Marketing Week once reported that marketing teams are losing their footing, as procurement’s role in agency negotiations grows, with executives turning to procurement staff when finalising decisions.
The facts of the article were based on a survey undertaken by 43 members of the Worldwide Federation of Advertisers, with members including large corporations such as Coca-Cola, Unilever and McDonald’s. The survey revealed that over the last decade there has been a huge shift in the way agencies are negotiating contracts, with procurement’s contribution rising by as much as 90% over that time.
51% of members when asked said that contract negotiation and implementation was now lead by procurement, with 11% saying the process was the sole responsibility of procurement staff.
Over this same period, as procurement involvement has risen so marketing involvement has fallen, with just 20% of marketing teams now leading negotiations, compared with 26% in 2011. and supported by procurement and finance fell to 20 per cent, down from 26 per cent in 2011.
Steve Lightfoot, communications procurement manager at the WFA, told Marketing Week: “Marketing is losing its role [in agency negotiations] but marketing is about building brands and finding creative solutions to business challenges, not finding the right remuneration method to pay an agency. This doesn’t encroach on core marketing capabilities, it has not taken over marketing’s creative role. This is the back office stuff of marketing.”
Performance Based Contracts
The report shows a steady move towards a more performance based negotiation with agencies, which is where procurement comes in. They are assessing both business performance and the remuneration of the agency based on their input.
Although there have been worries that this will lead to agencies losing out as procurement teams try to save as much cash as possible for the company, many believe this will drive positive change for all involved as it will reward agencies for their hard work.
Why Partnerships Are Vital
Giving procurement more responsibility in the negotiation process has come under scrutiny, and there are worries that procurement will eventually push marketing out of the process entirely. However, as Debbie Morrison, ISBA’s director of consultancy, told Marketing week, both teams bring their own unique benefits to the process, and therefore a partnership between marketing and procurement is the most beneficial route for all involved.
“Clients have hardened their commercial positions and moved towards what appears to be commoditisation of their creative agencies. The upshot is that although it appears marketing has ceded some of its control to procurement, the reality is it’s a team effort to control and manage costs more smartly on behalf of their organisations,” she says.
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