Marketing procurement might be likened to the plumbing of the ad industry. Even the most spectacular campaign relies on the nuts-and-bolts solutions brought by the humble marketing procurement team.
Like actual plumbing, you’d think you’d notice it more when it’s not there. But Pepsico is putting this analogy to the test by doing away with marketing procurement, sparking a good deal of discussion among marketers.
Six months ago the beverage firm made the decision to dump its procurement team, believing this could give it greater agility in fast-moving consumer business environments.
The decision has prompted diverse responses. Some marketers, such as Widhadh Waheed, director of eBusiness at Shangri-La International Hotel Management, agree agility is the issue. She believes the move by Pepsico is a sign of things to come.
“More and more companies will look to have more agility in marketing, and even though this may not mean that they go the route of Pepsi, I do believe that there will be more flexible frameworks under which marketers are empowered to make quick decisions,” she tells Campaign.
Agility based on customers and data insights “will give us the ability to respond quickly to change”, she adds.
Shufen Goh, principal at marketing consultancy R3, says most brands understand the need for agility ahead of just cutting costs. “However, that conversation can be very conceptual for their procurement colleagues.”
Todd Handcock Asia CEO and global CMO of Williams Lea Tag, a marketing outsourcing firm, agrees it is a live issue, but says speed to market has always been one of the big pain points for brands. Some companies do procurement well, he says, but he still encounters procurement people who say: “I’m lost. I know I have to support marketing but I don’t understand it.”
In most companies, procurement is a support function that acquires products at the lowest cost. But in large brands buying ads and marketing services is a vital function intended to create value.
“It surprises me that I see a number of organisations where procurement really doesn’t understand the marketing requirements,” Handcock says.
The marketing team needs solutions, not just products. Handcock, whose firm is the world’s largest marketing print buyer, says the problem is evident even in something as simple as PoS material.
“If your procurement team has saved money with a mom-and-pop shop in Thailand, that might help manage costs but will do little for branding,” he says. “The Burberry marketing team won’t accept a drop in quality.
“Cost is important. Of more importance is my procurement organisation helping me and my sales team.”
He cites four key roles for procurement: supporting the marketing team’s speed to market; accelerating the sales cycle; driving quality; and supporting innovation.
“Big organisations like P&G do marketing procurement brilliantly. These big brands are marketing companies. The most important thing for them is their brand. So the marketers are kings and queens, and procurement has to support them.”
Ranji David, marketing director Asia for the World Federation of Advertisers (WFA), which accounts for 90 per cent of global advertising spend, acknowledges that the field tends to get overlooked. “Procurement is a part of the marketing universe that doesn’t get written about so much. But it’s a very important one,” she says. The WFA’s procurement working group is one of the most active groups in the global industry body, she adds.
She does not see any sign that brands are doing away with procurement teams. In fact, the evidence points the other way: nearly a third of WFA members worldwide are seeking to hire marketing procurement staff.
Handcock also doubts many companies will start abandoning marketing procurement. “It comes down to the organisations and how mature they are in the process,” he says.
While some organisations have gone down the Pepsico path, he says that “nine times out of 10” they made the decision because “the procurement organisation didn’t understand the marketing, or marketing of brands”.
Getting marketing procurement to work requires expertise in both domains. But first management must recognise that need.
Handcock cites the case of a major MNC bank where the CMO has created a desk in his marketing team in which the procurement marketing rep must spend three days a week. “I’ve also seen companies where they do job rotations and rotate people through the marketing procurement function.”
WFA’s David says it’s about developing procurement specialists who know about marketing and understand its language. “It depends on the individual organisation. But what we have seen is when procurement people are able to embed in marketing there is an alignment, and when sourcing and marketing can align their goals, that’s a winner. Aligning KPIs also goes a long way.”
Goh, from R3, says brands are under great pressure to get “not just return on marketing, but return on agencies”. She believes the pursuit of value will only get more intense, but the problem is more than just a procurement issue.
She sees a “broken agency business model”, where transparency and accountability are lacking and trust between agencies and clients has eroded. “The procurement process has to extend beyond sourcing to a more robust performance management framework for agencies,” she says. “This means that procurement folks need to develop new skillsets and knowledge, beyond cost comparison. Hence, you see a trend of rethinking whether procurement is best-placed to lead this.”
Our view: Clear internal communication is crucial to making the most of your marketing procurement. Have a comment?