Yesterday we discussed the key challenges that need to be overcome in order for marketing and procurement to effectively work together, as well as a classification of “Above The Line” (ATL) and “Below The Line” (BTL) marketing spend, as discussed in the recent efficio report The Creative Challenge: Driving Efficiencies in Marketing Procurement. This report, which has highlighted on Spend Matters soon after it was released, is a nice companion 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, that I summarized in a 2-part blog post last fall (Part I and Part II).
Today we are going to discuss the 8-step Efficio approach to driving efficiencies in Marketing Procurement, but first we are going to review the addressability of each subcategory and some typical savings levers that a procurement professional can apply to gain savings in each of the categories and sub-categories of marketing spend, since these aspects of the report are quite useful.
The report classifies the addressability of each subcategory so that you can stagger your initiatives in waves, and start by addressing the categories where you are likely to obtain the quickest hits and bolster momentum for future efforts.
According to the report, the easiest subcategories to address are media space buying, free-standing inserts, media planning, and pre-press “above the line” and promotions, pre-press, printing services, and branded merchandise “below the line”. After this, it suggest tackling direct marketing – data management and campaign fulfillment, market research, public/consumer relations, sponsorships, and meetings, incentives, conferences, and events below the line, which are usually of moderate complexity. Finally, as you work your way from the subcategories that can be addressed using mostly tactical initiatives to those that require a lot of strategic planning and cooperation, you would end with the creative agency and broadcast commercial production spend “above the line” and the design agency spend “below the line”.
The typical savings levers that a procurement professional can apply to gain savings, which, depending on the lever can demonstrate savings anywhere from 3% to 50%, are:
- Consolidation with one media buying agency & fee compensation schemes
- Develop a cost model and consolidate buys with preferred media
- Prioritize services, change the remuneration model, and align resources to secure the best talent
- Change the fee calculation and include the cost model as a negotiation input
- Pre-select strategic partners and consider production companies’ business models
- Analyze vendor capabilities and streamline processes to better specify requirements
- Change the fee model and build it into negotiations
- Change from cost-per-project to core-team retention and link compensation to results
- Consolidate from agency management to direct supplier management and improve demand management
- Consolidate demand and channel to preferred vendors
- Conduct a structured benchmark of proposed rates, and closely manage time utilization
- Conduct competitive bidding to select preferred vendors
- Prioritize and streamline event sponsorship, review contracts, and closely monitor contract compliance
- Analyze pre-press vendor capabilities and streamline internal processes to better specific requirements
- Standardize and rationalize print specifications and select vendors based on capability match
- Standardize range of merchandize and consolidate spend
- Review and prioritize budgets and implement processes to increase compliance
The 8-step Efficio approach to driving efficiencies in Marketing Procurement is summarized as follows:
Determine the project scope and objectives and agree on the team, roles, and responsibilities.
- Category Profile
Do a spend analysis on marketing spend, understand current contracts and drivers of variety and complexity, and future requirements.
- Market Profile
Understand key market dynamics by market sub-category, understand scope of service offering and positioning of current supply base, and screen the market for potential alternative agencies.
- (Sub-)Category Strategy Development
Assess key demand issues and trade-offs and develop a procurement strategy per marketing category.
- RFP Process and Pitch
Use a multi-step RFP process where you compile a list of agencies, conduct initial “chemistry meetings”, and invite short-listed vendors to RFQ response submission.
- Contract Negotiations
Analyze the RFQ responses, prepare and conduct negotiations with selected agencies/suppliers to submit a final bid, and finalize an agreement.
- Savings Capture and Compliance
Institute policy, process, tools, and organization changes to mitigate savings leakage, track savings, and develop a transition plan to change mentality and habits.
- Supplier Relationship Management
Hand-in-hand with savings capture and compliance, institute policies, processes, tools, and organizational changes to maintain productive relationships.
The report also contains a Case Study on a Digital Agency Strategy, a Case Study on Market Research, and a Case Study on Printed Marketing Materials that are worth your time as well.