Getting through to the marketing spend is a tricky task. Marketing departments have run a tight ship when it comes to deciding which marketing supplier gets the biggest chunks of their marketing spend. But there is a lot of work that can be done in this area; both when it comes to controlling the spend and when it comes down to supporting marketing departments with the right tools to ensure competitive bidding for the contracts.
In many cases; marketing directors have had full control over which advertising agency a company works with. Agencies are often invited to creative pitches; where they have the chance to present their marketing ideas for a certain brand and the best presentation is often awarded the contract (when Swedish media daily Dagens Media did a survey regarding this practice in 2007 they found that the average advertising agency spent between 3 to 5 million SEK annually on pitches ). For creative purposes, this is just fine. Unfortunately, a large portion of marketing spend is disconnected from the actual creative process, yet, by tradition, the advertising agency is free to choose sub contractors for print, media placement, production agency (for tv/radio/web etc) and skims a few Euros off the top to generate some extra revenue.
While this might be rather alarming from a spend management perspective; the scariest bit is that advertising agencies rarely care about sourcing; and in bad times, they tend to keep the creative skills and send the administrators looking for a new job. So chances are the marketing buyers, i.e. the companies who actually pay for this (supply) chain is getting the worst end of the deal.
What purchasing departments need to understand is that they can support marketing departments by providing fundamental competition for parts of marketing spend; leave the purchasing of creativity to the marketing department; take control of the less cerebral side of marketing spend. Media, print, distribution etc are very suitable for e-sourcing, and there is a lot of potential savings available.
Many media providers posted record results in 2008; for instance Swedish TV4 increased revenues by 8 percent and European broadcaster MTG increased their sales by 16 percent; this during a year where TV for example lost 0,4 percent of advertising share in Sweden.
As the financial situation cuts budgets across the board, the first month of 2009 has seen a dramatic drop in advertising volume (in the range of 20-40 percent in Sweden according to Sveriges Mediebyråer); meaning that there is an overcapacity in a market which according to many media buyers long have been overpriced and with little price transparency due to discrepancies between list price and the actual prices paid by the advertisers.
Media spending is just waiting to be addressed by some real sourcing strategies.
February 17, 2009 at 5:33 pm
There were two really good whitepapers on the subject in 2006 and 2007.
The first is “Magic & Logic, Re-defining sustainable business practices for agencies, marketing, and procurement” which was co-sponsored by CIPS, the IPA, and the ISBA in 2006, and which I covered in these posts:
http://blog.sourcinginnovation.com/2006/11/06/magic–logic-i.aspx
http://blog.sourcinginnovation.com/2006/11/07/magic–logic-ii.aspx
The second is “The Creative Challenge: Driving Efficiencies in Marketing Procurement”, a white-paper released by Efficio in 2007 that I covered in these posts:
http://blog.sourcinginnovation.com/2007/08/14/the-creative-challenge-i.aspx
http://blog.sourcinginnovation.com/2007/08/15/the-creative-challenge-ii.aspx
February 18, 2009 at 11:43 pm
This story has some good examples of internal marketing and managing the marketing services spend:
Services spend management: Find your inner salesperson
http://www.purchasing.com/article/CA6635589.html
February 19, 2009 at 12:54 pm
Thanks for the link Dave, great stuff indeed; purchasers often forget that they too need to sell their services in order to get recognition.