Marketing Procurement

No more death by a thousand cuts

Lifetime Value (LTV)

“Properly used, procurement can help your marketing teams extract this value, and it is precisely this value that is at risk if the function is directed to cut costs and resource without fully exploring what could be lost. “

When you stalk the corridors of your organisation, do colleagues that you encounter rush to greet you warmly – or attempt to merge with the pot plant in the corner? 

Marketing procurement professionals have every right to feel frustrated. They are the enablers of the marketing department, and the business as a whole. They have the power to deliver on tough business goals, equip teams with tools that superpower skills and boost competitive advantage. Yet, all too often they’re viewed as a harbinger of doom, toting a virtual scythe with which to slice costs and a dark refrain: “Do more with less”.

Procurement needs a brand refresh. Its skillset is wasted on an efficiency drive. Instead, procurement must be seen as a strategic partner to both internal leadership and external suppliers. Only then will organisations really begin to see costs dip and value rise. 

How to achieve this operational nirvana? Quite simply, it’s all about collaboration. 

With collaboration comes accountability, and that can be a difficult pill to swallow. In today’s performance-led landscape, there is a tendency to cling to metrics to prove value, only to find they’re the wrong ones. Then, when procurement is asked to find cost savings, the axe can fall on valuable tools or projects, curtailing their potential, or deliver only a short-term solution to a long-term problem. The first challenge is to move to measuring the real business outcomes of procurement activities, and that means finding the right data and the right metrics. 

In essence, organisations have been optimising towards the wrong goal. Typically, this is transaction revenue. ROI is important, but a focus on this to the exclusion of all else inevitably results in a growth plateau and potential marketing overspend in the pursuit of an elusive number. It’s time to recalibrate towards the three, true growth drivers: Profit, customer acquisition and retention. The key to understanding these is lifetime value (LTV).

If you understand LTV you put your organisation in a position of long-term growth. It allows you to invest confidently in your most valuable and profitable customers. And it moves you away from short-termism and knee-jerk reactions that lead to long-term damage. 

But finding the true essence of LTV is not easy in an omnichannel world. Walled gardens, cookie deprecation (or not), customer privacy concerns all lead to data voids. This is where partnership and collaboration play a vital role. Are your internal teams unintentionally gatekeeping vital customer insights? Do siloes mean teams are searching for information that is right under their noses? Are you able to make the most of your supplier support? Do they have insights and customer data that could be used to enhance your own, first-party data? 

Properly used, procurement can help your marketing teams extract this value, and it is precisely this value that is at risk if the function is directed to cut costs and resource without fully exploring what could be lost. 

To be able to make the most of procurement as a strategic partner, organisations first need to take an honest look at how they perform against industry best practice. Google suggests one way to do this is to measure your capabilities against its digital maturity benchmark. 

This puts companies into one of four categories: Nascent, Emerging, Connected and Multi-moment. Nascent is single channel focused and depends heavily on third-party data, while Connected companies are multichannel and rely on their owned first-party data. 

Moving from one category to the next means building a data-driven strategy that improves visibility of the customer journey, creates opportunities to further enhance that data. It’s in connecting these dots that begins to give your organisation a much better understanding of what it needs to move to the next stage. Cost savings may well be part of it, but they’ll come from more effective marketing, not drawing a red line through the expenses sheet. 

Far be it from me to add to the noise around AI and machine learning but there’s no escaping the fact that automation and machine learning should now be a leading tool in your arsenal when it comes to evolving and refining your marketing strategy. Yes, it allows more tasks to be done, faster and more often. But simply increasing the volume of activity is not the goal. 

Indeed, leadership teams have been guilty in the past of assuming that machines will be able to either take over the roles of a more expensive human resource, or perform a task more cheaply. In reality, there are few tasks that can be accomplished successfully by machine alone. 

We need to focus more on the ‘human behind the click’. Taking the human consumer understanding at the planning stage and using it to drive the use of technologies to provide experiences that simply make sense to the end consumer. 

Alternatively, it’s about deriving insights from the data that allow the human-in-the-loop to craft meaningful communications. Machine learning delves into those micro details that unlock insights into your cross-channel performance. It helps you build models that predict that likely LTV based on any number of signals. It can also help you begin to understand customers’ changing circumstances, literally growing alongside them. Amazon adopted this model in 2021 and grew its sales nearly a third (29%) in 12 months alone. 

This is all well and good but the fact remains, most brands operate in a fragmented, siloed, multi-provider ecosystem. If this approach is truly to bear fruit, those transparent, accountable partnerships must be a priority, and procurement should be in the driving seat. 

How does this look in the real world? 

Global pharmaceutical company Viatris needed to evolve from an offline-only brand to one that embraced ecommerce. A standard approach would be to partner with Amazon, like many others, but with the pharma ecommerce marketplace expanding at more than 14% CAGR, Viatris wanted to explore the furthest possible bounds of its ecommerce opportunity.

With no historical online source of customer data to build a picture of how that ecommerce strategy should look, the company used Havas Market’s extensive reach across its global supplier network to audit the market and potential platforms to allow it to enter ecommerce as a multiplatform brand from the get-go. With analytics delivered form Havas Market’s tool stack, Viatris could use a single dashboard to allow for continuous optimisation. 

The procurement perspective here could easily have seen Viatris go all in with Amazon for sheer scale and access to consumers. After all, it would have meant little effort on the brand’s part in setting up the management of multiple channels, ingesting data from cross-channel behaviours and then acting on it. But then it may also not have gained the returns it did. From a complete ecommerce novice, Viatris managed to drive a 416% increase in  revenue and a 48% rise in conversion rates, year on year. 

The view that navigating the marketing ecosystem is unnecessarily expensive, or that technology alone is a solution to the current expense and complexity, is misguided. 

For brands to succeed – and procurement professionals to do their job effectively – there needs to be a much more strategic, integrated, collaborative approach. Working with teams who understand how technologies can be deployed to drive effectiveness as well as efficiency is a boon. Working with teams with broad networks where data and insights can be shared in a privacy-first but detail-oriented fashion is essential. Working with procurement teams to deliver on long-term, strategic, results-based, effective marketing strategies is absolutely non-negotiable. 

About the author

Alex Walker is Managing Director, Havas Market