Can agencies pick up more business with a changed approach to procurement teams?
Agencies pitching for new work are used to regarding brand procurement teams as their opponents, but it doesn’t have to be that way. We explore how alternative approaches could mean agencies picking up more business.
Could agencies make themselves more attractive to brands with a new angle on procurement?
When brands measure the distance between agencies competing for their business, they consider a number of criteria – from creative pedigree to digital capabilities to cost. It’s often left to a company’s procurement team to consider the latter, weighing up not just budgetary concerns, but opportunities to boost further business growth.
Typically, that process isn’t a welcome one for marketing and advertising agencies, given the contempt for marketing activity historically exhibited by C-suite power brokers.
But agencies could do themselves a huge favor when searching and pitching for new business by courting procurement teams as well as brand marketers.
”At creative agencies you’re always told that procurement are the bogeymen, that they’re going to suck the joy out of everything,” says Jon Williams, chief executive and founder of Liberty Guild. He says there’s an ”endemic mistrust” of procurement teams at agencies pitching for new work.
Keeping pace
According to Philipp Schuster, procurement teams have become significantly better at navigating and interacting with agencies.
Compared with 10 years ago, he says ”it’s night and day.” Schuster, now agency and marketing partnerships lead, global strategic marketing, for pharmaceutical firm Bayer, worked in procurement roles for years for Puma and later Adidas. ”In the early days it was a classic procurement function, but that has really changed. The most sophisticated procurement teams have very skillful people from the agency sides and marketing sides.
”It’s a much more sophisticated conversation. It’s not just about negotiating rate cards, it’s about the complex ecosystem of marketers, agencies, consultants, tech platforms, companies and other stakeholders – and how we can work together for the greater good of the brand.”
Schuster says not all agencies have kept pace. The structural renovations under way at several of the industry’s holding company players (he says Bayer’s relationship with WPP, Omnicom and IPG has benefitted from the fact that they have been able ”to transform, or are in the process of transforming, their organizations”) has brought them more in line with how modern brands think and work. But their competitors, Schuster says, will struggle if they don’t also embrace change. ”If you don’t keep up with that change, you will not be valid business partner... you won’t be getting that seat at the table.
”A lot of agencies did a lot of procurement-bashing in the past – that it doesn’t add value, that it just slows things down, that it’s difficult to work with.” But, he says, ”if agencies are just looking at procurement through that lens, maybe they’re as outdated as some of those teams. We need them to be more open minded.”
Open minds
One opportunity for open-minded agencies could be outcome-based pricing. According to Stuart Dunk, founder of consultancy Don’t Forget To Look, brands are keen to echo the measurability of digital media and marketing activity to remuneration structures. ”Brands are now more willing to pay in different ways, to pay outcome-based, output-based and not just to rate cards.
”Agencies that can articulate and offer different types of remuneration models, not just rate cards, but things that show they have some skin in the game – that are more to do with the outputs and quality of the work and the impact it has on the consumer – these are the sorts of agencies that are going to be successful in the next couple of years.”
Dunk is a gamekeeper turned poacher. Previously, he spent years in marketing procurement at brands such as Betfair, Reckitt Benckiser and Nike. Now he’s a procurement consultant who helps agencies make their pitches more attractive to the hard-nosed experts on the other side of the table.
”Marketing procurement has to be seen as a highly-valued partner,” he says.
Laetitia Zinetti, managing director for continental Europe at Ebiquity, makes a similar argument. ”Procurement should be treated as a business partner, where win-win conversations take place. To build trust, agencies should come to the table with a transparent approach from the beginning, where they open books and processes. Agencies should also proactively recommend KPIs that will measure success and efficiencies (including soft and hard ones) from the pitch, which are transparent, realistic, ambitious and, most importantly, measurable (with clear sources and methodologies).
”Agencies should emphasize the value they are driving for the business, sales they can drive – and focus their presentations on these figures. Demonstrating the value and growth opportunities an agency can provide while demonstrating a practical, responsible approach to media will help both parties better understand the partnership they’re going to engage in and provide more opportunities for negotiating.”
Dunk argues that big rewards await agencies that try to change their approach to procurement teams. He suggests approaching procurement teams outside the typical pitch and review process. ”Pitch processes are not the easiest way to sell to a brand ... they’re quite price-oriented and you’re up against three or four other equally keen agencies snapping at your heels.”
Instead, Dunk advocates ”getting comfortable with organic, targeted outreach sent by agency leaders, personalized to the people it’s being sent to. It is a great way to start a conversation that is outside a potentially rigid procurement process where they have to compare apples to apples.
”Some of the biggest wins, certainly the most profitable wins, can come through procurement – with personalized messaging. Of course it’s a numbers game, but so is sitting by the phone waiting for an RFP to land in your lap.”
Federica Bowman, chief executive officer at contract compliance specialists FirmDecision, says involving procurement experts from the beginning of an approach can be very valuable. ”Procurement should be a key stakeholder in the agency pitching process. Their contribution provides valuable structure and support to ensure the pitch is managed fairly and with the appropriate rigor. Their involvement will allow the media and marketing teams to focus on the service and outcomes being proposed by the agencies,” she tells The Drum.
”At the beginning of the process, procurement can provide invaluable support in identifying the key terms within their proposed contract or MSA that are mandatory for the business. These terms should be agreed upfront by the agencies or groups so there is clarity on expectations and less negotiation required further down the line. By providing these non-negotiable terms upfront, agencies that are unable to agree have the opportunity to not participate in the pitch, thereby freeing up valuable time and effort on both sides.”
Within the ritual space of a pitch, Williams suggests that agencies invite brands’ procurement teams into discussions at an earlier stage. ”It’s better if that happens in the beginning,” he says. After that, he recommends maintaining the relationship for the duration of the partnership.
”It works best when you have a troika of marketing, procurement and agency, working to a single agenda ... with a level of trust and transparency between all of them.”
”Agencies should value procurement roles rather than [be] adverse [toward them] and appreciate the role they have to do, especially when their only priority is not financial efficiencies,” says Zinetti.
And Schuster concurs. ”We have excellent procurement teams, why would [you] not take advantage of that resource? I want them to be part of that conversation.”
Talking money
While marketing needs are more complex today than ever before, Dunk suggests agencies emphasize their expertise in specific, vertical areas, rather than a breadth of services. ”You can’t possibly be brilliant at everything. You’d rather be an expert in a relatively narrow category or consumer segment. Look at your win ratio: unless you’re positioned as the absolute expert, you may not be winning very often and you may not be charging the price you want to very often.”
Furthermore, Williams says agencies pitching work should learn the language of procurement – of savings, stakeholders and supply – and sympathize with the concerns of the businesses they’re trying to do business with. ”There wouldn’t be a vast proliferation of cost control consultants if there wasn’t something to control.
”Value is what people are after. Value is great work for a good price, exactly the same as you or I would look for.” Conversations about cost and creativity ”are different sides of the same coin,” he says.
On the brand-side, Schuster again hits a similar note. ”Everyone in this environment wants to crate value, wants to do well, wants to add something.”
Williams concludes: ”The more agencies adapt, the more work these guys are going to get.”