Managing Marketing: The changing role and challenges of global procurement

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.

Steve Lightfoot, Senior Manager, Global Procurement at the World Federation of Advertisers discusses with Darren the challenges faced by global procurement teams and the role they will increasingly play in risk management and assisting global marketers in dealing with the huge complexity and differences of the global market on a market by market basis.

Global Procurement

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Transcription:

Darren:

Welcome to Managing Marketing. This week we’re in Boca Raton in Florida for the ANA Advertising Financial Management Conference and I’m joined by Steve Lightfoot, Senior Manager, Global Marketing and Procurement at the World Federation of Advertisers.

Hi Steve.

Steve:

Hello Darren, how are you?

Darren:

I’m very well.

Steve:

Good.

Darren:

This is our 8th year we worked out.

Steve:

Unbelievably, we’ve been here 8 times and it’s great, it’s fantastic. I mean, it’s been a fantastic event. I’m delighted to be here in Florida seeing lots of familiar faces, it’s great.

Darren:

Well it is good actually, coming back year after year. Florida and then Phoenix and then Florida again. One of the things I always look forward to is on the first day when Bob Liodice, the CEO of ANA sets the agenda with his speech and he had 4 areas, primarily around the digital media space but also, accountability and some of the other challenges.

What do you see are the main issues, not from a U.S. centric view but from a global view of the WFA as being the challenges?

The main challenges facing the WFA

Steve:

Well, yeah, Bob was talking a lot about how the transparency debate or discussion, however you wish to call it, but how the issue of transparency is playing out in the U.S. and there’s a lot of considerations there.

In a sense he sort of focused on a few things which are enormously important globally as well. I mean, if you look at some of the challenges that are being put to marketers it’s not just simplistically, are consumers less interested in advertising?

There’s big challenges being faced or being put to them by regulators, by governments as well. A lot of that of course, has to do with privacy but it’s also the appropriateness of commercial communications. This is to do with larger macro issues but they’re being faced all around the world.

WFA is a global trade body and we have many very large brands under our membership and we focus a lot not just on the slightly more micro, internal issues in relation to our industry that marketers would have, but also the bigger societal issues around things like privacy, around the concerns that consumers have, around the commercial communications and ad blocking and that sort of stuff.

Darren:

And the appropriateness of advertising to children, these are issues that are spread across a lot of markets. I know the tobacco industry which is heavily regulated in some countries is hardly regulated in others. In China and Japan you see cigarette vending machines sitting outside kindergartens and schools. Whereas, in Australia, which is from the tobacco industry view, a very dark market, they’re not allowed to even sponsor anything anymore.

Steve:

Absolutely, these are important issues that relate to cultural sensitivity and as Bob set out, some of these are big issues that the marketing industry faces here in the U.S.

Ad blocking came up, we had the transparency discussion, the erosion of trust between media owners and between media companies, between agencies and obviously clients. There’s a sensitivity to that here in the U.S. that is different elsewhere in the world. There’s different perspectives on it and it varies and in some cases, you can point to some mature markets in the E.U. that approach some of these problems in a different way.

Transparency is a big issue but if you look at what’s happened in places like France and Germany, the issue fundamentally around AVB’s and volume discounts and rebates, it’s a topic which has been spoken about for a very long time.

Darren:

Yeah.

Steve:

It’s still quite surprising to me that there is such a noise about this in the U.S. when it’s a topic that has been discussed in quite a lot of detail for some lengths elsewhere and that surprises me slightly.

Darren:

But I’m sure you had this feeling at this same event last year when we were in Phoenix…

Steve:

I did, yeah.

Darren:

Where suddenly, media was on the agenda because of what happened with Mediacom the ex-CEO of North America came out and said, well they’ve been doing rebates and value banks for years and in Australia we had Mediacom just before the last conference.

So I think maybe in the U.S. they’ve discovered that this behaviour has been going on and that’s why it’s such a hot topic.

Steve:

I think you’re right, yeah.

Darren:

But outside of the U.S., as you say, it’s been going on for years.

Steve:

I think so. I think partly it comes down to procurement involvement in media. Well, increasing procurement involvement in the marketing space and then consequently, a slight lack of awareness for want of a better way of describing it, of exactly how the media marketplace works because it’s complex.

It’s not complicated, it’s complex and there is stuff that you need to understand about it. There’s a large supply chain. The relationship that exists between agencies and media owners is a difficult one and it’s changing very quickly as everybody knows.

But this is quite difficult if your procurement person comes to this for the first time and they haven’t had experience in it before. That then creates a sense of a lack of understanding and a sense of misalignment between some of the procurement people who might be newer to this and then organisations who are trying to get the most for their spend.

That I think is crystallising here where you get that sense of clients not fully understanding the space and so therefore, decrying a lack of transparency, you know? Which is not necessarily the case. It’s very easy to point a finger and say, “You guys aren’t transparent”, when actually, it means that you don’t necessarily understand their business model.

So I think there’s some work to be done on all sides but certainly procurement shouldn’t shirk away from exploring exactly how agencies make money.

Marketing Procurement still embryonic

Darren:

But even marketing procurement itself is continuing to go through a transformation. It’s probably the most mature in the U.S. and the U.K. and then Europe. But the WFA certainly has representation in Asia where my feeling is that it’s still quite embryonic as a discipline.

Steve:

Embryonic is a pretty good way of describing it. So we have a lot of global brands in our organisation and what that means is that we tend to see global teams. Increasingly, I’m seeing that as those category matrices of how marketing spend is split up, how those teams are structured, you see people increasingly having a role of managing print globally or point of sale or some of these BTL categories that you were describing.

Some of those guys based out of Asia will have a global responsibility but be based in South East Asia or in China.

Darren:

Or India or China.

Steve:

Wherever. And that’s encouraging to see because it shows that there’s expertise. We’re still not perhaps seeing a head of agency operations from one of the big brands, a big sort of Western brand being based outside of some of the key hubs, maybe we’ll get there eventually but I think there’s still a lot of work to be done there.

Basically to skill-up and I think marketing procurement is a discipline which is evolving quickly. It’s a very young discipline, if you think about how old the marketing discipline is within most companies or companies that have been around a hundred years, they’ve had people doing marketing for 60, 70 years.

Marketing procurement has only been around for 15 years, 20 years perhaps maximum. In most companies within our membership, it’s only been around for like 8 years.

Darren:

In Australia, I really met my first marketing procurement person in 2005 and I started my business in 2000. There was just nothing in the marketplace about marketing procurement. Around 2005/6/7, suddenly there’s this growing group but being a very small market, a relatively small market, the other thing was that the marketing procurement person was invariably the indirects category procurement person and marketing was like one fifth or one quarter of their time.

So for them to actually build up skill sets in marketing, it was something that they spent one day a week on.

Steve:

Absolutely, yeah. And relative to the spend probably as well. That’s undeniably why procurement has got increasingly more involved in media because of the amount of money being spent on it.

But certainly the skill sets is an interesting one. We’ve done some research on what makes up the best type of marketing procurement professional and it really is difficult to sort of pin-down exactly what they should look like because of the specificities involved.

With ad production versus media you can’t just typically say, “Oh well somebody needs to sort of have this background, having worked in an agency and understanding how to produce or having worked with a media owner or having worked in auditing”, there’s a lot of different disciplines that make up a good marketing procurement professional.

Certainly the kind of curiosity and the sort of investigative nature of a mind which is just interested to understand how other businesses work and how the commercial model can work for their own brand, that is the sort of person I think who makes up a good…

Darren:

Yeah, if you’ve got a good procurement person that has that curiosity to really get to know the category, they can make a terrific marketing procurement person. Likewise, someone that’s worked in the category, either as a supplier or on the agency side or worked as an auditor that is then able to learn the procurement discipline and process and bring it to what they know already, both of those are equally valid.

Up-skilling both Marketing and Procurement

Steve:

There’s one great example, this company, a big FMCG client of ours who because of the visibility that marketing procurement has in their organisation, they actually have, as part of their internal talent development programs, they actually have their marketers, their senior marketers who are on fast tracks, have to actually pass through marketing procurement before they’re able to then attain a very senior level marketing position.

I think that is a fantastic endorsement of how mature their marketing procurement organisation is, but also how smart their marketers, their marketing leadership is in knowing that good marketers need some of that financial rigour that marketing procurement brings.

The way to actually get marketing procurement to skill-up fast and to acquire those skills is to actually give them exposure to marketing people, people who come from that marketing background and are helping marketing procurement speak the right language and find the right ways to address that spend and get much better exposure to marketing challenges and so it works both ways.

Even though it’s a marketing talent development program, marketing procurement benefits from having those people pass through their organisation as well so there’s something to learn from that kind of approach.

Darren:

So Steve I want to back up a bit and go back to privacy and I know it’s a big issue, it’s a big issue with governments all around the world, but it’s interesting because most of the marketing technology and most of the marketing strategies are all about getting to know your customer better.

The main driver of that is being able to collect data and analyse data on a person’s preferences, their performance, their behaviours, what they do, who they socialise with, all sorts of things which is being collected through any number of online platforms like Facebook and the like and Google.

So it’s almost like government policy to protect privacy which is an important thing, could be seen as working counter to the trend in technology.

Steve:

This is a real issue for the industry and the future of our industry because if we want to become ever more intelligent about how we segment our customer/consumer base, if we start looking at clever ways to use CRM technology, we’re going to be risking ever more in terms of a backlash from consumers.

Governance and risk vs performance and growth

Darren:

Look I think it’s about trust. You know, I gave up any privacy years ago when I started using social media, well aware that every single thing I do is being captured by someone. All I trust is that they truly use it to make my experience of their businesses and brands better.

Steve:

Yeah, that’s exactly it. And I mean, we have a program in place which is called a digital governance exchange and so what we try to do there is bring together different stakeholders within companies, those stakeholders would typically be senior marketers who get to talk to legal.

It’s not often you get marketing and legal in the same space but it’s getting senior marketers talking to legal but then also, talking to some of their public affairs, governmental affairs, regulatory affairs colleagues because the last sort of segment there are the people who are talking to policy makers and regulators and they understand those sensitivities that are being posed by some of the super international institutions, you know, World Health Organisation, United Nations, some of the other people, local governments who are getting involved.

They understand those challenges whereas legal will be looking at it purely from potentially a risk perspective or contract compliance, and marketing will be coming at it from a perspective of, well, if we can…

Darren:

Performance and growth.

Steve:

What’s wrong with being able to target customers better because that means I can serve them better ads more tailored to them and there’s a logic to all of that but I’d encourage any clients who are interested in this and who want to pursue this and it should be everybody because it’s a vitally important issue to work out how they can create their own internal programs, digital governance programs to really make sure their company has got a strategy for this.

Because it’s not just about having processes on paper, this is a very fast and quickly evolving space and you need that dialogue between those different stakeholders internally just to make sure that the messaging that you’re putting out and the reasoning and the rationale behind that is in line with what you want, and is in line with how you wish consumers to be interacting with your brand.

Darren:

I actually see an opportunity in this discussion for procurement. One of the things that people overlook about procurement is that they’re particularly good at risk management, okay?

And one of the key areas of a good procurement function is that they’re looking for ways of minimising risk.

Steve:

Yeah.

Darren:

Now, if you’ve got marketers that are driven by performance and wanting to use the data available in any way possible to get better performance, is it the ideal position for the future of marketing procurement to start being the risk managers, you know, the ones that actually become the intermediary between marketing and say legal?

Because procurement people are not just finance based, they’re also contracts based and things like that. They’re very cognisant in understanding the legal perspective.

Steve:

Absolutely, and assessing the commercial viability of certain suppliers and you’re right, that’s a core part of actually what is a traditional procurement skill that you’re taught in procurement management schools.

So I think you’re absolutely right and I think as marketing procurement gets more involved in working with some of the technology partners who are part of that tech space, I think risk will increasingly become a big issue.

If you’re working with somebody who is a very small agency doing something wonderfully creative, then that might be hugely attractive to marketing but there’s a certain risk involved with actually working with these types of suppliers, especially if you’re a big brand and you represent an enormous part of their business.

Darren:

Yeah.

Steve:

So these are definitely some of the softer, perhaps intangible but really important benefits that can be got by getting marketing to engage more with marketing procurement.

Darren:

Yeah, look, intangible except how many times have we seen companies have their customer data breached and it’s had a huge impact?

What was that dating site, Madison, Ashley Madison.

Steve:

Ashley Madison, yes.

Darren:

Someone hacked their database, got all their customer data and suddenly there’s this huge disaster because they’re publishing all these…

Steve:

I can’t remember if that was a disgruntled employee or if it was a data breach, but yes, that sort of thing is exactly the risk.

Darren:

So anyone that says it’s intangible, in fact, it’s very tangible because when it happens, there’s a huge implication and so you know, I sit in these conferences like this and I hear people talking about first-party data and third-party data and putting it together on a Data Management Platform and being able to get all these insights.

Steve:

Sounds too good to be true in a way, doesn’t it?

Darren:

Well, as soon as you start putting your first-party customer data out there, what are the protections, what are the risk management or risk minimisation plans? Marketers are not thinking about it and most technology people are not thinking about it so to me, I think it’s prime that the responsibility ownership of that should sit with a discipline within organisations that understands legal, understands finance and understands marketing and sales.

Steve:

Yeah. I’d like to explore a bit more of this with the network that we have in understanding more about helping marketing procurement work with some of these technology partners because that’s where the trend is going.

More and more companies want direct relationships with these technology partners because they want to take ownership of their data precisely because they see the risk in some of these things.

One of the most common trends that I’m seeing, as you eluded to just there with DMPs and direct relationships with those DMPs because they realise, clients realise that if they have that relationship, they can take ownership of data in-house and they’re not necessarily leaving that in the lap of the agency.

That reduces a bit of the risk. To be honest, I think it’s more of a play towards better segmentation but certainly any of those areas where you can work directly with the tech partners, that will help you minimise some of that risk and certainly procurement has got a big role to play as you say in that space. But it’s one to watch, let’s see how it evolves.

Is global procurement even possible?

Darren:

Now going back another step, this idea of global procurement and in fact, it’s in your title, global marketing procurement, do you see the trend is towards global functions rather than having country by country functions?

Because the interesting thing to me is we talk about global but say you’re global across 90 countries, effectively, you’ve got to be cognisant of 90 different bits or different types of legislation. Is it possible for someone to really operate on a global basis?

Steve:

It’s a really good question.So there’s a few parts to your question and let me try to answer it in a couple of different ways.

There’s a big trend towards centralisation. That’s not going to be news to anybody, but certainly within our members’ big brands, there’s a big trend towards centralising the processes around marketing procurement and all the things that it can do for marketing which are beneficial. Centralising those processes is a big thing.

However, it’s very dependent on the category that we would be talking about. So things like, events and to a large extent, media, things like sponsorship and experiential and activation, some of these areas are very local and you can have a global strategy, but the implementation of that global strategy locally is very, very, localised.

Darren:

Is on a market by market basis.

Steve:

For other things, it’s a bit more possible to have a global procurement person looking at it. Things like brand identity and design is something that typically you would really want to be heavily controlled by global teams.

So that’s possible to have a global person doing it. But there’s always going to be local intricacies that need to be reflected in those category strategies.

But to the second part of your question, can you really be a global marketing procurement person? I think global often means that you’re doing more of a strategic sourcing role. Local procurement will typically mean that you’re doing something more operational, tactical sourcing. So I think sometimes it’s a bit of a euphemism for that distinction frankly.

Darren:

Okay.

Steve:

If you can manage to cram 90 markets worth of knowledge into your brain then you’re doing a better job than most. So it’s a tricky one but there’s a heavy trend towards centralisation and I think we’ll see more of it.

Darren:

Look, the reason I bring it up is that, especially in Asia, we’re doing a lot of multiple market projects, you know, on a regional basis with a regional or global procurement team. One of the things that I try and get people to understand is that while Asia represents a very large market, it’s a incredibly diverse market.

You’ve got,what is it, 250 million people in Indonesia, but you’ve got two very different cultures within Indonesia alone. Then you’ve got China, you can’t think of China as a single market, it could be as many as 36 different markets but we break it down into the old tier one, tier two, tier three. You’ve got Japan and Korea and people are inclined to think they’re interchangeable but actually they are totally different in the way that they operate.

So one of the things that we’re very cognisant of is really diving into, even on the one project, each market so that you get a complete understanding of what’s operating, not just in that market but in that particular relationship.

Steve:

Yeah, and I think internally in companies, you see a lot of over simplification when it comes to Asian markets and even just saying something as simple as South East Asia, it’s a bit trite because it’s just a bit facile frankly, it’s just a bit easy to say isn’t it?

But there’s huge distinctions. I think…

Darren:

Most people when they say, South East Asia, actually mean Singapore.

Steve:

Exactly.

Darren:

Yeah, they think of Singapore but you’ve got Malaysia, you’ve got Thailand, I mean, Miramar is like the newborn baby of a capitalist society, you know? Then the Philippines is totally different again and Vietnam is totally different.

Steve:

The thing is, I think there’s a sense of over simplification but then, also, in order to get stuff done, you do need to simplify just to make it comprehensible to people who are trying to create global deals or regional deals where if you’re trying to just streamline….

Darren:

So hoping for the swings and roundabouts in a way, if it doesn’t quite work somewhere, hopefully it will work somewhere else.

Steve:

I was just thinking about areas like print management, there’s a constant sort of cyclical circular centralisation/decentralisation regional approach to it using local print but very fast paced or using regional printers and trying to deliver it and ship stuff.

There’s the constant discussion amongst the procurement community about how best to manage that.

Darren:

What’s the best way to do it?

Steve:

There’s no real kind of solution that you can immediately say because all these markets are just, very distinct and yet, somehow, you can bring certain markets together because of logistic ease or because of linguistic similarities or cultural appropriateness.

Darren:

Absolutely and it works perfectly to a consultant because the answer is always, “It depends”.

Steve:

Absolutely.

 

Darren:

What’s the solution? It depends. What’s the problem and then we’ll tell you whether there’s a global solution?

One of the other things that I’m quite interested in – we saw all those Mediapalooza pitches, the big global pitches and yet, media owners, media publishers, even the Facebooks and the Googles, have sales teams on a country by country basis.

There’s very little media that’s sold globally, truly globally, and the reason for that is governments will legislate because they don’t want the media in their country to actually be out of the control of the government.

Steve:

To be controlled elsewhere, yeah.

Different solutions for different places

Darren:

The interesting one and I’m sure you’re aware of this, South Korea, that’s government controlled media. If you want to buy advertising, they have one entity that you could buy the media through and there was a big outcry about lack of competition so their solution was to create a second department to do the same thing.

Steve:

Perfect, perfect, problem solved!

Darren:

Yeah! So could you imagine something like that happening in the U.K. or the U.S.? To me it’s the prime example of Korean solutions to complex problems.

Steve:

Absolutely. It’s wonderful to hear examples like that and especially sitting here in the U.S. where there is perhaps inappropriately, some guilt around people thinking that the same applies elsewhere and the same solutions can be rolled out elsewhere. I mean, that’s the beauty of doing what we do is we see how some of these very inventive ways of fixing problems can work in the market.

Darren:

The more I travel, the more I learn.

Steve:

Absolutely.

Darren:

But there is no one solution, there’s thousands of solutions.

Steve:

Yeah. I mean, one of the things that I find interesting and I suppose it’s sort of bringing it back to where we started in talking about media, some of the discussions around transparency, it really depends what you actually want and what you’re prepared to do.

I mean, here in the U.S., it seems to be as you said that things like rebates are new news. Arbitrage is happening all over the place and it’s something that is very common.

Darren:

They’re calling it principle buying now.

Steve:

Yeah, yes!

Darren:

Because arbitrage is such a dirty word.

Steve:

Another name, to another name. Just as we were saying, that culturally and as part of business processes, it’s just the way it works in other places and that’s just factored into the business model that exists in other places.

So to say that there’s a global transparency crisis is taking a cultural stance on an issue that may well exist in other markets but it may not actually be a problem in the same sense as it is in other places.

So I think we have to be careful in saying that this is a crisis or this is something which is a problem that needs to be solved. It’s something that needs to be understood better.

Darren:

To be aware of.

Steve:

Something that people need to be aware of, but it’s not necessarily problematic unless you wish to make it problematic.

Darren:

Exactly. And on that note, I’m afraid we’re going to have to finish but thanks for a great conversation Steve.

Steve:

It’s been an absolute pleasure Darren, anytime!

Darren:

Great catching up.

To learn more about how TrinityP3 can help businesses with Procurement and Sourcing, click here

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

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