Eight years ago I had an appointment with the purchasing director of one of Germany’s biggest breweries. When I offered him a solution to get more control over the marketing spending, he was waving aside. “These guys, they can just make what they want”, he explained to me, “they have the full backing of the management and the marketing spend has the status of a sacred cow.” When I was reading the last edition of the German business magazine “brand eins”, I was really happy. Henning von Vieregge, managing director of Germany’s communication agencies association (GWA), was complaining about the increasing influence of purchasing. Of course, I agree with some of his concerns. To purchase for a marketing function means also, that you have to understand how your marketing people are thinking.
First of all, a short look on the KPIs. Why do companies publish ads, place google advertising, go to conferences or build up huge displays at Piccadilly Circus? The currency of marketing is contacts: clicks on a homepage add, meetings at a fair booth or the amount of readers of a magazine. The KPI could be then cost per click, per contact, per view etc. As you can see, it is a myth, that marketing people do not care about the spend, the opposite is true: every marketing director is happy, when he could improve these values, since then he will have bigger effect using his budget.
How could you then improve the cooperation between marketing and purchasing?
The most common fault is, that the procurement professional becomes a part of the buying process at the very end. Usually he asks then for a discount, inexperienced suppliers are in shock, because they already gave their best price to the marketing director, experienced suppliers have a “purchaser’s top line” already in their calculation and give then a discount to the purchaser.
According to a study of the European Business School some marketing directors are afraid, that this “last stop” negotiation could damage also the relationship to their suppliers. As Christer Hallqvist stated in the book Purchasing Transformation: The best idea is, that purchasing steps in as early as possible. You can save the most money with the third party deliverables: printing, logistics, translations, desktop publishing, merchandising material … these are very often delivered by the advertising agencies and naturally the include for all of these services some margin. As soon as purchasing takes control, e.g. by establishing frame contracts for translations and logistic services, you can save a big amount of money. Taking over these services, should also not jeopardize the relationship to the agency.
When it comes to the creative services, my recommendation is: leave it to the marketing people. They create a briefing beforehand and make based on that a tender. A “bill of quantities” and clear deliverables do not exist in that stage, but should then be the outcome of the creative process … and this is, when purchasing comes in again.
The CIPS published together with the IPA and the ISBA a guide for marketing procurement called magic and logic. A nice analysis of this was done on the BLOG Sourcing Innovation.
This morning I read an interview with Herbert Diess. He is as member of the board at BMW since October 2007 and he is responsible for the new division Purchasing and Supplier Network. Herbert Diess joined the board when BMW launched its new strategy program Number one. The program includes a savings target of 6 Billion Euros until 2012. Purchasing and Supplier Network has a target to contribute a share of 4 Billion Euros. So Herbert Diess has some work to do!
