Opinion

Marketing and procurement, when two worlds collide

High quality but expensive campaigns are often blocked by procurement officers looking to prevent marketing budgets from spiralling out of control, but it’s a false economy – warns David Morgandavid-morgan-pic 

I was recently asked, at a Mumbrella event, for my opinion on the role of ‘procurement’ within the marketing industry. I think I may have answered: “Where do we start?”

Actually a good place to start is not really with the role of procurement, but instead with the role of marketers. They are the engine of growth in any business. They should know their consumers. And they should be focussed on persuading these folks into buying more of the products and services they provide. Make marketing accountable for the growth line. It is as simple as that.

On the other hand, the finance guys in an organisation should be charged with the company economics and keeping a close eye on the organisational cost line. Growth is good, but not at any cost.

So marketers drive growth, Finance people look after costs. Now plot the two lines for the company ‘jaws’. Ever widening jaws is the success model for most companies keeping the marketers and finance staff gainfully employed, and relatively harmonious. Still simple, right? So where does it go wrong?

Well, marketing is often not held accountable for business growth metrics. The fragmentation of marketing into multiple speciality communications units is not helping. Each unit determines its own metrics – brand awareness and saliency, earned media value, Google analytics, Facebook likes etc. – then they lobby for resource and chase their own obsession.

The problem is, without more holistic understanding and leadership – the thing chief marketing officers should be responsible for – none of these metrics correlate directly to growth. And so the marketers operate in small bubbles of commercial irrelevance, losing credibility with their cross functional business partners.

Meanwhile procurement is often not held accountable for business growth metrics. The procurement people are often good guys, well intentioned, quality professionals. However, with no business growth direction from marketers, they focus entirely on cost cutting. Sure they go after agency fees. If marketers cannot justify the commercial value of their partners, it makes sense to take a commoditised approach.

And the same for media spend. Procurement pareto charts look at costs and finding media is a high item. It means marketers are tasked with arbitrary targets to reduce spending by amounts which coincidentally often meet the board’s annual profit targets. The problem is not a marketing or a procurement problem. It is both.

Over the last decade, many companies have become increasingly obsessed with managing the cost line. Many industry leaders have in fact built their careers on cost line management. So if that’s what they are good at and that’s what what they’ve been rewarded for, it’s not a surprise that this becomes their main area of focus. If we are to find another way forward in the future, we have to start with recognition of where things have gone wrong in the past.

David Morgan is principal at marketing consultancy firm Morgan and former executive director of marketing at Nestlé Oceania

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