Changing the Conversation...
For many of us, the economic conditions we work within have been improving markedly over the last three years. Consumers are spending more, western economies are out of recession, banks are lending again (although not as riskily) and, perhaps more importantly, marketers are being given more budget to invest in achieving their brand goals.
As a result of this, procurement is at a critical juncture…. irrelevance is a very real threat that many CPOs will see as their main challenge for the next 18 months and beyond.
The spotlight that was put on procurement during the lean years enabled many of us to engage at a much deeper level within our organizations but that engagement is now under threat as businesses move into growth strategies. Savings are becoming less of a headline.
This is our chance to take a lead in changing the conversation and, in doing so; redefining what procurement is about for the businesses we work within. CPOs are increasingly being asked for more than savings and some of those CPOs do not know where to look for the ‘next big thing’….
Marketing investment has long been an easy target for corporate procurement departments looking to deliver savings to the business. It is often in the top couple of indirect spend areas and, to the uninformed, it can seem like a happy hunting ground for savings opportunities.
One of the main challenges is the poor job many marketing departments do in highlighting the difference they are making for the business through their marketing dollars. I still shudder at the memory of a CFO in a very large client who turned to me and said “what does it really matter if we cut £10m from the marketing budget – its all discretionary spend anyway…” – this is a classic case of the business not appreciating the value created from their marketing investment.
Another challenge to overcome is that of measurement…it has been said that you manage what you measure and never is that more apparent than in the world of marketing procurement.
For a long time, input costs have been the focus of many procurement practitioners. How many times have you seen a ‘saving’ claimed through a reduction in rate card pricing? – far too many for my liking and here’s why…
Agencies have figured it out!
Rate cards have become a tool used by agencies to bamboozle procurement. The use of ‘blended’ rates is just one of the tools in their arsenal. What about the promotion of team members at a pace that seems a bit unlikely?
I worked with an agency in London a few years ago that had a young Account Manager who did a great job on client A – 'very personable but a bit wet behind the ears'... a year later, I came across the same Account Manager on a different client only this time she was an Account Director on Client B’s account – the agency had overcome the ‘price’ discussion by uprating a staff member to fit the rate card – I have no issue with promoting staff, but having the same staff member being charged out at very different rates for two different clients is a bit ‘shifty’ to say the least.
The problem is, agencies will always find ways to play the rate card game if procurement force them to focus on it.
Our goal should be changing the conversation to VALUE…if we understand (and can demonstrate) the value being created by the agency we can pay them based on the creation of that value.
I don’t for a minute think that this is an easy transition but it can work. When agencies are given the opportunity to directly impact their compensation by increasing the value they create the impact is astonishing…
- You get the right people on your account all the time – not just when you’re watching
- Problems with other agencies get resolved without the client’s intervention
- Plans get challenged based on the true likelihood of success
- The agency becomes a business partner
- The work gets better
So, how can you make this change?
First thing to do is understand what ‘value’ means for your CMO. Set up a session with them to talk about value – my guess is that your CMO may be surprised by this approach but persevere – its worth it!
Once you’ve clarified what value means for your organization set up a working session with your key agencies and ask them what they think – explore what they see as value creation and see if the two match up…
All that’s left is to find the right agency to try this approach with and work your magic – if you’ve got this far, it should be a
Good luck and enjoy – I’d love to hear about your successes.