A retail marketer gives his perspective on the role of marketing procurement

At the CIPSA Category Week in Sydney May 29 – June 1 2012 I invited seven senior industry professionals to be on a panel to help the audience of procurement professional “Navigate the murky waters of marketing procurement”.

In this, the third of the posts from that session, Murray Chenery gives his perspective:

Many see procurement as a black and white process, often just focusing on the best price.

Procurement in marketing is about seeing the colour: as marketing is a strategic and creative process.

In my experience, treating marketing as just a commodity means the best relationship deal is never achieved for your brand.

If you ask a room full of marketing suppliers about their feelings about the current trends in procurement, their answer will be “they don’t like the process which just focuses on price.” “They would rather focus on the value they can bring to the business.”

Former General Manager Marketing, Target Australia and Co-Director of the L’Oreal Melbourne Fashion Festival

Suppliers would rather have the relationship with the brand manager because they are the one that they will have day-to-day contact with.

In my experience, suppliers often start from the premise that the procurement process will “screw” them on price no matter what. Therefore, suppliers will hold back on critical value-added services that can really drive your business as they feel procurement staff will not fully understand the importance of the services.

But, this is what the marketer also wants – strategies (or the colour) to help drive their business: Those strategies that can set your business on fire.

So, marketing procurement is not always about the lowest price, but more about strategic and creative solutions that can set your business apart from others at a fair price. A marketing phrase that I have used many times: ‘differentiate or die’

From my experience, there is a strong correlation between doing great work for clients and making profits. Great ideas and creativity will always cut through in a world of sameness.

Great ideas and creativity is the colour that is rich in dimension; but sameness is the black and white that is flat and lacks vibrancy.

Too many companies are about ‘value extraction’ instead of ‘value creation.’

Although cost-cutting is important, it is not a strategy to grow revenue or take market share. Creative and experienced marketing partners will help do this.

Role of procurement?

So, in my opinion, the role of procurement in marketing is absolutely critical, but in the following way:

  • Helping setup a robust tender or review process based on understanding that marketing is a creative process (that is seeing the colour)
  • Assisting the brand manager in briefing potential strategic partners, and
  • Making a recommendation to the brand manager based on agreed review criteria (not making the decision)
  • Helping trial others partners to see if they are a logical fit with the business

How do I define value in marketing?

Well, value in marketing is when you engage with a strategic partner who:

  • Is willing to understand the brand’s DNA
  • Who identifies and communicates market trends
  • Who can access a wider specialized team, if needed
  • Is proactive in identifying strategies to increase sales, reduce costs, makes you more competitive and helps differentiate your brand
  • Is experienced and has strong systems and processes to react to marketplace dynamics
  • Is willing to ‘go that extra mile’ when needed (and it will be needed)
  • And provides a fair price

Example 1. Target’s Toy Sale catalogue

Target’s strategic print partner prints 300 million Target catalogues per year.

One year, a truck carrying 600,000 catalogues rolled over into a ditch three days before distribution to customers losing the entire load.

When Target’s strategic print partner heard of the situation, they quickly moved other clients to reprint the 600,000 catalogues overnight with no time lost in distributing them to customers.

The risk was tens of millions of dollars in lost sales.

This partner ‘lives and breathes’ Target and averted a sales catastrophe. They knew the importance of catalogues in driving weekly sales, particularly the TOY SALE catalogue.

If this printer was not treated as a strategic partner and just treated as a commodity, do you think they would have significantly impacted their own business flow and saved the day?

Example 2. Reaction time by Target’s advertising and media-buying agencies

When I was at Target, the creative advertising agency was The Campaign Palace and the media-buying agency was Universal McCann. (Still is)

Both agencies are respected strategic partners and were included in critical Target business and operational meetings.

They understood the DNA of the brand, the dynamic retail marketplace and the need for nimble and fast-reaction retailing.

Both had strong systems and processes to deliver quick turn-around tactical support advertising, when needed.

If sales were slow on a Thursday and the decision was made by 1pm to provide extra support to that week’s campaign, then we could have national radio in the marketplace by 4pm that afternoon or a full page press ad in every metropolitan newspaper the next morning (from a standing start)

Without marketing partners who know your business and the marketplace dynamics, these strategies would not be able to be implemented in such short time.

So, what are the best performance metrics for marketing suppliers?

  • Agreed service levels that are established collaboratively across critical areas to drive the business, and
  • Stability of account service

There is also the need to advise partners what they can do better (they don’t know what they don’t know.)

 

What is the best way to brief and select agencies or marketing suppliers?

I am often asked: What is the best way to brief and select agency and marketing partners?

Firstly, treat them as strategic partners.

Then, develop a clear brief delivered with the brand manager which includes:

  • Brand DNA  and business background
  • Market forces
  • Business strategy
  • How partner fits into business strategy
  • Consistent and comparable reply format

Then, evaluate account service experience and skill

Then, evaluate potential partners’ understanding of your business

Then, ensure an unbundled cost approach

Then, look at the price and see if it is fair for the service, experience, creativity and systems and processes being bought.

So, when does procurement work well in marketing?

When procurement understands that marketing is a creative process

When evaluation metrics are clearly understood

When partners are briefed with the brand manager

When there is an understanding of the processes being bought

When does procurement not work well in marketing?

When there is an expectation that group tenders will deliver better outcomes.

It is my experience that group tenders do not deliver on brand’s specific needs and result in vanilla outcomes priced by suppliers to defray risks.

So, my 10 winning procurement strategies in marketing are:

  1. Recognise marketing is a creative process – Be sure that you see the colour that marketing is
  2. Treat suppliers as strategic partners – Because they’ll deliver the colour in the strategies that can drive your business.
  3.  Understand the brand’s DNA and strategy – If you don’t, how can you expect anyone else to understand it?
  4. Understand the market’s dynamics you are buying into – That’s about knowing what market and competitive forces that partners are dealing with.
  5. Appreciate the history of existing relationships – Because normally, existing relationships deliver service and value way beyond their fees, as love working with your brand.
  6. Brief clearly, jointly with the brand manager – This is critical to enhance the delivery of the brief and to answer questions; but also to provide a working face to the relationship.
  7. Understand all the processes being bought – Often, this can be missed or not understood leaving gaps in the review process.
  8. Avoid group tenders: they don’t deliver to brand specific needs – Don’t set out for mediocrity; set out for what is right for the individual business.
  9. Evaluate partner’s systems and processes based on visiting their operations – You will be surprised what you can learn visiting their work environment.
  10. Flexible, longer contracts build partner loyalty leading to better deals – My experience is that partners want to invest in technology and operations to drive your business, but if you offer a one year contract, they are reluctant to commit funds to help set your business on fire.

So in summary, don’t just see black and white when looking at marketing, see the colour because marketing is a strategic and creative process that can deliver differentiation and competitive advantage to set your business on fire.

 

Related Posts Plugin for WordPress, Blogger...

About Darren Woolley

Darren is considered a thought leader on all aspects of marketing management. A Problem Solver, Negotiator, Founder & Global CEO of TrinityP3 - Marketing Management Consultants, founding member of the Marketing FIRST Forum and Author. He is also a Past-Chair of the Australian Marketing Institute, Ex-Medical Scientist and Ex-Creative Director. And in his spare time he sleeps. Darren's Bio Here Email: darren@trinityp3.com
This entry was posted in agency remuneration / compensation, agency search & selection, agency solutions, marketing process optimisation, marketing procurement, return on investment and tagged , , , , , , , , , , . Bookmark the permalink.

4 Responses to A retail marketer gives his perspective on the role of marketing procurement

  1. This is a brilliant article, I hope all of my clients and prospective clients discover it and commit it to memory, and that you manage to get as much airplay as possible for it. Murray Chenery you are my new hero 🙂

    • TrinityP3 says:

      Hi Roanne and thank you for your comment. I have always been impressed by Murray's ability to manage and get the best from his agencies. While other marketers where changing agencies, he was working with his agencies. His favourite says is "Don't change agencies, change your agency." And I think the proof is in the growth Target has enjoyed through more than 20 years he has managed the brand.

    • Murray Chenery says:

      Hi Roanne, it was great to read your comment on the presentation.
      I guess it is something that we all know: that relationships are more important than formulae.
      Certainly in my experience, people are prepared to go the extra mile when they are engaged and not merely appointed.
      Yes, my philosophy is ‘don’t change agencies, but change your agency’ on the basis that clients are able to shape their agency rather than incur the cost of a divorce and re-marriage.
      All in all, people count more than process.
      Happy to talk more about this, if you would like.

      • Hi again Murray
        I appreciate your response.
        I would love to read or hear more.
        I have sent this link to several clients.
        Our growth over the past 12 years has been based on initially lowering the engagement risk as much as possible for the prospect, always talking partnering not procurement, once engaged try to shut up until we really do know the clients business and then commence that fantastic journey to push, pull, terrify, love, cheer, amuse, learn and coach to get the best from our account service team, the client, the dollars and the market. Its not easy on either side when your contact changes roles every year or two so growing open frank relationships from the top to the very pointy end is critical for both sides to get the best from each other.

Comments are closed.