Three Big Trends in Marketing Procurement
Vivek Radia, Managing Director, North America
FirmDecisions and Ebiquity were co-chairs of the recent Procurecon event held in Nashville, bringing together 150 marketing procurement professionals from the world’s biggest brands. Vivek Radia, MD North America of FirmDecisions, and Neil Capobianco, MD of Ebiquity’s US Media Practice, report back.
Procurecon’s Marketing Procurement conference is a fabulous event: a genuinely peer-led audience, large enough to warrant a centralized event, but sufficiently approachable for real dialogue and relationships to form. The critical importance of transparency and trust pervaded the conference, particularly in the more measurable sphere of digital media. The three major trends we took away from Procurecon were:
- Agility is crucial.
- Targeting sounds great, but remains mysterious.
- Agency Black Box offerings are growing.
For some years, talk has been focused on the cataclysmic changes that are happening in marketing. These are largely driven by shifting demographics, coupled with newer, more fragmented media options including digital and social. A decade ago, these mediums were nascent and brands dabbled in them; today, they command nearly half of media budgets. The speed of these media and associated consumer behavior changes has CMOs racing to keep up.
Immediately before Procurecon, PepsiCo announced that it had eliminated its marketing procurement function, citing a need for greater speed. This decision – driven by a desire to inject genuine agility into the company’s
marketing – is radical and antithetical to most of the market. It set the context for a debate in which the old watchwords of ‘change’ and ‘fragmentation’ focused on understanding the market, while ‘agility’ and ‘pivoting’ emerged as the new action-oriented buzzwords. As more brands participate in newer trading methods, the conference consensus was that procurement’s role is ever more important. Yet they, too, must move faster.
Procurement professionals realize that the need for ‘agility’ is leading the marketers they advise into increasingly opaque media trading models that promise better consumer targeting. The challenge of addressing potentially thornier questions about media buys also demands greater speed and technological toolsets. If procurement is too slow, they risk alienating their marketing counterparts – and potentially more PepsiCostyle decisions. So the new conundrum is for procurement to solve marketing’s problems faster and know where to be open to newer ways of procuring media and marketing services.
Brands are grappling with reaching consumers over video platforms, mobile devices with newer ad formats, and a host of other challenges including ad blocking. Procurement and marketers alike are attracted to the
promise of connecting targeted media to consumers and thus solving John Wanamaker’s age-old question about marketing ROI. But is it working? While available media inventory has nearly doubled over the past decade, these newer, digital environments present their own challenges.
First, a WFA/Ebiquity study revealed that nearly 25 percent of typical programmatic media buys go to data fees to enhance targeting. Yet further inspection reveals that the technology is not fully mature. Brands audited using Ebiquity’s technology toolkit find their ads appear in rather inappropriate places, to the wrong audiences, and even in the wrong geographic location.
A deeper dive shows that many of these advertisements are not actually seen by people, if they’re viewable at all. Between false internet traffic, intentional software techniques, or a lack of viewability, over half of the ads are never seen at all. While this may not be the fault of the agencies, it is clearly a significant issue that needs independent resolution. As agencies trade nearly all of their programmatic buying as Principal, they are not a fully independent party here.
Black Box media trading
As agencies and procurement have danced through cost-saving exercises over the past decade, agency profits have risen. Some of this is certainly driven by an increased scope for the agencies – taking on more labor-intensive digital work and data-related assignments.
What has grown noticeably is the status of the agency trading as Principal, which requires advertisers to forego transparency. What was once a game of creating mass awareness is now focused on delivering sales, achieving savings metrics, and driving tighter ROI. So more barter media is purchased – more digital media programmatically – and agencies are launching exchanges for local TV, with some other television areas likely to follow.
Non-transparent transactions have changed the nature of advertiser/agency relationships. On the one hand they behave as the advertiser’s agent; on the other, the trust of an agency has been compromised by the agency’s status as Principal. While they may be doing what other media networks do, a conflict of interest arises from an agency’s duty to act as a fiduciary agent in most cases. As a bare minimum, procurement must keep tabs on this conflict and ensure that all Principal buys are proven and measured. Procurement’s role should accelerate in this fast-paced, hard-totrack tech game.
While agencies clearly want to retain their new-found role of Principal, there is a new mandate for procurement. Clear contractual parameters need to be spelled out and understood, and procurement can help drive that clarity.
The role of independent marketing auditors is also growing in importance. Auditing is no longer just about ensuring advertisers get great value. There is now also a dimension where auditors need to help advertisers understand if they are actually getting any value at all.
As media trading continues to evolve, an independent viewpoint is critical to answer the following questions for advertisers:
- Is my media mix truly correct?
- Are we optimized for our marketplace and performance in our owned media (e.g., company websites and social channels)?
- When measuring media value, do we have the right tools in place to know if our ads are actually even seen?
- Does our contract clearly spell out what you can audit and what you cannot?
It is only by answering these questions independently and authoritatively that marketers can have restored faith in their agencies. What Procurecon Nashville clearly showed was that marketing procurement has a critical role to play in returning transparency to what has become an increasingly murky world.