challenges in marketing procurement...4 introduction The marketing category is a dynamic, exciting,...

challenges in marketing procurement

2

contents

Foreword

Part 3: The Agency Dynamic

Part 1: Organisation & Structure

Introduction

Part 2: Performance & Predictions

3

15

5

4

7

3

foreword

Almost a year on from our original trends report and the changing

marketing landscape continues to present both opportunities and

challenges for procurement.

Procurement teams are becoming more progressive and integration

with marketing continues to improve. Half of respondents in our

study revealed they’re planning to restructure their teams to increase

alignment with marketing, demonstrating the continued investment in

strengthening relationships to achieve greater synergies.

Furthermore, with only a few exceptions, nearly every respondent

confirmed their KPIs are either closely or reasonably well matched with

their marketing teams.

Despite these developments nearly half of procurement expect they will

have less control of marketing spend in the next three years. Although

gaining complete control of budgets isn’t necessarily the objective this

will no doubt be something procurement will wish to address.

However, with the enduring trend for marketing budgets to continue

shifting to digital channels marketing will no doubt value the unique

benefits procurement can offer. Procurement now has a firm

understanding of digital and the value that can be added in this

increasing area of spend will prove fundamental for marketing teams.

Yves RogivueCEOKonica Minolta Marketing Services

4

introduction

The marketing category is a dynamic, exciting, forward-thinking, customer-centric and entrepreneurial category of spend to

work in and has been an established procurement skill set in Europe for over 20 years.

It does differ from other procurement categories, as relationships and personal opinion plays a more significant role.

However, with a rapidly changing technology-driven marketplace, both marketing and agencies have to be quicker to adapt

marketing strategies, review media choices, use technology and manage societal implications.

Procurement can provide and manage the supplier network to assist in this delivery by utilising the skills and processes that it

has, as well as providing market and supplier insight.

The focus in this study was to look at optimisation and drivers: how marketing procurement can review the multiple sub categories that

sit in marketing, and what the best strategies are to do this.

More than 100 senior executives were interviewed, with job titles including: Global Head of Marketing Procurement,

Head of Marketing Procurement, Marketing Procurement Category Lead and Director/ Head Indirect Spend among others of

similar standing.

Additional contributorsThe benchmark data and analysis contained in this report is complemented by selected quotations taken from interviews with

industry experts. The comments presented here are intended to add personal insight and do not reflect the views or policies of

their respective companies.

Tina FegentIndependent Consultant,

ProcureCon Marketing Advisory Board

Peter RoweGroup Sourcing Manager Marketing,

RBS

Larry SmithStrategic Sourcing Director Global Marketing,

Mars

Barry ByrneGlobal Procurement Director - Marketing Services,

SAB Miller

5

part 1: organisation & structure

What is the scope of your marketing procurement role?

How long has your organisation had a marketing procurement department?

How is your marketing procurement team structured?

More than half (58%) of procurement teams have adopted a regional structure for their organisation. This is in

contrast to only a quarter who have elected to concentrate the responsibility for purchasing centrally. This allows

organisations to be more responsive to local factors, and offers the potential to be both more efficient, and cut out

unnecessary bureaucracy.

UK only

One country only outside of the UK

A region in Europe

All of Europe

EMEA

Global

16%

10%

17%

44%

6%

29%

< 3 years

3-5 years

6-10 years

11+ years

Do not have one yet

7%

44%37%

11% 1%

Centralised at a group level

Decentralised at a country or company level Regional Local

Mix of both, with group

taking the lead on the main categories

By category of spend

By business unit

23%58%37%25% 42% 61% 40%

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Do you plan to restructure the marketing procurement team in the future, to align more with the marketing department or with the business?

part 1: organisation & structure

A full half of respondents are planning to

restructure their procurement in the future

and a further 30% say that restructuring

to better align with either the marketing

department or the business is possible. This

may represent the swinging pendulum of

opinion on how best to structure marketing

procurement, however, it could also be due

to uncertainty on what the future holds,

especially in the light of digitisation and the

growth of mobile and social channels.

" To a certain extent there will always be restructuring going on, as people move up and move on. One other main area

of change however is in the categories, and things are always evolving. Two years ago the digital category was most

likely a sub-set of IT procurement, now it is not necessarily clear whether it should sit in marketing procurement or IT

procurement. Of course, the need to restructure may also be the result of shrinking budgets and the need to do more

with fewer resources."

Tina Fegent, Independent Consultant, ProcureCon Marketing Advisory Board

50%

30%

20%

Yes

No

It's possible, but no decisions have been made yet

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part 2: performance & predictions

What do you see as the future of Marketing Procurement?

There is a mixed view amongst marketing procurement teams of what their role will be in future. However, it is clear

that there is plenty for marketing procurement to contribute. Nearly 70% of respondents see development into

internal consultants, working with their colleagues to find solutions to shared problems, and 63% think the role will

involve developing into one of an information agent, providing data and analysis on market trends. However, the

traditional is not forgotten – 64% agree that continuing to focus on cost will be a big part of the future

for procurement.

68% Be an internal consultant, who works with stakeholders to look for solutions to their business problems

64% Continue to focus on cost as financial analyst

63% Develop into an intelligence agent who provides data on the market place

60% Risk advisor - help stakeholders manage risk

57% Relationship broker with stakeholders and agencies/suppliers

50% Legal advisor to ensure that we minimise exposure to any contractual risk in external relationships

24% Supplier coach and change agent

" I definitely think that more progressive procurement professionals are moving away from being purely focused on financial

analysis. They will tell you: they have done costs, they’ve looked at rates, and they’ve looked at how fees are structured

and at remuneration. These people are definitely moving toward a more consultancy based ways of working. For them,

being an agent of change is very important."


64%68%

63%

57%

24%

60%

50%

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Will procurement have more or less control of marketing spend in the next three years?

More

Less

No change44%

44%

12%

In a surprising result, we see more than 40% of respondents under the impression that marketing procurement will

have less control that they currently do.

" I’ve always been of the view that we shouldn’t try to control the budget, rather we should seek to exert proper influence.

Companies who have let procurement completely control the marketing budget have tended to end up with decisions

being based on cost alone, and this often has negative effects. I don’t think that we in procurement should have complete

control over the budget, but we should be an equal partner to marketing and we should certainly have more influence."


9


Which KPIs do you use to measure the success of your marketing team?


Nearly 80% of procurement teams use total cost of ownership reduction to measure the success of their marketing

procurement departments. There are also a range of other KPIs which are highlighted by these results, including a

focus on agency and supplier performance.

" It’s so important to look beyond cost savings – eventually they are going to run out, so you’ll have to focus on other

things. Things like supplier relationship management, adding value and driving out waste. We’re very focused now

on driving top-line value – driving sales. It’s good to see other companies moving away from simple cost savings and

looking at some of these important areas for business improvement."

Total cost of ownership reduction

Improvement to agency and supplier performance against agreed scorecard

Process improvements

Cost reduction

Cost avoidance

Innovation

Migration of risk

Improved marketing ROI

Satisfaction of internal stakeholders

Creating a customer journey

We do not have any KPIs in place

Aligning suppliers to ensure brand consistency

79%

55%

55%

53%

51%

51%

48%

47%

44%

42%

38%

3%

10


How well are your marketing procurement KPIs matched with your marketing team?

Closely matched

Reasonably well matched

Poorly matched

Not at all matched

49%

46%

4%1%

Harmonising KPIs between marketing and procurement is an effective method of both achieving shared goals and

improving relations between departments. 49% of procurement teams already have closely matched KPIs, and a

further 46% are reasonably well matched. This result demonstrates the significance all stakeholders place on fostering

real trust.

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Is your marketing procurement department able to consistently demonstrate 'value add' (other than delivering cash savings)?

How and where marketing procurement can most effectively add value is a question on the lips of senior procurement

managers worldwide. 52% of procurement teams are able to add value consistently, while 41% feel that their

contribution, while occurring more slowly, adds value incrementally. Only seven percent of respondents do not feel

that they are able to consistently demonstrate added value.

" Marketing Procurement is well placed to offer significant value other than cost savings alone. This can come in variety

of forms, but some of the most important include:

� Sourcing: knowing your market and being able to respond quickly according to stakeholder requirements

� Safety: contractual negotiation (especially in a regulated industry)

� Contract Management: measuring SLAs and KPIs throughout the life of the agreement

� Efficiency: removing duplication, identifying process improvements (maybe using LEAN principles, certainly

automating through the use of technology)

� Alignment to marketing objectives: yes, delivering best value but also ensuring that service delivers to marketing

objectives (e.g. performance media delivers CPA, sponsorship delivers its own objectives, events spend drives

customer experience, etc.)"

Yes

No

Slowly

7%

52%

41%

Peter Rowe, Group Sourcing Manager Marketing, RBS

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Which categories of marketing spend are you able to consistently demonstrate 'value add' for?

" We need to stop referring to ‘digital’ as a category. It is most definitely not a category, it is our environment. I would

raise the debate that a category approach to marketing procurement has been successful, but in order to stay ahead

we need to create ‘journey managers’ who are more aligned to marketing managers than agencies and adopt a hybrid

model, keeping the best of category management."

Peter Rowe, Group Sourcing Manager Marketing, RBS

65%

62%

57%

56%

55%

39%

Market Research

Production

Digital

Promotional Merchandise

Data

Point of Sale

CRM/DM

Creative

Meetings and Events

Experimental

Media

Print

PR

Sponsorship

39%

36%

34%

26%

22%

17%

13%

66%

13


In which channels do you predict growth in the next five years?

The growth of social media and the use of

tablets and smartphones has gone hand in

hand. The effects of this are being felt even in

marketing procurement, and the results are

on show here. 82% of respondents predict

growth of the mobile / tablet channel, and a

further 64% on social media.

Marketing procurement spend will be

dramatically affected by digitalisation and the

growth of social media and mobile tech. It’s

absolutely clear the future is mobile (in fact

mobile is now!). I expect to see a huge uplift

in the volume of spend through this channel.

TV production will drop for sure, however,

it will still remain an important part of the

media mix, but not a leading part.

Barry Byrne, Global Procurement Director - Marketing Services,

SAB Milller

82% Social Media

64% Mobile/Tablet

8% TV/Radio

0% Print

82%

64%

8%

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Where is the greatest opportunity for optimisation in your organisation?

Clearly marketing procurement executives consider there to be significant room for optimisation in a number of spend

areas. This is a very positive outlook on spend habits which are sometimes assumed to be quite mature. Production

comes out as top of the list when it comes to the potential for optimisation, followed by media buying and market

research / data.

" Taking control of media spend takes someone with a really good strategic sourcing background who is mature

enough, senior enough and good enough with people to really absorb what they need to know about media. This will

enable them to work with people on the buying side to perform a really deep analysis of how the market works,

who the big players are, what the relative strength of their buying agency is in that market, and what the media

owners want."

Larry Smith, Strategic Sourcing Director Global Marketing, Mars

Unimportant

Production

Media Buying

Marketing Research/Data

Point of Sale

Display

Agency Fees

Highly Important

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How many different agencies / suppliers do your departments use?

part 3: the agency relationship

0-10

11-20

21-30

31+

Managing agency and supplier relationships

is a core function for procurement. However,

doing this successfully remains a significant

challenge. 70% of procurement teams

manage up to twenty agencies or suppliers,

and a full 30% manage even more than that.

It is essential that procurement have a robust

strategy to manage and assess their suppliers

and streamline the roster if necessary.

37%

33%

13%

17%

Do you have true financial transparency in the client / agent relationship?

Yes

No

Sometimes

37%

33%

13%

17%

Nearly 60% of procurement teams now

consider themselves to have true financial

transparency in their relationship with

suppliers and agencies – a very positive

result indeed. Some marketing procurement

teams still have work to do however, 36%

of respondents felt they have achieved true

financial transparency with some but not

all of their agencies and suppliers, while

five percent did not feel their financial

relationships with agencies and supplier were

transparent at all.

" I can’t stress the importance of regular auditing enough. As much as you think you know what you’re doing, and that

you understand everything that’s going on, you don’t. I think a good, professional financial audit every three years is

healthy. Even the creative agencies said that they learned so much about themselves through the process."

Larry Smith, Strategic Sourcing Director Global Marketing, Mars

36%

59%

5%

16

What areas of spend have you decoupled from creative agencies?


" Does decoupling still have a big part to play in marketing procurement strategy in future? Absolutely! In fact, it’s

amazing it hasn’t happened everywhere yet. Decoupling offers a big opportunity for TV and Digital, but is also an

absolute must for all below-the-line activity. "

Barry Byrne, Global Procurement Director - Marketing Services, SAB Miller

These results show that there is certainly more which can be done to optimise spend via decoupling. There has

certainly been progress, in particular in regard to traditional media where 28% have already decoupled their spend. It

is interesting to see that there is still lots of opportunity in this mature area of spend.

Print

Broadcast

Digital

None

20%

28%

11%

53%

17


To what extent are you able to evaluate your agency roster on the question of value vs price?

While evaluations themselves play a

very important role in procurement’s

ability to balance value and price,

the underlying strategies vary.

Approximately a third (34%) of

procurement teams operate 360

degree evaluations with all of their

clients, and a further third (33%)

evaluate each agency in detail,

although this is not yet a best practice

in the industry.

Getting the most out of your agencies is all about making sure that you have a really productive working relationship

with them, and making sure that you choose the right partners. Ultimately you need to make sure that you have a

robust strategy for managing the category, if you don’t have that you’re going to be flailing.

Larry Smith, Strategic Sourcing Director Global marketing, Mars

We engage in 360 degree evaluations with each of our agencies

We regularly evaluate each agency in detail

We conduct periodic evaluations of our agency roster

We evaluate our agencies on an ad hoc basis

34%

33%

21%

12%

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What tactics have you used to try to reduce agency spend?

Reducing the operational costs involved with working with a (potentially) large base of suppliers and agencies is an

important objective for marketing procurement teams. The most popular method for doing this is to tie agency fees to

performance related objectives (70%), this was followed closely by bargaining for volume based discounts (64%), using

agency trading desks (63%), and consolidating the number of providers (63%).

Introduced a program to tie agency fees to performance

64%Bargaining for discount based on volume

63%Using agency trading desks

63%Consolidating the number of providers

57%Regular contractual renegotiation

Redistributing media spend (e.g. traditional to digital media)

26%

45%Bonus programme for hitting cost / service commitments

27%Decopling production from creative

70%

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about Konica Minolta Marketing Services

For more information about Konica Minolta Marketing Services visit ms.konicaminolta.com

Marketing Procurement:� Print management

� Permanent point of sale

� Promotional merchandise

Marketing Production:� Central production agency

� On-site agency

� On-site studio

Customer Engagement:� Digital

� Data

� Direct

� Social

About the studyThis report is based on research carried out with WBR surveying leading procurement professionals in 2016.

About Konica Minolta Marketing Services Konica Minolta Marketing Services is a Global Marketing Services company that manages the creation, production and distribution of cross-channel communications. We provide strategic procurement solutions for marketing production services, whilst adding value and reducing costs.

We work with some of the world’s top brands across multiple territories including BMW, Stanley Black & Decker, Unilever and Sony. We strive to truly understand our clients’ marketing goals – using this insight to deliver cost effective, innovative and sustainable brand management solutions.

Our core areas of expertise are:

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