In our last post we discussed how Marketing Procurement was still a sacred cow at many companies, despite the fact that significant savings, which exceeded 42% at one CPG company, are to be had. Even though CIPS and the IPA tried to highlight the potential three years ago with their report on Magic and Logic: Re-defining sustainable business practices for agencies, marketing, and procurement, which was followed by Efficio‘s treatise on The Creative Challenge: Driving Efficiencies in Marketing Procurement which laid out an eight-step approach to driving efficiencies in Marketing Procurement.
Then Booz & Co. decided to get in the game with their recent whitepaper on Efficient Sourcing In Marketing, which is a good candidate to complete the trilogy. In this paper, which described the all-too-common scenario that represents the sourcing side of marketing at large companies, Booz & Co. outlined some of the many advantages that can result from bringing a disciplined process to Marketing Procurement and laid out their six step process for getting results, which we’ll cover today.
1. Analyze Marketing Spend in Detail
As with any sourcing process, you need to know where and how the money is being spent. Currently, most CMOs have no idea of their marketing expenditures or a comprehensive profile of their supply base as their budgets are divided between “above the line” items, such as advertising and creative services, and “below the line” items, such as promotion and direct mail. Furthermore, most marketers manage against budgets and campaigns rather than vendor compliance to contracted terms.
2. Adopt a More Rigorous Approach to Spend
There are two ways Marketing can be disciplined in cost control. The first way is to rebid and consolidate the vendor base. The second is the through the manipulation of demand and process levers through the requirements placed on suppliers by marketing staff themselves. Procurement can help with both levers using the methodologies identified by Booz and Co. in the white paper.
3. Deploy Decision Support Tools to End Users
These tools can alert marketers when their current suppliers are overly expensive, less experienced, or less capable compared with other suppliers they are spending on (when performance metrics are tracked). These tools can also automate price comparisons, cost trade-offs, and complain analysis — offering tangible metrics that quantify the results of marketing’s efforts.
4. Create a Clear Delineation of Roles and Responsibilities
Cost savings rarely happen where decision rights and lines of responsibilities aren’t clearly delineated in most departments, with Marketing being one of the worst offenders. Categories of spend that span business units should be centrally managed, whereas those that are business unit specific or local should be done according to well defined rules that define vendor selection. Typically, final decision rights will remain with Marketing, while Procurement works to facilitate and continually improve the effectiveness of the strategic sourcing process.
5. Define an Operating Model
The operating model should be governed by the roles and responsibilities define above but be streamlined to support the nature of the company’s marketing activity.
6. Use Change Management to Implement the New Paradigm
Each of the previous steps require a company to change established strategies and practices and implement new ones. As a result, the appropriate application of change management must be anticipated and provided if the initiatives are to succeed.
In other words, if you deploy a good cross-functional strategic sourcing process, you’re already well on the way to Marketing Procurement success.