How Can the Procurement Team Optimize Marketing Spend

Marketing and procurement relationships have become vital in today's business landscape. Companies aim to maximize ROI and maintain competitiveness, placing procurement's role in enhancing marketing expenditure at the forefront. Integrating supply chain management at this intersection is tough. But, it offers chances for organizations to optimize resources and grow.

Procurement departments, part of the supply chain, face pressure to shift from cost-cutters to strategic advisors, especially in areas like marketing. However, this shift has its complexities. 

Procurement aims to control spending and manage suppliers. Marketing teams prioritize collaboration with partners and results. They see procurement's role as a potential interference. This mismatch in priorities can cause friction. Marketing may question the need for purchase orders after briefing their agencies.

Traditional procurement success metrics, like savings and reduced lead times, complicate matters. They sometimes align with marketing's value delivery goals. This misalignment shows a need for a better procurement strategy in marketing. It may involve working with fewer suppliers to improve efficiency. Fewer vendors may help avoid supply chain issues. But, more suppliers could weaken our buying power.

To close this gap and improve marketing spend, procurement pros must gain skills. They need to work with marketing teams. They must balance cost with creativity and strategy.

Marketing spend management or how to optimize resources for maximum impact

Marketing spend management is about making the most of your advertising budget. It's how businesses plan, distribute, and keep track of their money to get the best results. This vital job ensures marketing resources are used wisely. It aims to boost ROI and meet business goals across campaigns and platforms.

Many organizations, though their needs vary by industry, share a need to manage everyday marketing costs.

Effective marketing spend management is crucial for several reasons:

• It helps to align marketing activities with overall business goals.

• It enables data-driven decision-making for budget allocation.

• It improves accountability and transparency in marketing investments.

• It facilitates better performance tracking and optimisation.

• It supports cost control without sacrificing marketing effectiveness.

Here are some examples of everyday marketing expenditures:

1. Digital advertising

2. Content creation and management

3. Web-design and site maintenance

4. Marketing automation and CRM software

5. PR communications and media outreach

6. Event marketing and sponsorships

7. Print advertising and collateral materials

8. Market research and analytics

9. Branding and design services

10. Video production and photography

The challenges and opportunities of the marketing function

A hallmark of marketing spending is a heavy reliance on agencies. Typically, organisations work with one or a few key agencies that command a significant portion of the budget. This high spending requires a careful approach to selecting suppliers. It often involves consolidating vendors to cut costs.

Fewer suppliers can streamline ordering and reduce management issues. Consolidating suppliers can reduce costs and improve prices. It does this through bulk buying and better negotiating power. It also reduces freight costs and simplifies logistics.

Notably, the most cost-effective option is only sometimes the one with the lowest hourly rate. Creativity, strategic insight, and market impact can justify higher fees. So, traditional cost-cutting methods are less applicable.

Also, new platforms, tools, and methods keep evolving. Marketing teams must adapt their strategies and skills to keep up. This challenges procurement to be agile in their sourcing strategy. They must avoid the pitfalls of managing too many vendors and increasing costs.

Strategies and trade-offs for traditional marketing procurement spend management

Traditionally, many organisations outsourced most or all marketing activities to a full-service agency, handling strategic and operational aspects. However, this has become tricky as the marketing field has grown more complex and specialised. 

The breadth of services required in modern marketing makes it difficult for a single vendor to excel in all areas. Procurement pros who suggest aggressive supplier consolidation may clash with marketing teams. They want to focus on two or three suppliers. Marketing values specialized expertise.

Switching to a smaller supplier base, instead of multiple vendors, can be time-consuming. But, it often leads to lower costs and better relationships with trusted suppliers. Firms can streamline their procurement while leveraging specialised expertise by carefully evaluating current suppliers and selecting those who offer the most value for a particular product or service.

Therefore, companies typically employ several strategies for managing marketing spend, each with its advantages and drawbacks:

1. Full-service agency partnership: 

   • Pros: Eliminates infighting among suppliers, reducing the number of vendors, also reduces service overlap, creates accountability, and potentially leads to better supplier relationships

   • Cons: May lack specialised expertise in certain areas, potential for complacency

2. Multiple specialised agencies: 

   • Pros: Access to best-in-class expertise across various disciplines

   • Cons: Requires more sourcing, negotiation, and contract management; potential for coordination issues

3. Hybrid model (core agency + specialists): 

   • Pros: Balances consistency with specialised expertise

   • Cons: Requires careful management to avoid conflicts and maintain clear roles

4. In-house marketing function: 

   • Pros: Greater control and alignment with company strategy

   • Cons: Often not cost-effective, challenging to maintain cutting-edge skills

5. Project-based sourcing: 

   • Pros: Flexibility to choose best providers for specific needs

   • Cons: Lack of long-term relationships, potentially higher transaction costs

How can supplier relationship management (SRM) improve marketing spend?

To truly improve marketing spending, procurement must see its role goes beyond cost-cutting. Grasping the complexities of marketing challenges and broader business concerns requires an investment of time and effort. 

It is urgent to build and maintain strong relationships with internal stakeholders, especially in marketing. Equally important is obtaining a deep insight into multiple suppliers and their capabilities. This approach demands patience and a real curiosity about marketing. It also requires a strong interest in the business's commercial side.

Here is how procurement can improve marketing spend:

Strategic supplier management

Imagine a mid-sized tech company needing more consistent branding across its digital platforms. Procurement steps in and: 

• Conducts a thorough agency review, identifying a digital marketing firm with a strong track record in tech branding.

• Negotiates a contract. The agency's pay depends on better brand metrics and engagement rates.

• Implements quarterly reviews. Marketing and procurement jointly assess the agency's performance. This increased brand consistency scores by 30% in a year.

This method improves marketing results. It also builds a better bond between procurement and marketing.

Data-informed decision making

Consider a retail chain facing the classic "use it or lose it" budget dilemma each December. Procurement introduces: 

• A spend analytics tool that gives real-time visibility into marketing expenses across all channels and campaigns.

• Work with marketing to define KPIs beyond sales, like customer acquisition cost and lifetime value.

• Regular benchmarking against competitors, showing the company overspending on print ads and underinvesting in social media.

The team could reallocate budgets more effectively throughout the year. This eliminated the year-end scramble and improved ROI by 25%. These changes may let them spend 20% more time on strategy. This could lead to better campaigns and increased market share.

In other words, the procurement team doesn't just help save money; it also helps attain smarter spending and get more from the funds.

10 ways to know your procurement and marketing teams are successful

Here are ten signs of a healthy and productive partnership:

1. Both teams align on objectives that balance cost efficiency with marketing effectiveness. They jointly track metrics like return on marketing investment (ROMI) and traditional procurement KPIs.

2. Procurement is invited to marketing strategy sessions from the start. It must share insights on market trends and suppliers before fully developing campaigns.

3. Marketing values procurement's negotiation and supplier management skills. Procurement, in turn, values marketing's creativity and strategic thinking.

4. Both teams take part in agency pitches and selection processes. Procurement will facilitate them. Marketing will lead the creative evaluations.

5. Scheduled check-ins for both teams to discuss projects, market trends, and ways to improve.

6. Teams collaborate to solve issues like budget overruns or supplier underperformance instead of blaming each other.

7. Procurement pros learn marketing trends and terms. Marketers learn procurement processes and best practices.

8. Procurement adapts procedures to meet marketing's unique needs, like expedited approvals for urgent campaigns.

9. Both teams use integrated systems for spend analysis, project management, and supplier management. This ensures transparency and alignment.

10. We celebrate and report joint wins, like successful campaigns and cost savings that fund more marketing.

Procurement's role in reforming marketing agency relationships

Choosing the right agency partners is key to marketing success and should be based on transparency and mutual respect. Procurement professionals need to realize that marketing procurement is different from other categories. Creative agencies are a must for establishing a brand's market position and shaping customer perceptions.

Traditional sourcing and selection processes may only be sufficient with careful consideration. For example, blindly offering creative services can hurt quality. This can lead to unsatisfactory results. A tailored approach is essential. It will ensure the chosen agency can help the brand succeed.

Finding your perfect marketing match: Ten agency supplier selection tips

People often seek a new marketing agency for fresh ideas, new strategies, or specialized skills. While cost can be a factor, it's rarely the sole determinant. 

To streamline the agency selection process, consider these ten tips:

1. Define clear objectives and KPIs: Understand your marketing goals and how the agency can contribute.

2. Conduct a thorough market analysis: Identify potential agencies that align with your brand and industry.

3. Create a detailed RFP: Clearly outline project requirements, budget, and evaluation criteria.

4. Establish evaluation criteria: Determine the factors influencing your decision, such as experience, portfolio, and pricing.

5. Shortlist agencies based on RFP responses: Focus on agencies that strongly understand your needs.

6. Conduct agency interviews: Assess cultural fit, team expertise, and strategic thinking.

7. Request case studies and references: Validate agency claims with previous clients.

8. Create a detailed evaluation matrix. Score agencies on your criteria to compare them.

9. Negotiate contracts and service level agreements: Protect your interests and ensure clear expectations.

10. Onboard the selected agency effectively: Facilitate a smooth transition and knowledge sharing.

Marketing agency remuneration: Decoding a complex world

Marketing agency pay models vary. They pose a big challenge for procurement pros. Traditional models like retainers, fixed project fees, and hourly rates are easy to manage. However, they may need to align with marketing initiatives' dynamic nature fully.

Value-based models reward agencies for the impact of their work. They are appealing but hard to measure and verify. Commission-based models, tied to specific outcomes, share similar challenges.

Rate-based models, used in consulting and accounting, provide transparency. They link costs to time spent. However, they may not incentivise efficiency or innovation.

A popular choice is a fixed retainer based on the SOW or a percentage of the client's budget. This approach offers predictability for the client. Alternatively, pricing per project provides cost certainty with clear expectations for budget adjustments.

Ultimately, a hybrid approach, combining elements of different models, can sometimes offer the best solution.

Successful partnerships: Best practices for agency collaboration

Successful collaboration with a marketing agency is key to campaign success. Consider these best practices:

• Provide a clear briefing with project goals, target audience, and desired outcomes.

• Set measurable success metrics for alignment and accountability.

• Establish clear communication channels to avoid errors, preferably through a single contact.

• Maintain open and honest communication to build trust and address challenges proactively. Encourage client feedback and suggestions.

• Implement a well-defined approval process to streamline decisions and prevent delays.

• Build trust through open communication, shared goals, and mutual respect.

Shifting to platforms will help in consolidating suppliers'

Increasing the number of contractors in media buying creates challenges for marketers. Switching to a platform-centric approach can help manage these complexities. Medialister's platform offers a robust solution by centralizing media-buying operations.

The platform uses programmatic ads. It helps marketers scale sponsored post buys. It eliminates the need for slow, manual negotiations. This centralized approach helps with data-driven decisions. It optimizes budgets and improves ad control.

Medialister's platform, beyond fast buying, offers powerful analytics and SEO tools. They boost campaign impact. Marketers can boost ad visibility and engagement. They can do this through multimedia integration and search engine optimization. The platform's detailed audience insights are vital for managing many contractors. They enable coordinated, cross-channel campaign execution.

Medialister's platform transforms media buying from a fragmented process into a strategic advantage. It solves key issues by simplifying operations, optimizing performance, and providing actionable data. It helps marketers navigate the complex media landscape with confidence and efficiency.