Heading to the future
The ‘new normal’ is a term now firmly fixed in our vernacular. Although what it means exactly is yet to be determined. But one thing is certain; we are being hit with a wave of unpredictability as a result of COVID-19 and the global response. As we make sense of the various predictions for what the world might eventually look like, it’s clear there are some trends already starting to emerge.
‘Value based’ partnerships and remuneration
Clients are looking to their agency partners to help navigate this strange time - drawing on their cross-sector thinking, perspectives and insights. Yet whilst of critical importance to brands facing growth challenges, these assets are difficult to attribute value to and agencies are giving these ‘high value’ services away for free. An unsustainable situation.
Traditionally, commercial arrangements between agencies and brands are based on fees for deliverables measured in hourly rates. But, if the partnership’s true value comes from intangible creative capital, we need a new kind of arrangement. Procurement teams should work with agencies to evolve anachronistic fee models and create commercial partnerships based on mutually exchanged value and quantifiable ROI.
Timely and fair, compensation for expertise
Over the coming months, brands may well ask for substantial discounts or changes to payment terms. This in itself isn’t new. But in the ‘new normal’, where many agencies have furloughed or reduced staff, the flouting of contractual terms, late payments or changes to terms, could be fatal.
Procurement must ensure remuneration models and fees are competitive and, just as importantly, that agencies can operate in a commercially responsible and sustainable way. If they fail, it’ll be at the expense of the agency's primary commodity - talent. Ultimately depriving clients of the very thing they need to face new challenges.
The evolving role of procurement
Procurement teams have long been primary stakeholders in agency selection and retention. Now they need to become guardians of delivery and quality. But there’s a problem. Many procurement people aren’t marketing specialists, so aren’t fully equipped to take this on.
We can help by investing in effective agency onboarding, participation in project kick-offs, ensuring agreed ways of working are adhered to and regular client - agency relationship reviews. In my experience working with Nike, Pepsi and Diageo, their procurement teams have been excellent at helping protect both the client and the agency. We worked closely to reduce scope risks and issues, manage project overburn and ensure we had a shared vision.
The influence of intermediaries and ISBA
Finally, what is the role of intermediaries and ISBA? They can provide much-needed advice on best practice and offer knowledge to marketing procurement. Intermediaries could improve transparency through the agency selection process - helping clients with agency cost benchmarking, supporting fairer and more sustainable fee negotiation and remuneration models. ISBA needs to continue providing support to marketing procurement to maintain and develop the insights that enable better decisions to be made leading to more sustainable working relationships.
Shared Ambitions
While the new normal is hard to predict, the impact of this crisis has accelerated many developments already underway. We may come to think of this time as an evolution rather than a revolution. But one thing we can be sure of is procurement’s role in helping our shared ambitions thrive through true and equitable partnerships.