As pointed out by Jason Busch over on Spend Matters, efficio recently released a white paper entitled The Creative Challenge: Driving Efficiencies in Marketing Procurement that focuses on how procurement can target marketing spend. Since I wondered how it compared to the Magic and Logic: Redefining Sustainable Business Practices for Agencies, Marketing, and Procurement research report co-sponsored by CIPS (Chartered Institute of Purchasing and Supply), the IPA (Institute of Practitioners in Advertising), and the ISBA (Incorporated Society of British Advertisers) last summer, I decided to give it a read and summarize it in a 2-part blog post so that you, dear reader, could do a high-level comparison for yourself by referencing the posts I did on the latter last fall (Part I and Part II).
The report presents some of the major challenges to the initiation of rewarding discussion and collaboration between marketing and procurement, a taxonomy through which marketing spend can be understood, and the outline of an approach to driving efficiencies in marketing procurement. This post will review each section.
The key challenges addressed are the following:
- Understanding that Close Relationships are Good for Both Sides
Marketing often believes procurement is not interested in learning about their market or relationships while procurement often believes that marketing does not want them to be involved in relationships with them or their agencies.
However, a productive understanding can be reached if procurement takes the time to learn the marketing business and both sides agree on clear roles and responsibilities.
- Realizing that It’s Not Just About Cutting Costs
Marketing often believes that procurement is only interested in cost-reductions at the expense of the client-supplier relationship while procurement often believes that marketing has a “money is no object” viewpoint that is exploited by suppliers.
However, a productive understanding can be reached if procurement takes the time to position themselves as a growth enabler, educating marketing about the total supply chain approach, and focus on the value they can bring.
- Acceptance that Good Procurement Does Not Stifle Creativity
Marketing often believes that procurement only knows how to apply a rigid process while procurement often believes that marketing departments are unable to follow processes.
However, a productive understanding can be reached if procurement develops a structured commercial approach tailored to marketing and a joint agreement is made on objectives and key performance measures.
- Understanding Properly Structured Relationships are Effective
Marketing often believes that procurement is only interested in tendering and tactical savings while procurement often believes that marketing’s relationships with their suppliers are too cozy and that suppliers take advantage of this.
However, a productive understanding can be reached if procurement takes the time to demonstrate their value add.
The taxonomy breaks marketing spend down into categories and sub-categories according to “Above the Line” (ATL) and “Below the Line” (BTL) spend. ATL generally refers to all activity related to advertising and all other marketing activity, which is generally undertaken to support the messages created in ATL, generally falls into the BTL category.
“Above the Line” spend includes media space acquisition (divided into media space buying, free-standing inserts, and media planning) and campaign production (divided into creative agency spend, broadcast commercial production, and pre-press) while “Below The Line” spend includes other marketing services (design agencies, direct marketing data management, direct marketing campaign fulfillment, market research, promotions, public/consumer relations, and sponsorships), printed marketing materials (divided into pre-press and printing services), branded merchandise, and meetings, incentives, conferences, and events.
The lion’s share of the marketing budget in most companies is directed towards “above the line” activities and usually towards media space acquisition through agencies in particular. Furthermore, even though the markets often lack transparency when it comes to costs, since markets range from strongly regulated markets to highly negotiable markets (in Europe alone), there is a significant opportunity for a company with a large budget, especially when distributed across several markets, to achieve savings through a structured approach to selecting, managing, and giving incentives to its media buying agencies without impacting the quality or creativity of individual campaigns.
Tomorrow we’ll review the efficio approach to driving efficiencies in marketing procurement as well as some of the typical savings levers that a procurement professional can apply to gain savings in each of the categories and sub-categories of marketing spend.