A new approach to marketing procurement
By David Fincham, Business Development Director at Charterhouse, the marketing services production company (www.charterhouse.tv)
The gap between marketing and purchasing has been gradually spanned over the past ten years. As might be expected, the pace of progress varies wildly across sectors and industries, providing examples of the potential cost savings available with increasingly productive relationships.
Increasing pressure to cut costs while remaining effective has fueled this cross-department collaboration. Indeed, the latest IPA/BDO Bellwether Report confirmed that marketing budgets were revised down for the third consecutive quarter in Q2 2011. This board level quest for cost-efficient agency relationships, combined with greater marketing awareness, has also changed the role and skill set of a typical purchasing department.
A minority of companies are still living in a ‘coupled’ relationship where creativity and production are controlled by agencies and the purchasing department has no input. However, the benefit of getting a procurement perspective on agency relationships has been realized by some, with purchasers offering advice on matters like service level agreements and pricing.
Additional cost savings have been made through de-coupling certain production disciplines, including media and pre-press. While a number of companies are lingering at this level of maturity, some have taken the idea further into a fully de-coupled model. In this situation, marketing retains its relationships with its agencies but purchasing has a holistic view of not just pre-press and media but spend for all channels including TV and print.
Though the majority of brands are currently operating under this fully de-coupled model, it is not necessarily the most cost-effective way of working. A small number of forward-looking companies are starting to move full circle into a ‘re-coupled’ model. This entails full categorization and consolidation across procurement channels, full visibility of spend and the use of a single supplier for production, ensuring maximum economy of scale and value.
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As with anything new, an innovation curve will see a small group of early adopters taking up the initiative, followed by a delayed interest from organizations that prefer to wait for evidence of the promised benefits. Purchasers need to decide if their business can afford to be a laggard or whether they will be one of the first to reap the rewards of re-coupling.
Companies moving from a coupled to a re-coupled model may view this new procurement approach as too great a leap of faith. Still, de-coupling will see major improvements in efficiency and cost-savings, from which the transition is then a natural one. Good management of agency relationships will help to diminish fears of over-dependence on one production partner.
Re-coupling eliminates significant overheads, including the need for multiple account directors and account managers who perform similar roles across all production channels. It also improves brand consistency, and perhaps most significantly, offers marketers a partner who can genuinely deliver integrated marketing campaigns.
In addition, this focus makes it easier for companies to bring production insight and expertise to the campaign creation process at a much earlier stage. Not only will this introduce new ideas to the table, but also campaigns are less likely to deviate from the brief.
De-coupling has saved as much as 30 per cent on production, and re-coupling could shave a further 10 percent off total spend. Though any restructure is a daunting process, effective management skills and selecting the right partner will open opportunities to bring production closer to the business and reap the rewards.