The dramatic increase, over the past four or five years, of Procurement departments’ involvement in the management of the marketing communications function of companies has had a significant impact on marketers and their agencies alike. Whether they are labeled Procurement, Strategic Sourcing or simply Purchasing, these departments are designating specialists that are focused on the money and processes their companies dedicate to the marketing of their products or services.
However, as marketers and agencies quickly learn, many if not most of the assigned Procurement professionals have very little background or experience in marketing communications arena. Too often they are forced to reinvent the wheel when addressing company needs such as an agency search and selection, agency contract and compensation design and negotiation, ongoing agency performance evaluation and even overall accountability processes such as fee tracking or auditing.
Lack of experience can sometimes lead to damaging consequences. An example is the desire to cut costs by driving down agency compensation, but with no understanding of the unintended consequences. Without objective verification of compensation, internal and external benchmarks and a review of contract provisions, all of which a consultant can provide, this cost cutting attempt can actually have the reverse effect. Arbitrary compensation cuts result in mandating that the agency cut staff or use under-experienced personnel and ends up with increased cost, poor productivity and performance…ultimately leading to an agency change and a costly, time-consuming agency search.
In our experience with talking to Procurement folks we find everything from a few know-it-alls to the vast majority who recognize when and where they may need counsel and help. Unfortunately, however, too often Procurement departments are not budgeted with sufficient funds to allow for employing outside consultants. While charged with the responsibility of creating more efficiencies and better accountability within the marketing communications function, Procurement must go hat-in-hand to the Marketing department or individual brands to seek funding for every important initiative. Marketers with limited and, in many cases, diminishing budgets are reluctant to offer up dollars for longer-term improvement opportunities that may not payout for a year or two. Many marketers are also often resistant to new, improved processes that may require additional demands on their time, as well as financial resources. Even if that is not the case, Procurement folks are worried about that potential impact.