Monday, September 27th, 2010

Why we need to learn to love procurement

As strategic thinkers, we love a trend; and the one thing that’s become glaringly obvious over the last few years is the increasing appearance of procurement people in pitches. Once consigned to the back office and only brought into play once the horse-trading starts, they’re now at the forefront of a revolution in the pitching process.

Not too long ago, the smartest, most creative idea sealed the deal twixt agencies and clients. But with prospects now looking for ‘best value’ in every transaction, it has become clear that agencies must change the way they sell creativity – and that those who cannot adapt will struggle to compete.

As industry thought leader, we felt a responsibility to develop an understanding of this issue -  so we’ve set out on a journey to become the agency that loves procurement more than any other. The planning and business development teams here at Manchester marketing agency, gyro, commissioned a team of crack MBA students from Lancaster University Management School to help us explore how agencies can adapt to the growing necessity of dealing with procurement , whether our quest for creative excellence really does conflict with procurement’s true motivations and how we might re-shape our rules of engagement.

It was a process that started with some introspection. With every pitch, we’d felt increasingly compelled to tailor our thinking to procurement types we perceived as somehow better accustomed to rubber-stamping the purchase of more immediately quantifiable products and services such as toilet rolls, photocopiers and cleaning services.

Having parked our perceptions, delving into the nature of agency relationships with procurement was most enlightening. Certainly – at first glance – it looks like a case of ‘never the twain…’

Agencies think that procurement personnel don’t understand -  or care – how they work, that hey do not understand the value of creativity, and that  their influence is disproportionately powerful. Indeed, agencies seem prepared to do whatever is required to work around procurement. On the other hand, procurement teams believe that agencies do not like them and will do anything to avoid engaging with the numbers – and even that their own marketing function are somehow ‘in league’ with agencies.

The reality is simultaneously more prosaic and reassuring. Our research revealed that procurement teams are not all the faceless bean-counting machines that agencies consider them to be. They are open to communication, would like greater involvement throughout the pitching process and want to be though of as a facilitating partner in the buying process. They even appreciate their shortcomings and are actively looking to agencies to help educate and develop their capabilities.  And – brace yourself – they’re not all about cost. Specification, working processes, issue escalation and management of the relationship are all on procurement’s radar – so ignore these details at your peril.

Ultimately, we can no longer ignore the harsh reality that organisations have put in place processes to extract best value from all suppliers. Rather than work around them, agencies should seek to forge relationships with procurement professionals as we do with our marketing contacts.  Agencies can no longer afford to assume that ONLY the procurement function or the ONLY the marketing function has the casting vote in every organisation. Indeed, our MBA team defined the Client as ‘Marketing + Procurement’. As such, it’s crucial that we understand that you can’t have one without the other – and that we engage and address each audience in the most relevant way.

Whatever we learn from our project one thing is startlingly clear: not only has the recession accelerated procurement’s involvement – it’s here to stay. And, rather than treating procurement with suspicion, those agencies  – and marketers – that reach out a little more just might find themselves winning more pitches.

‘Why we need to learn to love procurement’ is a research project undertaken by gyro in conjunction with Lancaster University Management School. We are currently analysing and summarising the outputs. If you would like a copy of the final analysis, please email danny.turnbull@gyro.com

3 Comments

  1. Very interesting project. And a good one. The problem is that often cost is mistaken for value. And the reason this happens is equally much their lack of knowledge (many times) and our inability (perhaps) to prove our value. Everytime they mention cost – we need to counter, with arguments of numerical and emotional character – that it’s an investment. We need to say; do this – get that. The “get that” is what management consultants are really great at. As a matter of fact; they INVENT their own KPI:s.

    We can too, but shouldn’t have to, but rather point to cash. It’s hard, but we need to get much better. If you only see deliverables – you’ll only count cost. When you see future cash – you’ll see investments.

  2. Any Procurement or Sourcing team worth their salt are completely supplier agnostic, and the very final consideration on any project should be cost. Running a competitive process should be about capability and compatability with requirements. Only once you have a short list of capable suppliers should you push them on price to gain market price, and the best way to do that is via an auction.

  3. just closed a project that involved the procurement and contracts department; there are pros and there are cons. What is important from what i have noticed is to be as clear as possible in terms of hidden costs and third party suppliar management. initial cost is never a concern, or at least not the only variable. it is the overall spending they worry about. tailor your presentation to always address how flexible your contract process is. always voice two golden rules; 1. there are standard industry practices we cannot avoid or compromise. 2. we encourage a procurement to agency session where align ourselves with contracts and finance in order to best understand how you operate, share how we operate and locate adjustments to create a comfortable leap and heqlthy start. more than 70% of accounts where procuremwnt and the client are new to the advertising and creative industry end with a contested bill somehwere down the line.

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