How procurement can take a front seat in a post-pandemic world across the APAC region
The pandemic has had a significant impact on many areas of business, in particular the way clients and agencies have worked together to overcome the enormous disruption. The importance of secure partnerships has come to the fore as businesses have had to adapt to constant flux, says Dale Garvie, MD of FirmDecisions, APAC.
Inevitably, greater attention has fallen to procurement’s role in managing the supply chain disruptions, as well as how clients and their agency partners have worked together. And in the past few weeks, there has been a flood of agency reviews and pitches concluded some of which have been in play for more than a year – which once again elevates procurement’s role.
Amid the wave of clients currently moving agencies, the need for thorough and rigorous exit audits is paramount. The onus is on procurement departments to lead on this – to ensure that exit audits reveal any unspent funds and have them reimbursed before any agencies shut their doors and that new agency contracts are written to ensure any gaps highlighted in the exit audits are corrected.
As new contracts are signed, fairer, more balanced arrangements can be made for both parties. Clients and Agencies can learn from previous situations and ensure that nothing is rolled over without scrutiny.
So how can procurement lead in its complex relationship with marketing and better understand the priorities of the marketing team in the coming year?
The pandemic has elevated procurement in the eye of many marketing and company leaders. Now seen as an essential partner, its ability to make things happen – be that renegotiating contracts, organizing staff plans, payment terms, or media spending – has increased its prominence. But that does require procurement to respect what marketing does. Instead of being seen purely as an expense, the value of that investment for the health and growth of the business needs to be recognized. In that way, a supportive and positive working relationship can be nurtured.
With budgets under severe scrutiny, often paused, trimmed, or canceled entirely, procurement has had to adapt. From having an ‘always on’ involvement to being flexible to the business’s needs, a greater understanding of the role of marketing and how marketing spend is not always as quantifiable as other departments’ spend, has been a much more significant requirement over the past couple of years.
Procurement needs to be seen as more than merely the gatekeeper of the budget, and as a partner in the business that can help marketers make better decisions and keep tighter reins on how its budget is spent among agency partners.
We have embarked on some research in this area. Looking at the short-term impact of the past 18 months on marketing-agency commercial relationships, we interviewed 100 procurement and sourcing leads to gather insights. From this, we can share three guiding principles on how to help marketing and procurement build their relationship.
The first is clearly identify budget priorities – and these are likely to be more closely aligned moving forward.
As there has been an increased focus on online marketing, more than one-quarter of procurement leaders will prioritize SEO and web development (28%) and programmatic advertising (27%) in the next six months. In addition, nearly half of procurement leaders are reconsidering how they use three of their marketing partners: branding (45%), market research (40%), and social media marketing (40%).
Marketing procurement’s priority has increasingly been to reduce the number of creative agencies as a long-term and strategic goal. Prior to COVID, marketing may not have concurred but now it seems that work is probably going through a handful, rather than hundreds, of agencies.
Among organizations that have changed their marketing relationships, nearly half (47%) stated that their agency teams led discussions with clients to identify better ways of working together and nearly half (42%) said their client procurement teams implemented changes in their ongoing relationships with agencies.
The standout sentiment from our research was that good stakeholder collaborations meant things could happen more quickly. This suggests that procurement had, in these cases, successfully worked with agencies and marketing divisions to introduce tactical changes to marketing relationships.
Among those organizations that changed their marketing relationships, very few shifted any services they procured from agencies to internal teams.
There is an urgency to update contracts across all areas of marketing and, as mentioned earlier, there is currently a particular need to audit as relationships end. New contracts can learn from past mistakes.
Our research showed that in terms of specific areas of marketing services, procurement leaders intend to update their contracts for SEO and web development (37%), market research (36%), e-commerce (33%), affiliate & influencer marketing (31%), social media (30%) and email marketing (31%).
Among organizations that have renegotiated their contracts, most (58%) renegotiated agency contracts in terms of remuneration (both model and levels of remuneration); 51% switched talent and capabilities (such as with more digitally focused staff) as well. A third of respondents indicated that they had also re-negotiated payment terms and scope of work details.
The coming year is going to be challenging across our region, but if client marketing and procurement teams work together, it will benefit the whole marketing industry.
Featured in The Drum.