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August 4, 2010
Four Ways to Cope With Procurement
 
For the last dozen years or more, clients have inserted sourcing or procurement specialists into the management of agency relationships. Most agencies still haven’t gotten over it, fearing that ignorant and malevolent bean counters will grind them down and steal their magic.

It’s a classic mismatch. Personality types and business orientations clash repeatedly. For the most part, agency types are C students on business and finance topics. They generally dislike or put off the process of counting, scoping, negotiating, pricing, and reconciling. Similarly, agencies are notoriously behind the times in process automation and in using sophisticated software to manage their business.

On the flip side, sourcing professionals don’t know or care much about the intangibles of marketing. Sourcing pros create systems, which are interrelated and yield business results. Their world is one of ratios and regularly changing financial constructs. They look to use extensive process modeling and high-powered software suites to standardize, template, count, sort, compare, benchmark, and yank costs out of every system.

The latest evidence comes from an ANA survey of 225 people -- 76 client-side procurement types, 59 client marketers, and 90 agency executives. Only 14 percent of agency executives think procurement knows anything about the tangibles of advertising and marketing, and only about one in three feel that they communicate openly.

The parties view the issues from opposite ends of the spectrum: 84 percent of procurement people see advertising as an investment to be optimized, and 74 percent of their agency counterparts believe they view marketing as a cost center to be minimized. The chasm doesn’t have to be as wide as it seems if both parties spend more time with one another and talk realistically together.

Consider these four approaches to working more effectively to get fair value for the contribution agencies make toward client business results.

Check your ego at the door. This isn’t personal. Procurement people are just as exasperated by the process as agency people. No one is trying to screw you. Both sides are trying to accomplish the same goal and meet profitability and productivity metrics. Its not necessarily a zero-sum game. It’s a constant negotiation where transparency and relationships directly affect the outcome.

Understand the context. Business operations have changed dramatically over the last decade aided and abetted by the recession. Everyone wants more for less. Everyone is looking to cut every cost they can. Everyone wants to re-use, re-purpose, and squeeze as much use and value out of every asset. This has been going on for 25 years in manufacturing, production, supply chain, research and development, and human resources. This process is not an inquisition against marketers or agencies.

Recognize the different points of departure. Procurement comes to the game with an industrial optimization mentality. They want to measure outcomes -- what happens in the business. They really don’t care what it takes to achieve the result as long as the cost of getting the result has a reasonable ratio to the return. They are on a continuous hunt to define “good” in financial terms.

They figure if they are going to buy something, it ought to have legs, and they don’t want to buy the same thing over and over again. They ask a lot of detailed questions. They want to know why the same CD working on two different projects has two different costs. They want to know the ratio of art directors to designers on each job. They want to know why one e-mail project takes four weeks and a similar e-mail for another takes eight. They want to know the real costs and the mark-ups on outside vendors or tech suppliers. They want to understand why things can’t be templated, re-used, or shot once in a universal format and placed in 10 different media.

Rarely are agencies models of process efficiency. There are few industry norms because agencies consider their processes, even the most convoluted ones, part of the secret sauce. Everyone does the same basic steps a different way or uses a different sequence. Every agency allocates staff differently, assumes a different number of rounds for review and revision, and offers a different mix of services priced in idiosyncratic ways. While the 4As do annual financial surveys, everyone knows the data is not 100 percent accurate. This drives procurement people nuts. They live in a world of standards, norms, and rules of thumb, and agencies do everything they can to avoid being pinned down.

Why?

Ad guys see themselves as creative artists. They don’t like to think of themselves creating molds or repeatable processes. Advertising is where business logic expressed through art interacts with customer interests and needs. Agencies create one-off executions. They prize their talent and want to be paid for the time, effort, and creativity -- the inputs that constitute a campaign. But like sports stars, the impact and productivity of the work is variable. Sometimes, the effort yields a monster result. Other times, it’s a strike out. This, too, makes procurement people nuts.

Be realistic. In real life, there are many predictable and repeatable tasks that agencies undertake for clients. Many agency relationships are predicated on the idea that an agency has arms and legs and capabilities to supplement the client’s marketing team. A lot of agency work is cranking out planned projects on time and on budget. While agencies reject the factory analogy, there are many elements to agency work that are production-centric.

Many agencies routinely re-use templates, creative concepts, and HTML code to achieve economies of scale, to accelerate creative development, or to build-in production efficiencies. The sourcing people want to understand how, when, and why this is done, and they want a piece of this action in terms of productivity or timing benchmarks and predictable rates.

Many big clients have created complex rate cards that account for the timing, complexity, and business value of projects and align fees accordingly. Some have built-in incentives for efficient production and/or reward exceptional performance with bonus dollars. While it often feels intrusive to agency leaders, having a fully transparent rate card often creates the case for custom pricing for special jobs that require extraordinary effort, talent, scope, or timing.

Working with sourcing and procurement is a fact of life. The world will never return to the old days, so use these four tactics to make the process easier, friendlier, and more productive.

 

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Danny Flamberg, EVP Managing Director of Digital Strategy and CRM at Publicis based in New York, has been building brands and building businesses for more than 30 years.Prior to joining Publicis, he led a successful global consulting group called Booster Rocket, as Managing Partner. Before becoming a consultant, he was Vice President of Global Marketing at SAP, SVP and Managing Director at Digitas in New York and Europe and President of Relationship Marketing at Amiratti Puris Lintas and Lowe Worldwide.
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