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Managing Marketing – The state of marketing procurement

Tina Fegent
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Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

Tina Fegent is a marketing procurement consultant with extensive agency and industry experience in the UK, Europe and North America. Here she discusses with Darren the state of the procurement profession and the role agencies and marketers play in the process.

You can listen to the podcast here:

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Transcription:

Darren:

Welcome back to Managing Marketing, I’m in London and have the pleasure and opportunity of sitting down with Tina Fegent, who is a marketing procurement expert who I’ve known for more than a decade. Welcome Tina.

Tina:

Thank you Darren, nice to see you in London.

Darren:

Well, in fact, when we met in London originally I think you recalled it was Harvey Nicks, we had lunch at that restaurant, I can’t remember who paid.

Tina:

I’m sure it was you, I’m procurement, I wouldn’t have paid.

The early days of marketing procurement

Darren:

At that time, you were doing something really unusual and I think still fairly unusual.

Tina:

Yeah.

Darren:

Which was you were actually acting in a procurement role in a creative agency.

Tina:

Yeah I worked for two of them. Grey and Lowe, 12, 13 years ago, it’s when we first met and my job was to manage the agency’s costs, which is always a challenge. And also to negotiate with procurement people, so I have been a procurement person on the other side of the fence. Then you go on the supplier’s side which was such an eye opener.

Darren:

It was unusual, I mean, I recounted recently that it wasn’t until 2005 when I met my first procurement person.

Tina:

Yeah.

Darren:

So in 2005, I met my first procurement person in Australia but we had actually met slightly before that.

Tina:

Yeah and I’d been doing marketing procurement for about 25 years in the UK, that’s when we first started.

Darren:

So you started straight out of what, high school?

Tina:

So kind Darren, I wish. Not too far off but yeah it’s when I worked for Cellnet, a mobile phone company now owned by Telefonica, I thought what’s this fluffy area of marketing that no procurement person is looking at.

You know we were looking at the usual things like station, IT and cars and just thought, who’s looking at marketing and started to dig into it, about 25 years ago. There was us at telecoms and there were people in financial services, that’s where it really started, it was really telecoms and financial services in the UK.

Darren:

That makes sense because, when we analyse marketing expenditure, they’re the two biggest volumes of marketing spend, because both of those categories seem to have a huge amount of what I call “collateral production”.

You know they would spend maybe 20% of their budget on brand building and about 80% of it on collateral related acquisition or retention, that’s pretty much true isn’t it?

Tina:

Yeah it is, I just had a meeting with someone and they call it “amplification” now I believe.

Darren:

Right ok, amplification, lovely word.

Why marketing is so challenging for procurement

Tina:

Yeah exactly. And I think you’re exactly right, that traditionally you had what was the above the line stuff, so TV, traditional media, but there is so much else that’s done, what was below the line but in terms of amplification, implementation.

I think at the last count I did there were about 17 different categories of marketing procurement. So it’s a very complex area. If I was buying stationery or IT, I’m not saying it’s straightforward, but you probably get a deeper knowledge of one category, I think marketing procurement people have to be multi-skilled and understand the whole category their dealing with and it’s immense.

Plus, the challenges within that – as you know full well from your experience and your consultancy – are immense. Dealing with the stakeholders and dealing with the agencies who often don’t want you involved. And understanding print through to point of sale, through to premium gifts, through to events, through to digital, you know you could….

Darren:

It is so complex isn’t it, because there are so many moving parts and we’ll get back to the whole procurement agency-marketer relationship down the track but I wouldn’t mind exploring this area because one of the key things is all of these moving parts.

It’s becoming more and more complex you know, because in the last 10 years the whole digital era has emerged and now there’s an extra range of suppliers that are all digital specialists in various shapes and forms isn’t there?

Tina:

Yeah.

Darren:

And media as well, I mean, programmatic buying and all of that controversy that we saw globally. But Tina you don’t just work in the UK, you work across Europe and I think you’ve even done work in North America haven’t you?

Tina:

I have done, yeah, global.

Darren:

So that just means in America, that means the US plus one other country.

Tina:

Yes, that’s true, that’s right. I don’t think I’ve worked in your country.

UK and Europe are leading the way

Darren:

The reason I raise that, is because from an Asia perspective certainly the UK and Europe is much more advanced and sophisticated in the area of marketing procurement than Asia is.

Tina:

Yeah.

Darren:

I wouldn’t mind your opinion but I get the feeling that the UK and Europe is even ahead of the US in this space.

Tina:

Yes, I’ve always thought that and I think when I’ve met you before and we’ve gone to conferences at the ANA, I think that both of us, to a degree, have probably found it quite frustrating in terms of the content and the level of presentation and I think I agree with you, I think the UK is leading the way.

I think that America and Asia are probably catching up, but I think in the UK, it’s a smaller market. If you’re looking at media or the decoupling of production in the UK versus another market, it’s probably a bit easier to do because it’s smaller and we’ve got more knowledge here I think.

So if you look at decoupling of production or the digital side of things, it’s the case but I did hear the other day that 70% of the global CMOs are based in America.

Darren:

Oh ok, I heard it slightly different. 70% of global marketing expenditure decision making is by US based companies. Now that doesn’t mean it’s in America per se.

Tina:

Yeah.

Darren:

But that US based companies contribute to and spend 70% of the global marketing expenditure and see that’s interesting for me because you and I have had that conversation before about is it remuneration or compensation.

Tina:

Yeah.

Darren:

I can always tell in Asia if it’s a US based company because they call it compensation.

Tina:

Ok.

Darren:

Whereas I find English and European companies are inclined to call it remuneration.

Tina:

Yeah.

Darren:

Um, but you know I think that’s where the influence of the US is vast because so many of the big advertisers are US based companies.

Tina:

Yeah.

Darren:

But the sophistication, the level of development in the UK as you said, the first to embrace decoupling.

Tina:

Yeah.

Darren:

The first to look at digital and new ways of doing digital.

Tina:

Yeah and the media transparency, people like Debbie Morrison who you’ve interviewed are  very much leading the way from a trade body perspective about having the transparency in media contracts.

You know we’ve got some great standard agency templates. Obviously you’ve been over this week for Good Brief Week, I mean that sort of stuff is great. I think it allows us to push buttons in different areas and try and reposition procurement, it’s not just about cost savings.

I think what I find in procurement people in the UK and Europe is, yeah, we’ve looked at remuneration and compensation models, we’ve looked at hourly rates, what’s different, what’s new, where can we get added value? And I’m seeing that more and more in the last couple of years over here, things like technology, looking at processes.

I’ve done a couple of big projects this year looking at ways of working to drive efficiencies and how we can use technology. I was talking to a client the other day and she said can you help me identify what technology systems we can look at to make the approval process a lot quicker? Getting back to remuneration and performance based fees, how are we driving that?

I think you will find that the more sophisticated are doing that and actually that will hopefully lead the way for other markets in terms of looking at that.

Cost saving and the damage it can cause

Darren:

I really hope so because in the last 12 months we’ve had a number of examples, either that we’ve been involved in or have been brought in after the event, where there is this incredible drive by procurement to deliver savings.

In one case I had a procurement team in China contact me, and ask me if I could benchmark their media agency and I said of course I can and they said well how much will you guarantee you’ll save us.

Tina:

Yeah.

Darren:

I said well I don’t know until I’ve done it. Oh, well your competitor has guaranteed 10% and we’ll give them half that fee. It was so clear that it was just about delivering savings.

Tina:

Yeah, you’re never going to get away from that from a procurement point of view. We are about managing cost and maximising value. So it’s managing the supplier base and it is making sure that you get best value but it’s how you determine what that value is.

I think the trouble is a lot of procurement people, unfortunately, well not unfortunately, fortunately have been put in to CFO rolls, finance people and that does drive a behaviour.

But I think the established ones, that perhaps have been put in a lot of the FMCG companies and again, a lot of the financial services, they’ve been able to prove themselves and say yes we’ve done that but actually it’s about increasing the value we can get from the marketing budget to spend on other things.

That’s why I like the technology and the process projects because it’s moving away from that.

Darren:

Well it’s delivering efficiencies isn’t it, through technology.

Tina:

Yeah, but also, it’s on both sides.

Darren:

Yeah.

Tina:

So I actually had a brief from a potential client the other day and it’s looking at processes and it’s all the agency. I said I don’t think it’s all the agency, it’s a two-way street. Actually, both of you should pay for the project and the operations person wasn’t happy with that.

I was just like well you’ve got to understand the way that you both work to then improve it and invest in that long term relationship.

Darren:

Yeah.

Tina:

I think that’s what the future is, hopefully if good procurement people start to look at those sort of things to drive efficiencies but to spend the money more wisely on better investments and actually to embrace technology. I think as an area, we don’t embrace technology as much as we should do.

Darren: 

No, people talk about the CMO being the biggest investor in technology, outstripping the CIO. But in actual fact I think that a lot of marketers are confused or baffled by all of the technology offerings and so they are inclined to stick their head in the sand and hope that it goes away.

Whereas, I think there’s some key areas where procurement can take a real leadership role in the transformation.

Tina:

Yeah, it always makes me laugh talking about digital and social engagement, how many marketing directors are on Twitter? So few, and when I do train procurement people I say you’ve got to embrace the service and categories you’re buying. So what’s your favourite TV ad, what’s your favourite digital banner ad, how many of you are on Twitter, are you using LinkedIn, are you using Facebook.

You’ve got to love the category you buy and I think that’s difference with marketing and procurement versus stationery buying or buying cardboard, you’ve really got to understand this category and I think a lot of procurement people come unstuck.

You know, there’s a story of a girl who was an ingredients buyer for a company. Great, she was buying a category which was their prime product. The next week they got moved to buying digital and tried to apply the ingredient buying process to buying digital and of course it didn’t work.

You had to feel for her because the week before she was probably the top ingredient buyer in that organisation and then she goes to apply the same process and it doesn’t work. But, my issue is, who should be supporting her, because actually should it be agencies? Well that’s not their responsibility.

Darren:

No, they’re the supplier ultimately.

Tina:

Yeah, exactly. Down to client organisation and I think that procurement needs to invest in more training.

Darren:

So an interesting thing from an Australia and Asia perspective is that we often find that the procurement person in our region will be one person who is called the indirects procurement person of which marketing is maybe 25% of their time and they’ll have all the other indirect costs.

So, they’re under-resourced, they’re looking at a huge expense and spend area and yet they just have no resources. Like compare that to Pfizer in New York, they had like 12 people at one stage working on marketing procurement.

Tina:

Yeah because often in bigger organisations you’ve got one person for advertising, one for media, one for print, one for point of sale. So they’ve got the luxury of a headcount. But for me, unfortunately, sometimes they don’t appreciate or understand the category and I think, I hate that word “indirects” it covers pens and stationery and HR.

Whilst you could say it services buying, you are buying people. I think marketing is very different from any other type of procurement and I think you do need the experience and knowledge to buy it.

Darren:

Well so much of it is chemistry, not just relationships.

Tina:

Yeah.

Darren:

I’ve had procurement people go oh well we do relationship based like legal and accounting services and I go, but there’s a special chemistry here that you need to take into consideration and I think a lot of the procurement people, the more enlightened ones, pick up on that very quickly.

Procurement need to leave the comfort zone sometimes

Tina:

Yeah, but also I think that people do need to invest time in learning and training so it’s easy for me to say that being a consultant, it’s my role, I like to attend conferences and learn about the categories and learn new things but I do find that a lot of procurement people don’t do that because they are really busy.

They have got pressure but I think, even if it’s one day a month or even if it’s going on Twitter and following your agencies or reading Campaign or Mumbrella, you’ve sent me a few of those articles and they’re really good. Invest the time to understand that so if it is only 25% of your job then spend 25% of your spare time perhaps reading the category or going to visit suppliers.

One of the first rules of procurement when you get a category of buying, go and visit the suppliers. I’ve heard stories from agencies, because you know, I work on both sides of the fence, where procurement people just don’t leave the office. Well, again, you don’t understand the category you’re buying, get out of the comfort zone.

Darren:

You’ve got to get out there.

Tina:

Yeah, you have.

Darren:

Going back to the CFO, there was an example recently where we were engaged in helping the tender process up to the financial proposals and then it was handed to the procurement team who took on the negotiations.

At the end of it came a completely different result which was primarily price driven and there was a huge outrage by all of the agencies involved and we were incredibly confused as to why suddenly, having gone through a process about chemistries and capability, that it came down to a significant reduction in the agency fee for it to stay with the incumbent.

Tina:

Yeah.

Conversations need to happen upfront

Darren:

When I had the conversation with the procurement team it was because they had been set up in a way that if they didn’t deliver the numbers in savings they would be disbanded. The CFO had created procurement to focus on marketing purely to be a self-funding exercise.

Tina:

Yeah.

Darren:

Now I can see huge flaws in that.

Tina:

Yeah.

Darren:

What’s your opinion of that approach?

Tina:

I’ve never heard that before and it’s disappointing but what should have happened, is that conversation should have been had upfront I think so that everyone knew. Because actually, they could have had a close pitch with the incumbent, with you as support.

That’s what I find frustrating sometimes when you talk to procurement people, if you’ve got a 5% cost saving target, share it with your key agencies and suppliers. Say if you come back and say if you change X, Y, Z we can actually save you 8%. But there’s so much that’s hidden.

Darren:

This was worse; they were literally working for their own existence.

Tina:

Which is really awful and I blame the CFO for doing that but then the procurement people who took the job or were aware of what it was, I think they should have been more upfront about it and I think they wasted a lot of your time and a lot of the other agencies’ time.

Darren:

They created a lot of bad feeling within the industry. And also, the interesting thing was that the marketers actually didn’t want to work with the incumbent and the incumbent shouldn’t have been in the process.

Tina:

It won’t last, will it, that sort of relationship?

Darren:

No, that’s right, it’s not sustainable.

Tina:

Someone asked me that not so long ago, if I ever made a decision, you know, for an agency selection just about cost and I said there was only one that I was involved in. It was a big media pitch for a telecoms company and the new agency was a 15 million pounds saving on a 60 million spend.

Darren:

That’s a huge

Tina:

Yeah so it was huge even for the auditor.

Darren:

Was it deliverable?

Tina:

Well exactly, even the auditor wasn’t sure they could deliver, but with the decision, procurement did over rule the client. A year later, it hadn’t worked and they went back to the incumbent agency.

I know agencies do complain that actually they get through a pitch process and then procurement try to negotiate them down. It’s about engaging with procurement as early as possible, even if you know it’s going to be heartache.

I would say to any agency that’s listened to this, engage procurement as soon as possible and really push them as to what they want to get out of the process. Are they just managing the selection process? Are they the decision maker? Have they got 50% of the votes or 70% of the votes? So actually get the scoring criteria upfront. The trouble is, I’m sure it’s the same in the markets you work in, there’s an oversupply market. In the UK, the figure is over 20,000 agencies. So for every agency that says no…

Darren:

There’s going to be 10 that say yes.

Tina:

Yeah and that’s really hard, it’s really hard. We have a lot of issues over here at the moment with payment terms, you know.

Darren:

I’ve just had a client ask me, commission me to do work that they’ve said that they can’t pay until the next financial year, which is OK, calendar year is in January and we are in November at the moment.

And then the procurement person piped in and of course it’s 120 days on top of that. And I went, “I don’t think we can do business”. I think my advice to agencies is to be willing to walk away.

Tina:

Yeah.

Darren:

The thing that really annoys me about the complaints from agencies about procurement is when they go in with their eyes wide open and then do nothing but complain afterwards.

Tina:

Yeah.

Darren:

Because I think it’s that old saying, a principle is only a principle when it costs you money.

Tina:

Yeah.

Agencies need to push back at times

Darren:

If you go in with your eyes wide open and it costs you money and then you complain about it, why are you even playing the game?

Tina:

Yeah, yeah I agree with that. I did a talk a few weeks ago and I got a lot of questions from SIPS as in charge of purchase and supply about payment terms and that was one of my points, agencies need to be more financially accountable.

Actually in 25 years how many great FD’s have I ever met in agencies. It is hard to stand up and sometimes say no I’m not accepting that but I’ve actually worked with some agencies who have gone back to clients and said look, you said 120 days payment terms but we’ve got production and we’ve got media, so we are going to charge you 5% interest if you want us to bank roll and the client’s like oh ok.

It’s having those facts and figures and pushing back and saying look, we are in this together, this is the situation we are in and I think from a SIP’s point of view, they say there shouldn’t be an issue about payment terms and actually there is a responsibility at board level to actually have responsibility for payment terms and make sure suppliers are treated fairly.

Indeed, two weeks ago Tesco’s in the UK announced that they are paying all SMEs within 14 days I think it is. So I mean, they are starting to do that.

Darren:

That goes straight to corporate social responsibility. The small to medium enterprises are the actual backbone of most Western economies.

Tina:

Yes.

Darren:

So large organisations that want to act in a responsible way should be making sure that their cash flow is sustainable.

Tina:

Yeah and procurement should be supporting that obviously as well.

Darren:

Tina, unfortunately we’ve run out of time, but it’s been fantastic talking to you. I always love catching up and have you got any last minute advice that you would give either marketers or agencies about working better with procurement.

Tina:

I think engage with them fully, understand where they come from, you know the age old thing of magic and logic and that agencies and marketeers love the magic and procurement love the logic.

They are there to do a job as we all are and when it works, it works really, really well. So I think engage as early as possible and everyone needs to be as transparent as possible as to what they want out of that process.

Darren:

Fantastic. Thanks Tina.

Tina:

Thanks Darren.

Darren:

See you next time I’m back in London.

Tina:

Sounds good to me.

There is a fine line between good work, and great work. Good work covers the bases: great work ultimately delivers great results. It’s as simple as that. Learn how TrinityP3’s Procurement and Sourcing Service can help you select the right path.

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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

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