Abbott Mead Vickers.BBDO, the only advertising agency to employ an in-house procurement specialist, last week axed the role. Emma Nussey, who was the agency’s commercial director, has left after four years to go freelance.
Advertising agencies have long been wary of the procurement process because they fear a value-for-money approach threatens creativity. But with client procurement specialists arriving on the scene to drive down costs, agencies realised they needed to make themselves more commercially savvy and respond to the involvement of these specialists in their new business negotiations.
As a result, AMV and Lowe appointed their own commercial directors to handle procurement and client budgets. But other agencies failed to follow their lead and Lowe has since terminated the role. Most agencies leave account directors and the finance department to handle procurement.
The AAR director of advertising Martin Jones says: "Procurement and finance do not speak the same language as finance people tend to look after numbers and not buy."
He adds that while it may not be essential to have an in-house procurement specialist, agencies need to learn fast about clients’ purchasing demands, which include developing robust and transparent supplier relationships, negotiating with suppliers, measuring the strength of the relationship and installing effective payment mechanisms.
"These days procurement people are increasingly getting involved at a very early stage of the pitch process," says Jones. "In almost 50% of the pitches that we run, we see the client procurement specialist before the marketing director."
Nussey says the problem is that agencies are not process-driven. "As a creative service provider it is not in their culture to have identifiable procurement skills, though over the years most agencies have almost been forced to formalise purchasing skills," she says, pointing towards the competitive nature of the advertising market.
AMV group chairman and chief executive Cilla Snowball concedes that increasingly tough negotiations with advertisers has heightened the need for agencies to improve their procurement expertise.
"Procurement discipline, which is about applying specialist skills to the way we buy and sell, is here to stay," comments Snowball. "What Nussey has done is to fast-track the process in the agency by helping us to understand it better and build it into the infrastructure."
Many experts say the industry has developed "enormous" skills to negotiate remuneration in the past five years.
"Not only have agencies become much more sophisticated when it comes to selling their services, but they have also become much better at saying no to accepting work at knockdown rates," says Suki Thompson of The Haystack Group. She adds that agencies are no longer being ripped off by client procurement specialists driving a hard bargain.
Delaney Lund Knox Warren & Partners managing director Tom Knox believes agencies can worry too much about procurement in a world where everyone is under cost control pressure. He does not think that a procurement specialist can do justice to the complexities of deducing advertising effectiveness.
"Clients are not paying for time or people, but output. Account directors understand that. And it is their job to negotiate an equitable relationship with their clients. I don’t see the sense in having a specialist procurement person in an agency."