Magazine article Marketing

PROCUREMENT'S PROGRESS: Purchasing Is on the Rise at Client Companies. Jane Simms Asks Key Industry Players for Their Opinions

Magazine article Marketing

PROCUREMENT'S PROGRESS: Purchasing Is on the Rise at Client Companies. Jane Simms Asks Key Industry Players for Their Opinions

Article excerpt

Legend has it that when Saatchi & Saatchi billed British Airways for its 'Manhattan' commercial back in the 80s, the invoice amounted to one line: 'TV commercial - pounds 1m'.

The story may be apocryphal, but it exemplifies an approach to providing marketing services that is by no means uncommon, even today.

Despite the strides agencies have made toward greater transparency and accountability, many still take a relaxed, even cavalier, approach to the way they charge for their services.

'Many clients still perceive agencies to be poorly run, and see the way they charge for their services as a big black hole,' says Debbie Morrison, director of membership services at the Incorporated Society of British Advertising (ISBA).

Agencies are not solely to blame, of course: marketers still have a way to go to quantify the benefits of their discipline. But growing pressures on costs, the breakdown of the commission system that paid agencies a fixed percentage of media spend, and the rise of supply chain management in companies, have created a new trend: the application of professional procurement techniques to marketing services.

Morrison, who also heads ISBA's Communications Purchasing Action Group (Compag) estimates that, over the past six years, the number of marketing purchasing specialists has grown from around seven people to almost 200, and says that Compag is the most active group within ISBA.

The trend infuriates many agency bosses. They argue that because most procurement managers come from a purchasing rather than a creative background, they don't understand the first thing about buying marketing services - and interpret their involvement as a cynical ploy by clients to screw them on fees. Equally, some marketers are concerned that the primary motivation of purchasing specialists is to slash their budgets.

In reality, professional procurement managers, who have both a good understanding of marketing and strong inter-personal skills, can offer significant benefits to both parties. For one thing, they can relieve marketers of the detailed commercial aspects of their relationships with agencies - contract negotiations, fees, evaluation and appraisals - ensuring the business gets maximum value for money, while allowing marketing to focus on more creative aspects.

At the same time, purchasing managers' rigour and focus on project management ensures that agencies get a well-defined brief and a clear contract, while guarding against 'scope creep' - clients changing their minds as they go along.

'They exert a useful discipline on marketers,' says Peter Williams, director of procurement consultancy QP Group. What's more, he says, with marketers changing jobs frequently, procurement people often act as guardians of agency relationships.

Tim Sarson, finance director at design agency Landor, adds: 'The involvement of procurement people enhances our relationships with clients by introducing order and discipline. They are tougher on fees than marketers have traditionally been, but that doesn't mean they are less fair, or that we are paid less money.'

But, he adds, the quality of the relationship depends on the nature of the purchasing manager: 'Bad procurement departments just try to knock you down on price and add no value.'

Indeed, applying the same commodity approach to buying marketing services as to toilet rolls forms the basis of the agencies' main gripe.

Tina Fegent, head of category purchasing for global marketing services at Orange, believes the complaint that purchasing people don't know enough about marketing is valid.

'Because the role of purchasing in marketing is just gaining ground, lots of companies are putting quite junior people in the position who have no marketing experience and have a manufacturing mentality,' she says.

Mike Moran, commercial director at Toyota, believes a purchasing background is the best preparation for marketing procurement managers. …

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