By Chuck Hatsis
Marketing is a substantial investment at most companies, often equaling double- and triple-digit millions of dollars each year and running as high as 3-5 percent of gross revenues. But despite its size, marketing tends to escape the financial scrutiny and sourcing rigor applied to other large spend categories. But herein lies a unique opportunity.
Experience from the field proves that many strategic sourcing and supply management principles are applicable to marketing, too, and will deliver the same or greater results. In fact, the author's experience suggests that savings averaging 8 percent are possible in as little as six months — without reducing total ratings points (TRPs), laying off staff, changing the media mix or changing ad agency support levels.
The simple truth is that marketing investments should be sourced as rigorously as every other major spend category in the supply chain. However, the tact to deploy depends on the maturity of your marketing procurement capabilities. With that in mind, this article outlines steps that any organization can take to improve its marketing procurement, based on its maturity level.
Low Marketing Procurement Maturity
Common characteristics among these organizations include a lack of C-level support — for example, from the CEO, CFO and/or chief marketing officer — for Procurement's involvement in sourcing marketing spend. As a result, performance evaluation criteria are misaligned between Marketing and Procurement, and Marketing neither trusts nor values Procurement's involvement.
Usually one also finds that few or no Procurement personnel have ever held marketing or ad agency positions. They might have sourced other categories, but not marketing, and they have never taken any marketing domain training. Consequently, marketing procurement in these organizations typically is performed exclusively by marketing functional subject matter experts (SMEs), and marketing spend management is decentralized across divisions, brands and geographies. In addition, spend management and management reporting is almost always manual, Excel-based and done on a one-off basis.
Low maturity companies should first cement C-level support for trials or pilots and foster momentum based on the results. Senior-level involvement ensures that Marketing and Procurement mutually define "success" and align metrics accordingly.
On the personnel side, educate staff to be involved in marketing procurement through the Association of National Advertisers or via an "Intro to Marketing" class prior to their engagement in projects. Staff may also want to study under a marketing procurement specialist to acquire the necessary expertise before going it alone.
It will be important to centralize marketing spend management across divisions, brands and/or local regions — it is beyond the scope of this article to discuss how to do that, but this magazine and others have written about the tools and processes necessary for spend analysis and rationalization. In addition, these low maturity companies should consider investing in a marketing spend management solution like Aprimo.
Finally, in terms of an initial project, Procurement would be advised to "start small" by taking on a category like commercial print. Most marketers regard print as non-strategic and will therefore likely be more amenable to giving Procurement a shot. In addition, print can typically be sourced using a process similar to other spend categories that will be more familiar to your team, and it can deliver substantial savings that will help build your team's momentum and credibility.
Medium Marketing Procurement Maturity