The difference between paying consultants on percentage of savings and success fees
It is a common practice in procurement to reward procurement consultants by paying a percent of the savings they have identified. But in the marketing space this is a practice that is fraught with danger for the client, while highly lucrative for the consultant.
In the realms of marketing communications, unlike many other areas of traditional procurement, it can be incredibly difficult to provide a measure of quality. Quality of people, quality of outputs, quality of relationships are often highly subjective or difficult to measure. Therefore developing a value proposition is also difficult or at best highly subjective.
Rewarding the consultant on purely financial criteria, such as savings, without taking into consideration the other important component of value, being quality, the client will often end up paying for marketing services that are ineffective and unsustainable because the consultant as screwed the supplier to the Nth degree to maximise their payment.
A classic example was an FMCG client who engaged a well-know procurement consulting company to review all of their print requirements, both marketing and non-marketing. The final solution saw the appointment of a print management company with no experience of packaging printing, which is one of the more technical demanding print disciplines and one that poorly executed can risk many millions of dollars in costs. By the time this eventuated, the consultants had been paid and moved on to the next client, championing the work they had done and leaving the FMCG client to fix their solution, too embarrassed to tell anyone of their experience.
Instead, we recommend a more accountable and sustainable approach to the process.
