Procurement folk tend to get a hard time from agency types. The cycle of deliver a little bit more every year, for a little bit less, is not generally embraced with enthusiasm and joy.
But, our belief is that the current crisis is an accelerator of trends. That businesses will need to reinvent themselves for a new and different world. Many habits will have changed forever. The emergent change, restructuring, transformation facing CMO’s, CEO’s and CFO’s means procurement teams will be asked different questions in regard to agency suppliers and partners.
Slightly lower costs with a slightly better agency product won’t cut it anymore.
To use production terminology. If the old world was about Kaizen or continuous improvement, the new world will be about Kaikaku, understanding how to reinvent and create radical leaps forward.
And the good news is that this change will force all parties to shift from a cost focus to a focus on value creation. An agency will win by showing they know where and how value can be created.
Procurement rather than focussing on better value through efficiency; cost-of-agency-services, costs of media buys, talent costs, overhead and the like, will now need to understand an agency’s delivery system to be able to paint a picture (and build the business case) around how and where new sales and margin growth can be delivered.
In our new world there will be 5 foundational pillars where an agency can drive significant leaps in marketing effectiveness. And the effectiveness gains could be 1.5 times, 2 times, 2.5 times better rather than a Kaizen 5% or 10% better.
Advanced Modelling. Does the agency have robust statistical modelling capability to enable zero-based budgeting? Can the agency’s modelling tools forecast forward accurately. Can the agency deconstruct the contribution to sales of all paid, owned and earned assets? Procurement will need an understanding of what constitutes ‘A grade’ modelling capability. Agencies will need strong, proven case studies of modelling delivering better P&L results.
Data Platforms. The volume of client and media data that hits a media agency today is vast and growing. Collating and making sense of the digital vapour trails is today’s gold dust. Knowing your customers better and acting on that knowledge faster is competitive advantage. The data will allow you to understand where, and with who, new value can be created. But data is messy, we have found that typical data sets provided across multiple territories and products tend to have a significant error rate (simple human error in collating and merging multiple data sources), but with automation this can flip to 98% plus accuracy. An agency with automated, real time data platforms, fusing both linear and digital data, will be able get to the gold dust with speed and accuracy.
Smarter Operations. If you started a network agency today you wouldn’t house and hire all your talent in the 10 most expensive cities in the world. Which agency services can be completed remotely and what services can be centralised? And centralised services, rather than being some off shore cost-cutting exercise, done well are centres of excellence where the innovation and product development is just faster due to concentrated effort and focus.
ID’s, personalisation and machine learning. The efficiencies to be gained through hyper targeting are well understood. Personalised creative and ID-based buying offers Kaikaku leaps in advertising efficiency and effectiveness. Personalisation at scale will be the new mass marketing. Understanding an agency’s approach to ID’s, and how machine learning and AI is being used, and quantifying the leap this could create will become critical in reimagining the future.
Performance Marketing, in a digital world, where everything is programmatic, and your organisation has burgeoning D2C capability, understanding an agency’s capability and talent in SEO, CRO, e-commerce shelf optimisation and the like will arguably be far more important than the capability and talent to deliver traditional advertising campaigns. The use of bespoke tools, AI, algorithms and machine learning to constantly improve customer UX between digital advertising to digital sale will be the new qualitative.
So, in our new world Kaizen will not be enough. Bosses will want Kaikaku, radical change and large leaps in efficiency and effectiveness.
Good procurement has always sought value rather than pure cost reduction. But the new emphasis will be on demonstrating an understanding of where growth and creation can be uncovered and delivered, rather than better efficiency of the same. The business and financial case created will be expansive rather than reductive.
How to quantify the gain to be made through better modelling, better data organisation, stronger operational processes, enhanced personalisation and machine learning will become the new ask of procurement. Positively, it also means that procurement will become ‘high sales and margin growth’ people within their organisation.
Procurement will still need to provide the same rigour, measurement and accountability in their decisions. But in our new normal, the nature of the work and engagement between agencies and procurement will change. Trust and understanding will need to be at the fore for both parties, and procurement will need to understand agency capability and their delivery system, as well as, or even better than, cost.