Release cash Reduce cost Manage risk Improve ROI T: +44 (0)20 7605 1600 E: [email protected]W: www.4cassociates.com Does Procurement stifle Marketing’s Creativity? 4C Marketing Breakfast Debate July 2012 Predicting ROI of marketing spend is not easy. If you are buying electricity, for example, a certain investment will deliver a defined amount of watts, which will keep a known number of lights on. There are no such certainties in advertising, marketing or PR, partly because most effective marketing requires differentiation, innovation, and personalisation. Standardisation and repetition makes spend requirements easier to predict, but the results will be affected. In this environment, procurement managers are not in a good position to determine what represents value for money. A growing number of businesses are looking to drive growth by cutting costs and optimising spend. In this context there is an increasing amount of pressure on marketing and procurement to work together. Traditionally, there has been some scepticism regarding these functions collaborating given their respective mandates. 4C brought together a selection of professionals from several sectors to determine whether procurement stifles marketing's creativity. Cameron Holder, Manager at 4C Associates, debated that procurement does not hinder creative thinking, whereas Alexandra Ranson, Managing Director at Specialmoves, argued that, despite best intentions, procurement gets in the way of effective marketing activity. Why Procurement Involvement Hinders Marketing Creativity The current business and economic environment poses challenges for all sectors and disciplines. Marketing is no exception: spend is increasingly being scrutinised to ensure resources are put to the best possible use. Monitoring whether marketing is delivering a decent return on investment is essential: there is no point attacking cost without knowing whether what you are spending money on is working. Expensive procurement processes are also a problem. 95 per cent of marketing agencies are SMEs and cannot afford to spend more hours replying to an RFP than they will be paid for, even if they win. Some of the most creative, flexible, dynamic agencies are ruled out by long, complex procurement processes which only large networks (with big overheads) can afford to participate in. "Marketing does not live in a bubble which should be immune from budget constraints. We need to be just as responsible and accountable as every other department."
Predicting ROI of marketing spend is not easy. If youare buying electricity, for example, a certaininvestment will deliver a defined amount of watts,which will keep a known number of lights on. Thereare no such certainties in advertising, marketing or PR,partly because most effective marketing requiresdifferentiation, innovation, and personalisation.
Standardisation and repetition makes spendrequirements easier to predict, but the results will beaffected. In this environment, procurement managersare not in a good position to determine whatrepresents value for money.
A growing number of businesses are looking to drivegrowth by cutting costs and optimising spend. In thiscontext there is an increasing amount of pressure onmarketing and procurement to work together.Traditionally, there has been some scepticismregarding these functions collaborating given theirrespective mandates.
4C brought together a selection of professionals fromseveral sectors to determine whether procurementstifles marketing's creativity. Cameron Holder,Manager at 4C Associates, debated that procurementdoes not hinder creative thinking, whereas AlexandraRanson, Managing Director at Specialmoves, arguedthat, despite best intentions, procurement gets in theway of effective marketing activity.
Why Procurement Involvement HindersMarketing CreativityThe current business and economic environment poseschallenges for all sectors and disciplines. Marketing isno exception: spend is increasingly being scrutinisedto ensure resources are put to the best possible use.Monitoring whether marketing is delivering a decentreturn on investment is essential: there is no pointattacking cost without knowing whether what youare spending money on is working.
Expensive procurement processes are also a problem.95 per cent of marketing agencies are SMEs andcannot afford to spend more hours replying to an RFPthan they will be paid for, even if they win. Some ofthe most creative, flexible, dynamic agencies are ruledout by long, complex procurement processes whichonly large networks (with big overheads) can affordto participate in.
"Marketing does not live in a bubble whichshould be immune from budget constraints.We need to be just as responsible andaccountable as every other department."
Q&AThe debate was opened to the floor with concernsexpressed regarding the extensive involvement ofprocurement in the RFP process. Attendees providedseveral examples of large organisations whose RFPsrequired an excessive amount of work and in one case,even charged a fee. Ranson called for marketers toimprove their performance management capacities toavoid the need for procurement to be so heavilyinvolved.
At this point, participants called for a distinction to bemade between good and bad procurement. It isundeniable that excessive involvement andconcentrating purely on spend can only serve to stallcreativity. Holder pointed out that this did not reflectbest practice procurement and that the function'sinvolvement in the RFP process should focus oncommercial and risk factors.
One participant disagreed with Holder’s view thatprocurement should steer clear of the creative process.A lack of involvement in the creative rationale resultsin an uninformed debate between both functions.Holder replied that in his experience, each functionwas perfectly capable of working to their strengthsand that procurement's involvement in the creativeprocess would hinder progress.
ResultsThe motion was amended to "Does 'good'procurement stifle marketing creativity". The floorvoted against the motion.
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Procurement also damages long-term relationshipswith agencies by pushing for regular retenders andrepitches. These can be very expensive (for both sides),disruptive, damaging to morale, and distract fromevery day delivery. Once selected, agencies will try toclaw back these costs by any means available, wipingout any apparent commercial gains that procurementhas negotiated.
Procurement does not Stifle Marketing'sCreativityThe idea that procurement and marketing cannotwork together is outdated. Procurement is there tohelp marketing do its job and allow each function tofocus on what it does best.
Pitch management is one of the areas whereprocurement has the tools, expertise and time to addsubstantial value. Procurement increases resourcesdedicated to the pitch, so marketing can consider agreater number of agencies. Relationshipmanagement is another area where collaborationbetween the functions can be fruitful. Procurementcan ensure robust contracts are put in place andguarantee that each party is clear on what the finalobjective is.
In addition, the function can carry out regularproactive reviews throughout the duration of thecontract, to make sure any issues are flagged up assoon as possible. This avoids the need for reactivereviews, which are carried out after something hasalready gone wrong.
"Sometimes someone has to be 'bad cop' indisputes. Procurement can do this so thatmarketers can carry on without their day today relationship with the Agency being tooaffected"
Another vital but often overlooked contributionwhich procurement can make, is obtaining supportfrom finance. Not only will marketing benefit fromhaving an objective voice on side when discussingbudget, but procurement also "speaks the samelanguage" as finance. This collaborative approachadds credibility to marketing's requests for reinvestingsavings rather than stripping them from the budget.
"Collaboration between marketing andprocurement benefits both sides and allowsfor the creation of a solid relationship withexternal agencies"
