It was with great interest that I read a blog post on Procurement Leaders from Danny Ertel dealing with the topic of strategic sourcing’s role in the procurement of complex services.
The article provides an insightful approach to dealing with the services business owners within the organization to gain their confidence and importantly, their buy-in to an active collaboration with the procurement team. In our experience working with marketers, the chief fear cited by Mr. Ertel when it comes to marketing leaders hesitation to actively engaging with procurement is the fear that their “trusted advisor” will be abandoned in favor of a lower-cost provider that is not as capable of supporting the branding and demand generation needs of the organization. From a marketer’s perspective this potential outcome carries an inherent level of risk that can be difficult to overcome when attempting to forge a productive relationship between marketing and procurement.
There has been a significant shift of late in assessing the procurement team’s “value proposition” to their internal marketing clients due in large to the recognition that the sourcing of complex services is different than that of direct procurement categories. It is generally agreed that the former carries more risk and in turn can yield greater strategic value to the organization when a productive, long-term relationship can be forged or enhanced with a marketing partner such as an advertising agency, public relations firm or marketing insights provider. In the words of M. Kathleen Casey:
“Do not free the camel from the burden of his hump; you may be freeing him from being a camel.”
So how should procurement fashion their appeal to professional services owners? According to Mr. Ertel, “procurement needs to consider ways to help address what such stakeholders might actually consider to be in need of fixing.” While simple in nature, this is an incredibly straight forward approach which too often is not followed. The primary reason for this is a lack of a basic understanding of the marketing services value chain and the role which suppliers play in assisting the organization in achieving its sales and profitability goals. Further, it requires procurement and marketing professionals to work in tandem to map out those areas where the marketing services team’s needs align with procurement’s resource and capability offering to find “win-win” opportunities.
While the end result of such collaboration could be savings, in all likelihood the rewards will be much greater and encompass future cost avoidance, process improvements, the mitigation of risk, alignment of corporate governance oversight and better resource management… for both the organization and its marketing supplier network.
When there is a perceived risk involved in the sourcing process, such as with the procurement of complex services, careful analysis of those risks relative to the cost: benefit proposition is paramount. This cannot be accomplished solely by the procurement team. For strategic service providers such as an advertising agency of record, deep category knowledge is required which will necessitate the active involvement of the internal marketing stakeholders and potentially independent advisors with specific skill sets in the area of search, agency remuneration and contract compliance.
The consequences of a poor decision in the sourcing of complex professional services are too great to be ignored. Therefore, the logical path forward necessarily requires a solid working relationship between procurement and marketing built on the notion of trust, a clear delineation of project goals and a mutually agreed upon division of roles and responsibilities over the course of the indirect procurement process.
Marketing investment is a substantial component of an enterprise’s overall cost structure which often runs as high as 3.0% to 5.0% of gross revenues – way too substantial to believe that this investment category can forgo the type of internal scrutiny and control rigor applied to other areas of the company. Thus, it is imperative that procurement and marketing strive to address their differences and forge ways to collaborate that unlock the value gains which are inherent in a marketing services supplier network.