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By Maddy Smith
There is still good, bad, and ugly in the world of marketing procurement. While there has been some advancement since the 2010 benchmark report from the ANA, the study reveals significant gaps in progress and perceptions.
“Procurement perceives that marketing is an investment to be optimised and agencies believe that procurement views marketing as an expense to be minimised”
Twelve years ago, in 2010, the ANA published a landmark report, “Procurement: The Good, the Bad, and the Ugly”. The work took the pulse of the US industry on the state of marketing procurement at that time, and measured practices and perceptions among professionals in three functional areas: procurement/sourcing, marketing/marketing services and agencies.
The topline findings from the 2010 report revealed that there were wide and disturbing gaps between both marketing procurement and marketing/marketing services and between marketing procurement and agencies in terms of the perceived contribution of procurement. Such gaps existed in virtually every area surveyed, including how procurement defined value, whether procurement viewed marketing as an expense or investment, and how well procurement worked with marketing and agencies.
Furthermore, the ANA say that the procurement function appears to have made little progress when current and historical research is compared.
In 2022, the ANA repeated and built upon this prior research to track progress from a total sample of 273 respondents. This comprised 132 marketing procurement/sourcing individuals, 56 marketing/marketing services and 85 agency respondents. All of whom have significant interaction between the parties.
52% of the client-side members who participated in the survey, (that is marketing procurement/sourcing and marketing/marketing services), have an annual US advertising budget of $200 million or more. Of the agency respondents, 59% are with general market full-service agencies.
Reporting on the progress which has been made since 2010, particularly in the relationship between marketing procurement and marketing, the ANA’s marketing procurement 2022 report highlights some of the key steps forward in the industry since the last report was published.
Overall, the report revealed that both rate the health of the relationship between procurement and marketing equally. 57% of procurement respondents and 59% of marketers say the relationship to be either extremely or very healthy.
Meanwhile, marketing’s perception of procurement being a critical member of the team has improved since 2010 and is now equal to the perception of marketing procurement, the ANA reports.
On the key metric of procurement’s definition of value, marketing’s perception has improved and moved closer toward maximum growth and impact and away from lowest cost.
And, the report says that on the key metric of procurement’s view of marketing, marketing’s perception has moved closer to an investment to be optimised and further from an expense to be minimised. Yet, there are still wide gaps in many other areas of the relationship.
Alarming differences of perception
The relationship between procurement and agencies continues to be a much bigger work in progress, and the gaps between these two constituents are troubling, the report states.
Some key examples of this is that one of the most fundamental metrics is that of relationship health. Here, somewhat alarmingly, procurement and agencies are not aligned at all. 54% of the procurement respondent base characterised the relationship to be extremely or very healthy, yet only 15% of agencies feel that way.
Furthermore, procurement perceives that their definition of value is maximum growth and impact.
Agencies perceive that procurement’s definition of value is the lowest cost.
Procurement perceives that marketing is an investment to be optimised and agencies believe that procurement views marketing as an expense to be minimised.
55% of procurement respondents agree completely that procurement understands the economic value of successful marketing, versus only 5% of agencies.
49% of procurement respondents agree completely that procurement is knowledgeable in advertising/marketing, while not a single agency respondent does.
Relatively immature discipline
One of the most fundamental findings of the report is that overall, marketing procurement overall is still viewed as an “adolescent”, with the average marketing procurement department only being in existence for 11.6 years.
55% of marketing procurement departments have been in existence for less than 10 years, while 24% of marketing procurement professionals have less than five years of experience in marketing procurement itself. This, the report concludes, may help explain why many of the issues that were present in 2010 still remain today.
The way forward
For a more positive road forward, the report suggests a number of steps.
Bill Duggan, Group Executive Vice President at ANA, says “Marketing procurement must understand their role. At their best, marketing procurement is an enabler and facilitator. At their worst, marketing procurement can be a roadblock and bottleneck”.
He adds, “Marketing procurement must understand what marketing needs, what agencies provide, and insert itself with the goal of optimising the overall value and quality of the output”.
To aid that understanding, many procurement professionals need to elevate their knowledge of the marketing/advertising industry.
In addition to this, also highlighted in the report, is the fact that to improve the relationship between agencies and procurement, the relationship between marketing and procurement should be addressed first.
Often, the goals of the two groups aren’t aligned and so marketing and procurement don’t come across as a united front to agencies.
Procurement often does not have early involvement, nor is it involved throughout the process. Additionally, there can often be a good cop (marketing)/bad cop (procurement) dynamic. All these elements send signals to the agency that influences their perception of procurement.
There are 10 recommendations for improving relationships and the standing of procurement with other fields:
Commenting on the ANA’s report, Founder at Encyclopaedia International, Nick Manning highlights that this is a very important study, one in which the same issues are recurring.
He suggests some possible solutions to resolve some of the issues which arose from the findings.
Manning considers two factors which appear to prevent progress. Firstly, he believes that “Advertising (especially media costs) cannot and should not be measured as they currently are. The old definitions of cost and value still prevail and haven’t moved with the times”.
Secondly, he explains that “Procurement teams are rewarded on cost reduction, not value creation. “It’s not surprising that agencies report that procurement teams are only interested in cost reduction, because that’s what they experience beyond the rhetoric at conferences and in the trade press”, Manning says.
As cost reductions are still procurement’s KPIs and therefore their bonus, promotion or raise, Manning explores the solution of procurement teams to charge their independent advisors to devise new reward schemes to reflect true value creation that improves effectiveness. At the moment, he considers, they ask to provide cost reduction grids that lead to illusory cost savings.
He advises that this then needs to be translated into reward schemes for agencies that also act as procurement’s metrics, or in 10 years’ time, this will still be the state of affairs.
One key problem here, Manning says, is that procurement obsesses over the agency contract and media costs rather than the core product, which is the media they buy. “The system currently says that poor quality inventory that is invisible at $2 CPM is better value than good inventory at $5 CPM. Cheap is cheap for a reason. Until this changes, little progress can be made”, he considers.
Ultimately, independent consultants need to educate their clients on how to improve attention and engagement at the right price, Manning concludes.
As well as this, Tom Denford, CEO, ID Comms Group & Founder of The Global Media Council raises two areas of concern. He considers that the relationships between marketing and procurement are still often not aligned with the same objectives. “This has been our observation over the same period, but is improving. Reporting lines and structure often dictate how extreme the delta”, he says.
He continues, “Procurement (sadly) still has a major image/perception problem with agencies. I’d like to see more agencies open to learning more about how marketing procurement operates, I expect it is a lack of understanding leading to a lack of empathy”.
Denford explains that smart agencies know their clients, not just the marketers, but their valued procurement colleagues too. He concludes, “Perhaps this education for agencies is something the ANA and 4As can facilitate?”
Having started out in marketing procurement before marketing procurement even started out itself, Tina Fegent, who has been advising clients for 16 years, says, “It is good to see that the relationship between marketing procurement and their marketing stakeholders has improved and is strong. I was surprised to see that many marketing procurement teams in the survey have only been around for 10 years or so”.
She explains, “Marketing procurement has existed as a role for at least 25 years and I know that many of the excellent global marketing procurement teams have been established for this period and don’t exhibit the ‘ugly’ behaviour that was evidenced in the report”.
However she comments, “I do agree re the investment in knowledge and education but it has to be on all sides especially procurement and agencies. There is a new dawn for procurement happening with the ongoing supply chain crisis that organisations are facing as well as the increasing global inflation, organisations are seeing procurement as being central to building resilience, sparking innovation, and driving business performance”.
Fegent concludes, “Nine of the 10 recommendations were based on procurement action with one for agencies. I would like to see this being more equal and very similar to the points in our CIPS and IPA Top Ten Tips that we did in 2020. Everyone has to invest in making the process better for all involved”.
From the agency perspective
Carl Johnson, Founding Partner and Executive Chairman, Anomaly also comments on the report. He explains, “Procurement teams need to realise that the real win comes when there is an emotional contract created between the client and agency, not just a financial one. The team tries harder, commits more, and thinks about the client’s business outside working hours, because they feel valued”.
Meanwhile, Stephen Larkin, SVP Growth & Development US, R/GA says, “Over the years I’ve seen the procurement role be elevated within organisations. While they play a specific and meaningful role, what I’ve always been impressed with is their intent to ensure there’s always a fair and balanced review process. When procurement is involved and at its best, I know there’s a process, there will be an outcome, and all agency participants are playing on the same field with the same rules”.
Mollie Rosen, EVP, Strategy, Insight & Innovation, 4A’s “This helpful report reminds us of the benefits that alignment and a shared understanding of business objectives provide as powerful accelerants for the relationship and business. The strongest outcomes occur when marketing and procurement align on goals and when procurement’s KPIs focus on optimising investment vs. cost reduction as well as starting with a deep understanding of agency processes and product. However, it’s clear that when any of those factors are out of alignment, it is an obstacle to creating a valuable and enduring partnership for all parties.”