In the last decade we have seen a growing trend for procurement’s involvement in the selection of marketing agencies. Hot on the heels of this latest recession, the role of procurement has dramatically increased in importance, and not just within public sector organisations. Here he shares his thoughts on the increasing importance of procurement and its relationship with marketing departments and agencies.

When companies outsource a marketing requirement, the procurement department is becoming increasingly seen as the ‘third’ main stakeholder after marketing and the agency. With Marketing Directors coming under increasing pressure to deliver on ever tighter budgets, often with fewer resources, they are starting to work smarter by utilising the purchasing skills of their very own purchasing departments. Recognising that a buying decision is so much more than purely driving down costs is the first step in accepting there is a better way of working together.

An examination of the power of procurement is in keeping with the ONE theme of this issue, because procurement’s role is very much one of making sure the marketing department and the agency are pulling in the same direction. This relationship and how to create it is perhaps best summarised in the following seven-step process for companies procuring marketing services:

STAGE 1 - An identified need
Have you ever been on your weekly shop without a shopping list and wondered why you bought so much more than you needed or didn’t need? This regular occurrence is due to a lack of planning and a lack of understanding on exactly what your real needs were. Unfortunately, this happens regularly in the work place resulting in waste, blown budgets and very stressful supplier relationships.

Recognising the true needs of you and your company is therefore key to the rest of your buying decision. They should be considered as a form of objective to be achieved rather than a specification that describes the solution. Your “needs” must drive your purchase, not the purchase driving your needs: a creative agency, for example, may actually be one of several different solutions to fulfilling your creative requirements.

STAGE 2 - Specification of services
Translating your written needs into a specification is about balance. A balance between being too detailed that it limits any innovative solutions or being to vague that suppliers are unable to respond.

For services such as marketing, a specification can be difficult to write. The key therefore is to define the characteristics of a successful model for delivering a solution and to determine how best to obtain this information from an agency. We (the client) are looking to be convinced that, without knowing the details to a future campaign for example, the agency will be able to deliver the service we want consistently and regularly.

We don’t want empty rhetoric and a sales pitch. Purchasing’s role is to help Marketing ask the right type of questions and we often act as devil’s advocate by thinking carefully through the responses you might expect. By working closely both marketing and purchasing can develop a clear assessment structure based on the specification.

STAGE 3 - Supplier selection
For a client, supplier selection usually means following this pattern:

1. Can we provide the service/goods in-house (the “make” decision)?
2. If not, then do we already have a supplier who might be able to deliver the service for us?
3. If neither of the above, then we need to find a new supplier (the “buy” decision).

Suppliers come in all shapes and sizes! They can be international or domestic, public or private, financially strong or financially weak. What you will certainly find is that no two suppliers are exactly the same which means every one of them can offer you something different.

The trick is to find the suppliers that will be able to realise your needs and then negotiate the best deal. There are many channels to finding suppliers and these include amongst others trade journals, business networks, references, institutes and the internet.

Brand and reputation will have an impact on whether an agency is added to the invitation list, but even if invited to participate an agency will still need to commit a lot of time, cost and resource to the pitching process.

STAGE 4 - Market approach
“First Contact” with any agency concerning the client’s potential business should be carefully thought through. Will this be a telephone call, a letter inviting them to pitch or a fully blown Invitation To Tender (ITT)? The way you approach the market will have a significant bearing on any subsequent negotiation and consequently on obtain the best deal available.

Be professional at all times. Make sure documents are thoroughly checked and any information provided is correct. Most importantly is not to include anything that doesn’t support your selection process.

STAGE 5 - Negotiation
In negotiations; “If you Fail to Plan you Plan to Fail”, which is true for all parties concerned. As an absolute minimum those involved should be collecting their thoughts under specific headings such as:

• Treatment of numerical data
• Your strengths / The agency strengths
• Your weaknesses / The agency weaknesses
• Variables
• Objectives
• Concessions
• Strategy

The bigger the risks and value then the greater the investment in time you need working through these. It will, of course, involve price and costs but includes a great deal more: even the simple arrangements for placing purchase orders, invoicing and problem escalation need to be thoughtfully agreed. Factors to consider beyond the details of the service will include the reputations of the participants, both as individual people and the business in its own right. Everyone has a different agenda! Knowing what they are can be critical.

The purchasing team’s experience in planning and executing negotiations will be much higher than other departments. Tapping into this experience should be the goal of the marketer.

STAGE 6 - Award/Purchase
The final decision to award a contract must be made with absolute confidence. So from the specification and negotiation stages the assessment and final decision can be completed. It is sometimes amazing just how difficult making the final decision can be, but less surprising when there has been no structure to the selection process. If the right stakeholders have been involved from the start then there will be no surprises. Sadly, you will also find some companies making a decision and awarding a “contract” to an agency only to then ask (for the first time) either Purchasing or Legal to write a contract or finalise negotiations.

A truly organised awarding process is a matter of the correct authority level putting their signature on a contract document and the issuing of a Purchase Order with no more questions.

STAGE 7 - Implementation & review
Just when you think the hard work is behind you, the service delivery begins marking the start of the future marketing/agency relationship. This is the point at which your confidence is dashed or rewarded. Stakeholders previously involved may change and words are transformed into action. Time should be taken to review all the activities to this point and procurement can lead this on behalf of all concerned, including the agency.

All seven stages boil down to confidence: The marketing department needs confidence that an agency can deliver; the purchasing department needs confidence they have the best available deal in the marketplace; and the agency needs confidence the client is right for them.

Philip brown is currently working with GyroHSR on a substantial research project with mba students at Lancaster university business school to look at the impacts of procurement on the commissioning of agency services