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The magic and the logic: New report explores the procurement-marketing balance
PMAC
Procurement professionals today find themselves playing a larger role in the complex acquisition of intangible advertising and marketing services. Offering common sense solutions is a new white paper entitled “Magic and Logic: Re-defining sustainable business practices for agencies, marketing and procurement.”
It outlines how procurement can work more effectively with two key groups of business partners—its internal clients in marketing, and external marketing services agencies.
The Purchasing Management Association of Canada (PMAC) is collaborating with the Association of Canadian Advertisers, the Institute of Communications and Advertising, and the Association of Quebec Advertising Agencies to make this valuable report—originally published by our British counterparts—available to Canadian practitioners.
“PMAC is pleased to participate in this project,” says Robert Dye, president of PMAC. “All of the associations who have supported this project believe common understanding and mutual respect among our memberships is the best way to move ahead.”
The principle underlying the best practices in this report is that all parties have a joint responsibility to produce “profitable ideas that make profit.” The report argues a major contribution to this objective could be made if all involved recognize the distinction between “magic” and “logic.”
The magic refers to customer insight, brand strategy and creative expression. The logic describes project management, production and purchasing of third-party services. The main focus of procurement’s attention should be on managing the logic element of agency work, leaving management of the magic to their marketing colleagues.
Controlling costs
The relationship between the three parties has not always been a smooth one, according to the report. The conflict between marketing and agencies took root in the 1970s and 1980s. Some agencies mismanaged client time and resources with inefficient working practices.
In the 1990s, this environment began to change as companies began to focus on controlling costs. Marketing departments worked with procurement colleagues to determine whether agencies were delivering the best product for the best price.
Marketing benefited significantly from this change. Procurement helped marketing control costs, establish proper billing and invoice procedures, clarify the amount and kind of work required from the agency, set timetables for deliverables, and source goods and services such as printing more effectively. After the fees and contracts were negotiated, procurement helped marketing evaluate the agency’s work by developing appropriate processes and metrics.
Despite these savings, some marketing departments felt procurement focused too much on cutting costs. Marketing believed profitable ideas were more likely to be created if agencies were treated as true business partners instead of simply as suppliers. The report acknowledges these concerns and concludes procurement needs to establish shared business goals with marketing.
Procurement can also help agencies improve their efficiency. Agencies that respect the skills procurement brings to the table can apply their methods. Some agencies have even hired experienced procurement people of their own.
As the report states, the rise of procurement should not be seen as a threat. Marketing clients and the procurement professionals acting with them can work together to ensure they achieve maximum value from their agency relationships.
Forward-thinking procurement professionals recognize the difference between the magic and logic part of what an agency does. It’s in the logic where procurement can add the most value.
Five messages for procurement
1. Procurement must make the effort to understand what they are buying when they buy agency services. This includes appreciating that quality of output and outcomes in marketing can be highly related to cost, and ROI would be a better measure of success than lower price.
2. Procurement should be more open about their “agenda,” so agencies and marketing understand what you do, how you work and what you expect from them.
3. Procurement must look for ways to work with agencies to help them be more efficient. The “logic” part of what agencies do is where procurement’s skills and processes can really make a difference.
4. Procurement can similarly help marketing to be more disciplined, which in itself would improve the cost efficiency of the process.
5. Procurement could have an important role in helping marketing to find ways to remunerate agencies that will incent them to produce profitable ideas.
The report will be available in English and French at www.pmac.ca b2b
The above column, and the French translation on the facing page, were provided by the Purchasing Management Association of Canada. See www.pmac.ca
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