding the value of services.
Some 71 per cent of the respondents found procurement’s involvement had no effect on the effectiveness of campaigns and eight per cent felt it had a negative effect.
“Using marketing services is highly specialised and requires and deep current understanding of the way marketers and agencies work,” Penistone-Baines said.
“The best procurement departments often employ ex-agency professionals, and are not shy about employing outside specialists to support specific project requirements. It’s important to recognise that pulling a lever on agency cost generally requires a corresponding improvement to the effectiveness of the marketer/agency way of working.”