Marketing procurement teams need to adopt a value-based approach to their work rather than focus on cost, according to an influential report.
In the report the World Federation of Advertisers (WFA) said marketing departments were under pressure to reduce spend due to the coronavirus pandemic but procurement needed to be “recognised for delivering a wider set of benefits than mainly cost saving”.
Research for the report found just 5% of survey respondents thought perceptions of marketing procurement were “extremely positive” and 92% thought the way it was perceived by their organisation could be improved.
The research also found the metric most used by procurement teams that was not shared with marketing colleagues was cost reduction, followed by cost avoidance.
James Taylor, global procurement director, media, digital and consumer planning, at drinks company Diageo, who was involved in producing the report, said: “Procurement teams need to stop using words like ‘stakeholder’ when referring to internal colleagues and instead talk in joint performance language around shared goals.”
The WFA said: “Ever since marketing procurement emerged as a discrete discipline more than 25 years ago, there has been a suspicion that the traditional procurement approach cannot be applied to marketing agencies where outputs are not repeatable and the impacts are hard to quantify and thus value.”
The WFA launched Project Spring in 2018 to address these challenges and the report is the culmination of that work.
“The goal is to ensure that marketing procurement teams have the tools to take a value-based approach rather than revert to a race to the bottom on price,” said the WFA.
The report said around half of global marketing procurement teams did not get involved in projects worth less than $75,000 but lowering this threshold would bring procurement and marketing teams closer. It also said procurement needed full visibility of marketing spend.
Half of procurement teams report into supply chain and 34% into finance, the report said, while data showed those reporting into finance were less likely to be seen as adding value to the business.
“Teams need to ensure relationships within an organisation are not siloed,” said the report.
It went on: “There remains a significant reliance on cost reduction and cost avoidance as core metrics. Procurement must ensure that their metrics look beyond price and capture wider, often less tangible benefits brought to the business such as a contribution to top line growth sales, the development of successful agency relationships or the reduction of business risks.”
Concerning relationships with agencies, the report said: “Changing the way marketing procurement perceive agencies is essential to evolving the perception. Agencies are not simple vendors; they are an extension of the internal marketing team and can have an important impact on the company’s business KPIs.”
Laura Forcetti, marketing sourcing global lead at the WFA, said: “The future of sourcing is in adding value beyond savings. It should be not just a business partner that shares objectives with colleagues but also a source for growth within the organisations. It can only be these things if there is a shift from a primarily savings outlook to a value creation approach.”
Tina Fegent, a marketing procurement consultant, told SM: “I think [the report] is very comprehensive and is a real checklist for those already working in marketing procurement and for those that are starting out. Conversely I am sure that the supply market of agencies could read it as well and help them better understand what good marketing procurement looks like.”
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