How procurement can help rather than hinder innovation

Procurement professionals admit they slow down innovation and cite ‘digital’ as the toughest area to oversee, but with a collaborative approach procurement can also empower marketers.

procurement

The relationship between marketing and procurement has never been an easy one. Marketers need to buy a huge array of marketing services but often find themselves hitting up against procurement, which all too often has different priorities and a reputation for focusing only on cost.

With an increasing proportion of marketers’ budgets going to digital and a focus on innovation at many major brands, this issue is only going to get worse. Some 42% of procurement professionals questioned by B2B marketplace Globality in a new survey cite ‘digital’ as the hardest category to manage.

This is in part because marketers’ need to find specialised agencies to work with on new areas – ranging from content marketing to virtual reality and search engine optimisation – does not tie in with what is often a long process of approving new suppliers at major companies.

“Many respondents express the need to work with specialised agencies in order to access cutting-edge digital expertise,” says the report. “Unfortunately, that desire is at odds with cumbersome onboarding processes and a lack of knowledge about the potential providers that can deliver on these projects – on the part of both marketing procurement and marketers themselves.”

In an attempt to find a workaround, many companies work from a pre-approved supplier list. Some 55% of respondents to the survey say they have one of these for marketing projects, with the aim of reducing risk and making projects go faster so a marketer doesn’t have to work from scratch each time. However, this has a knock-on impact on innovation and procurement’s strategic value because newer, more specialised agencies face barriers to getting on the list.

“Marketing is limited to choosing from a smaller pool of agencies, rather than looking for the absolute best fit for the project,” explains the report. “Further, respondents note that the pressure to get on this list — since it’s the doorway to all potential projects for a big client — sometimes leads suppliers to ‘fudge’ their capabilities and data. Down the line, that can lead to breaches of contract, so risk creeps back into the process regardless.”

The obvious solution would seem to be to make it easier to get on a pre-approved list and make the process less cumbersome. But Bayer’s vice-president of marketing procurement Malik Akhtar explains that procurement is under a lot of pressure to ensure a business is “contractually pinned down” and has the right compliance rules in place. Otherwise, he says, it will “come back to hit you”.

There is quite a challenge on us in procurement to actually empower marketers, where we know we can’t add value fast enough.

Paul Smith, Mondelēz

“The amount of compliance and rigour expected of me and my colleagues in terms of thoroughness is very high,” he says, speaking at the ProcureCon Marketing conference. “It is all about a business partnership and relationship and about being really transparent. But if we haven’t got that thoroughness pinned down we are in trouble.”

Revelations last year by the US Association of National Advertisers (ANA) around media transparency, agency rebates and kickbacks has brought the issue to the fore. Some marketers spoke about being hauled before their CEO or CFO after the investigation, to clarify if this impacted their business. And this is a particular issue in digital, where the complex system of buying ads makes it harder for marketers to be sure where ads are appearing and how much they have been charged.

READ MORE: Marketers must take responsibility for media buying and fix the ‘disconnect’ with agencies

Paul Smith, senior director of global marketing and sales procurement at Mondelēz, says: “I have had my trust knocked really badly through some of these financial audits and where money is actually placed with agencies. Having [spoken with] groups including the ANA and ISBA and [seen] the 21 different places agencies can move money, I am not naïve. I think the way to work and discuss this with an agency is very openly and transparently.”

Opportunity to add value

Yet Kristof Fahy, chief customer officer at Ladbrokes Coral, says digital innovation should be an area of opportunity for procurement to prove its worth. He believes too many departments are currently acting as the “cost police” and that they should instead be forming “proper partnerships” with their marketing departments by embedding themselves within the team, understanding what their challenges are and helping them “navigate the maze of opportunities”, particularly in marketing tech.

“Help us with issues of viewability. Are my ads being seen? How can we reward media agencies? Are we getting ripped off? Bring me different models, views; don’t just give me the same stuff,” he says.

“[Procurement] should be on this like a rash. I want you to lead those conversations because I can’t, as I’ve got to look after KPIs, turnover, cost and acquisition.”

Mondelēz’s Smith says procurement must also be prepared to “empower” marketers to make decisions. His company is focused on innovation and has a new agency model, called ‘fly fearless’, that sees it working with creative agencies in 20-week bursts rather than collaborating for a prolonged period of time.

That would seem like a nightmare for procurement. But Smith says it is about admitting the company hasn’t “cracked the growth thing” yet and determining how it can work with agency partners to think differently and re-evaluate its brand strategy. Rather than “get involved in everything”, procurement has a role to play in motivating marketers and agencies and trusting them to add value, he adds.

Mondelēz currently has a “huge” innovation agenda under way, and Smith says his fellow procurement colleagues often insist on taking a role in commissioning individual suppliers for each new initiative, which is problematic. “They want to get involved and they want to buy everything, and suddenly we are slowing down the innovation timetable,” Smith says.

“There is quite a challenge for us in procurement to actually empower marketers, where we know we can’t add value fast enough.”

Sarah Swaney, category lead for agencies in EMEA at Johnson & Johnson, says there must be a role for procurement to play in new areas such as ecommerce and martech but admits the question of how that would work in practice still needs answering.

“We’re all scrabbling round the bottom and trying to work out what is procurement’s real role here,” she says.

“One thing that is really important is to work with marketing to develop new ideas, and that we test and learn new things. We cannot sit on the sidelines. Managing value has to be about managing that process of continuous improvement.”

Additional reporting by Leonie Roderick and Charlotte Rogers

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