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Much comment has been made in the press since Pepsico announced their decision to dismantle their marcoms procurement function and hand responsibility for management of agency commercial matters on to their individual brand teams, supported by a ‘procurement manual’.
Far be it for ISBA to comment on how individual advertisers structure their business but in this case, as the home of a large industry committee populated by marketing procurement professionals (COMPAG), we felt it was appropriate for us to provide a view.
Responses from ISBA’s COMPAG group members, a UK marketing procurement community with 17 years depth history on this subject, indicated that many were ‘shocked’ at the old fashioned views being expressed in print since the announcement. The immediate return to an out of date stereotype of procurement being all about cost cutting and nothing more was surprising, not to mention contrary to the feedback procurement professionals are getting from their agencies (to their face at least!):
Throwing the baby out with the bath water? Marketing procurement teams differ…as do marketing departments and agencies and so its activities are entirely dependent on the quality of the team and what the companies/brands choose to use procurement for. A good procurement team adds value way beyond a cost perspective – in fact ISBA now meets many procurement professionals who do not have any savings targets as an objective whatsoever! Shouldn’t organisations be assessing the effectiveness of their procurement teams, and choosing their goals based on business objectives rather than shutting them down completely?
What about all the good stuff? most ‘good’ marketing procurement professionals are more concerned with ensuring effective and ultimately productive relationships than they are with cutting costs – in fact, many actually fight for MORE revenue for the agencies when budgets are threatened, they can also:
Hidden benefits - the vast majority of Procurement teams report into the CFO, and as such Procurement also play a vital intermediary role between Marketing and Finance teams. We are aware many Marketing teams do not enjoy a healthy relationship with Finance as they find it difficult to demonstrate the ROI of their activities, procurement often help build those links, make sure the right language is spoken and build trust and communication.
The requirement for greater Agility is cited as one of the reasons for moving to the new model but progressive marcoms procurement professionals, who are truly working hand in hand with marketing teams, understand agile marketing and are putting in place new model contracts which allow greater flexibility; speed, and freedom of choice for marketers, they are also pioneering more agile pitch processes and new ways of working.
Our group is not surprised by the agency reaction to the PepsiCo move, some agencies have long held procurement up as the scape-goat for their all their woes! But let’s not get too excited, this is one organisation experimenting with change, and it’s Compag’s supposition that this decision will be reversed in a few years once the organisation realises that the additional pressure on brand teams to also manage commercial relationships, may result in a lose - lose situation for all parties as formal contracts and fee negotiations slip down the marketing list of priorities!
Summary: Our depth of experience and knowledge reminds us of what went before the arrival of Marketing Procurement 20 years ago, when marketers were left to organise their own commercial terms (in a much simpler marcoms landscape!); where many deals were sealed over a handshake or lunch, with the only written evidence being a letter from the agency saying how much the client was going to pay them! Days when fewer than 50% of ISBA’s members had contracts and fewer than 50% of those were signed!!; where most operated under a loose sets of terms and both parties were left exposed. Now the marcoms marketplace is much more complex and advertisers have many more agencies to manage, with smaller marketing teams – is removing the only commercial support marketers have to manage agency relationships really the best route forward?
We will watch with interest to see how this develops but we do not predict that many of ISBA’s member organisations will be following suit! So is this a trend, we think not.
Let’s talk! - Last time we checked, we were all in the communications business, so COMPAG would like to extend an invitation out to both clients and agencies, procurement and marketing to come together at our January 22nd meeting and debate some of the issues raised above. If you are interested in taking part in this debate, email firstname.lastname@example.org or if you can’t make the meeting and would like to share your views please email these through.
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