enabling marketing excellence

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Enabling Marketing Excellence Through Procurement Best Practice

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Table of Contents

Executive Summary ................................................................................................................ 2

Additional Contributors ........................................................................................................ 3

Key Findings ............................................................................................................................... 3

Research AnalysisMarketing procurement’s rise in global influence .............................................................................4

Cost reduction is the key priority emphasized around marketing procurement .................... 5

Increasing the integration and alignment between procurement and marketing ................. 7

Developing the relationship with marketing through the demonstration of value ................ 9

Where procurement is creating value for marketing ....................................................................10

Gaining transparency and controlling the spend within supplier relationships ....................12

Key Recommendations ........................................................................................................14

Appendix ...................................................................................................................................15

Methodology ............................................................................................................................15

Charterhouse ..........................................................................................................................16

WBR Digital ...............................................................................................................................16

Marketing procurement has already taken an active role in many businesses for years, part of the trending growth of procurement’s influence across a broad range of industries. Given this history, working relationships with the marketing department have reached a stable point in many cases, although procurement leaders are still seeking to promote further integration. The reasons behind prioritizing internal relationships are manifold. Among them, one of the most important is a desire for involvement in strategy-shaping conversations at the outset of marketing campaigns. Where in the past, procurement may have been seen as a closer, brought in once a supplier of interest had been identified, now procurement is moving towards a proactive, consultative role. The department aims to furnish marketing with supplier options they may never have considered, uncovering the best quality for the best price. In order to achieve this, they need a seat at the table when a project is in its infancy.

Reducing and avoiding expenses continue to rank among the most important of marketing procurement’s KPIs, as there is no metric to point to quite as persuasive as effect on the bottom line. Going forward, the procurement department will continue to rely on cost avoidance and ROI to prove its value to business leadership. However, as it gains a greater say in overall strategy, executives are placing emphasis on balancing savings with risk reduction and creating sustainability. Other metrics such as stakeholder satisfaction and innovation around processes are also serving to solidify a more influential role for procurement early on in project lifecycles. Enabling improvements in the way that marketing operates, identifying out of the box suppliers, and communicating created value are the tools that marketing procurement will be using to strengthen their relationships with key strategic partners over the next twelve months.

Executive Summary

- Patrick Fogarty, CEO Americas Charterhouse

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Additional Contributors

Key Findings

Antonio HumphreysSenior Manager, Global

ProcurementAdobe

Amy CliftonSr. Manager, Indirect

ProcurementT-Mobile

Xavier VorhilonDirector of Global Supply

Management- IT and Professional Services

Stanley Black & Decker, Inc.

In addition to the benchmark data and analysis contained in this report, procurement executives and industry experts have contributed their insight via interviews. Selected quotations have been used to add context to the statistical information contained in this document. Interviews centered on benchmark findings as well as key trends around procurement identified by research.

Procurement’s alignment with marketing is stable within most businesses, but leaders are seeking to further integrate

The majority of procurement teams have been actively promoting greater transparency and proactive involvement around marketing initiatives, and have now reached a point where they feel they have succeeded in bringing their coordination with marketing to at least a functional level. Those who are leading the charge are being closely followed by their peers seeking to emulate best practices and increase efficiency. The large majority of procurement executives predict their alignment will increase in the coming year.

Reducing costs continues to be the biggest priority for procurement managing the category of marketing spend

While respecting the importance of KPIs such as internal partner satisfaction and the reduction of risk, procurement’s main focus is still on managing costs around marketing. Given a plethora of supplier options, as well as the high number of suppliers in use by many marketing departments, procurement still has scope to pursue discounts and value creation that is meaningful to the bottom line of the business.

In order to create the largest potential for savings, procurement is attempting to be involved in the sourcing process from the initial strategy-planning phase, as opposed to being brought in at the end of sourcing as a final obligatory step

The earlier that procurement is able to become involved in sourcing projects with marketing, the more effectively they can utilize strategy in order to deliver the maximum cost avoidance and value for their organizations. The closer integrated procurement and marketing become, the more naturally this will be able to occur as the process becomes normalized.

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Research Analysis

Marketing procurement’s rise in global influence

How long has your organization had a marketing procurement department?

What is the geographic scope of your marketing procurement role?

Do not have one yet

Under 3 years

3-5 years

6-10 years

11+ years

9%

26%

16%

28%

21%

Almost half (49%) of marketing procurement groups have been in place for over five years. For 21% of businesses, it’s been an incumbent department for eleven years or more, while another 28% have had theirs in place between six and ten years. A further 26% of marketing procurement groups have been in place for under 3 years, reflecting a growing recognition of the value around the program, as well as the movement of later adopters to bring the best practices other companies have pioneered to bear within their own operations.

Along with the success of marketing procurement comes the expansion of their jurisdiction. In most cases, procurement will grow organically along with the companies they serve. For 56% of procurement departments, this means that they are already serving marketing within a global jurisdiction. Another 18% are serving their marketing organizations for all of North America, and the remaining 26% have jurisdiction within the United States.

56% Global

26% United States

18% North America

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Research Analysis

Cost reduction is the key priority emphasized around marketing procurement

Which KPIs are used in your organization to measure the success of your marketing procurement team?

Cost reduction

Cost avoidance

Satisfaction of internal stakeholdersMitigation of risk

Process improvements

InnovationImprovement to performance against agreed scorecardTotal cost of ownership reductionImproved marketing ROIAligning suppliers to ensure brand consistency

Creating a customer journey

We do not have any KPIs in placeOther

86%

70%

65%

47%

42%

35%

33%

23%

16%

16%

7%

7%

2%

Marketing procurement executives continue to prioritize the reduction of overall cost, recognizing it as the primary KPI by which they are able to quantify the effectiveness of their processes. The overwhelming majority, 86%, recognize cost reduction as a KPI. Another 70% of procurement officials place cost avoidance among their KPIs, reflecting a more active role in managing spend, enabled by involvement earlier in the sourcing process on the part of procurement. The third most common KPI of marketing procurement is the satisfaction of internal stakeholders, with 65% reporting that they were held accountable for meeting this criterion. Balancing cost efficiency with critical marketing functionality has always been at the heart of procurement’s role, though now 47% are stating that they are also being looked to in order to diagnose and circumvent risk in their supplier base. Coming in just under this KPI, at 42%, is the promotion of improvements in the processes within marketing, another metric that can be optimized in order to give back to the bottom line. At this point, 7% have still not established KPIs, reflecting the later adopters of marketing procurement who are still defining their relationships with marketing and becoming involved with the spend of the category.

“Cost reduction is always going to be a staple and we’re continuing to unlock areas of the company that can benefit. We’re deploying these savings back into marketing at the stakeholder level which allows for immediate benefit recognition and encourages deeper participation in the program. This goes hand-in-hand with driving value beyond savings for our marketing stakeholders, such as brand guardianship, brand color management, and highly-detailed reporting.”

- Xavier Vorilhon, Director, Global Supply Management, Stanley Black & Decker

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Research Analysis

On which of these performance metrics does your organization place the highest importance?

Cost reduction

Satisfcation of internal stakeholders

Cost avoidance

Mitigation of risk

Improvements to agency and supplier performance against agreed scorecard

Process improvemnts

Improved marketing ROI

Total cost of ownership reduction

Innovation

Aligning suppliers to ensure brand consistency

Creating a customer journey

Unimportant Less important Important Extremely important Critical

9%

In average rating of importance, cost reduction is the clear standout metric. The majority of marketing procurement executives acknowledge that it is critical for proving their effectiveness to the leadership of their organizations, something that is unlikely to change even as other considerations are built into procurement’s mission. Satisfying internal stakeholders is the second most heavily weighted priority, beating cost avoidance, though both are regarded as extremely important. This is a reversal in position from how commonly the two appear as KPIs, suggesting that for those departments that do focus on internal stakeholder satisfaction, it is a consideration that can sometimes trump concerns around costs. Mitigation of risk is becoming another extremely important priority for a large number of marketing procurement teams. Procurement’s role in sourcing now requires ensuring not only that value and efficiency are built into the supplier base, but also that these suppliers are able to reliably adhere to the standards of the business at large.

“My team supports the insights, advertising, creative, media, print, and video production spaces. We are a relatively immature organization navigating how to provide value to support our diverse marketing and retail needs. Today, we manage the contracts, sourcing and supplier management activities as well as many tactical details. Our focus is to shift to a more strategic approach that includes creating more seamless processes, determining metrics that matter, and providing a point of view based on industry trends, spend analysis, benchmarking, and sharing internal subject matter expertise. “

- Amy Clifton, Sr. Manager, Indirect Procurement, T-Mobile

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Research Analysis

Increasing the integration and alignment between procurement and marketing

How integrated are your marketing and procurement teams?

Poorly integrated

Slightly integrated

Reasonably well integrated

Well integrated

Very well integrated

5%

10%

46%

32%

7%

Almost half (46%) of procurement teams are reasonably well integrated with marketing. Moreover, another 39% feel their procurement teams are either well integrated or very well integrated, demonstrating that the integration between procurement and marketing has come a long way. Just 15% of procurement professionals feel they are poorly or slightly integrated with marketing.

“I think the working relationship between procurement and marketing is a mixed bag, to be very honest. I know that there are some relationships where it’s very collaborative, very congenial, and quite productive because they see a lot of the value in what we bring to the table. It’s a dynamic where we can work together as a core team, and tackle different pieces of the project and make sure that it gets done. There are other groups that are still are very much wanting to own everything ‘soup-to–nuts’ on their end, and may not be as open to us partnering with them; but those things come with time. The best way that you continue to build bridges with all parts of the business is with small wins to build awareness of your value add to the process. With those small wins, and as you continue to pick the low hanging fruit, you build momentum towards a much stronger bridge with all the marketing groups. Overall, we have a good relationship with the business and there’s always room for improvement.”

- Antonio Humphreys, Senior Manager, Global Procurement, Adobe

“At this point, we are still defining our relationship with our business partners. I think that we are starting to earn more of a place at the table, where in the past, we’ve been primarily involved around contract support and being liaisons with the legal department. Now, we’re starting to help provide information to guide the business and drive strategy around suppliers and innovation. Our value at this point is to provide the business with a comfort level that we are mitigating risks and connecting the dots across the organization. We are also creating processes that better fit the business needs showing that we understand the environment that we support.”


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Research Analysis

Aligning the KPIs of marketing and procurement can enable a much higher level of cooperation between the departments, reducing some of the main sources of conflict that prolong the sourcing process. While 40% of executives feel that the KPIs of procurement are reasonably well matched with those of marketing, another 35% feel that they are poorly matched, most likely around the cost metrics that the majority of procurement departments hold among their key measurements of success. With only one percentage point of difference between the shares of those who report closely matched KPIs and those that are not matched at all, it would seem that the majority of marketing procurement teams are somewhere in the middle of attempting to align their KPIs, an ongoing process that is enabled by greater integration.

How well are your marketing procurement KPIs matched with those of your marketing team?

Closely matched

Reasonably well matched

Poorly matched

Not at all matched

13%

40%

35%

12%

“I think cost optimization is always going to be one of those quantitative KPIs that we’re held to in any sourcing function. Within Adobe, if we negotiate savings, it’s extra budget that can be reinvested in other areas to achieve the best ROI. When we look at other measures, they’re really about getting the optimal services for the job at hand, whether it’s developing creative content, whether it’s buying the best piece of media for that content, and making sure that it’s getting created in the most effective way in all our markets around the world. Those are the things that I’d say are more important to our marketing business partners. It is about getting the best talent and personnel to do the things we need while making the biggest impact in the marketplace. We definitely emphasize quality, and if we’re looking at things from a cost perspective, we never do projects where we want to go ‘bare bones’ and just get it done at the cheapest cost possible. That said, we definitely make an effort to get it at the appropriate ‘should cost’, meaning at benchmarked competitive market rate. Other ‘non-cost’ measures are to negotiate the best possible contract terms and conditions that ensure transparency and risk mitigation. There’s much more of an emphasis these days on due diligence around vendor compliance, information security, audit rights, etc.”


“The business determines most of the metrics required. We typically use score cards and metrics to gauge the health of the relationship and to determine if the agency results meet the agreed objectives as well as demonstrating effect around sales conversion. We manage our own procurement metrics around how many deals we have completed or have in progress along with pertinent information around the space, all the spend factors, risk factors, terms and the spend by commodity and activity. We also report on % of controlled spend and procurement bypass.”


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Research Analysis

Developing the relationship with marketing through the demonstration of value

How well would you rate your relationship with the marketing team?

Very weak

Weak

Reasonable

Strong

Very strong

2%

5%

45%

33%

15%

While 45% of marketing procurement teams feel that their relationships with marketing have reached a reasonable level of cooperation, the observable trend is that this is the jumping off point for improvement among the majority of teams. Less than a combined 10% of procurement executives report that their relationship is below this level. By contrast, a third, (33%), of procurement executives are reporting a strong working relationship, while another 15% have achieved a relationship that they feel is as strong as possible. By continuing to demonstrate the value of their involvement with the sourcing process, marketing procurement can win the trust and cooperation of the marketing department, ultimately putting them in a better position to create wins.

How do you see the marketing/procurement relationship changing in the next year?

With the majority of procurement teams not yet fully aligned with the marketing departments they work with, it’s no surprise that they are working on building those critical relationships in the coming year. 80% of executives predict that their relationships with marketing will improve, while 20% feel that there will be no change for better or worse. No procurement executives expected their relationships with marketing to get worse. The overwhelmingly positive response from procurement demonstrates their confidence in the processes that they employ to create value, as well as the ability of marketing to be brought on board through the demonstration of this positive change.

80% It will improve

20% No change

“Establishing a strong relationship with marketing can take time and sometimes you have to earn their trust incrementally. Trust is a critical factor. Last year we implemented an initiative to optimize our marketing print spend which introduced some radical changes. Naturally there was some initial resistance to overcome but the project has been a great success and the relationship is now stronger than ever. Being hands-on throughout the process has been very important to its success. If we simply worked on contract negotiations and then left marketing to it, the process wouldn’t have been nearly as successful and may have jeopardized the procurement-marketing relationship in future if things had gone wrong.”

- Xavier Vorilhon, Director, Global Supply Management, Stanley Black & Decker

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Research Analysis

Where procurement is creating value for marketing

Around what areas or disciplines of marketing has your procurement organization had meaningful engagement?

Where procurement is able to engage with marketing in meaningful ways, they can unlock significant improvements around cost and value. Currently, 73% of procurement executives have been able to make a meaningful impact in the area of print based marketing, with an equal percentage reporting successes around the engagement of digital agencies. Negotiations with agencies of record are an area where procurement has been able to make an impact according to 68% of executives, while the same holds true around creative agencies for 66%. Over half (56%) have seen positive development around dealings with media buying partners. The only two categories where procurement’s level of meaningful engagement was below the threshold of 50% were around production and meeting planning. Generally, these results indicate that where procurement is able to become involved, they are adept at enabling changes related to their KPIs, part of what is fueling their case for greater integration with marketing.

Marketing Print (direct mail, point of sale, packaging, brochures, collateral, signage, etc.)

Digital agency

Agency of record

Creative agency

Media buying

Production agency

Events planning

“We’re are getting more involved in our agency relationships. We’re trying to scope better initially and then to have more prescriptive and robust contractual obligations and clearly defined performance metrics. Developing a cadence of regular reviews driven by procurement ensures we get in front of the business and supplier and provides an opportunity to course correct quickly if needed”


73%

73%

68%

66%

56%

39%

34%

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Research Analysis

A major area where procurement sees opportunity is through earlier involvement with marketing projects, specifically in a consultative role around sourcing strategy, which 44% believe is the way that they will create the most value for marketing. Another 39% see their primary ability to create value manifested in their role in vendor negotiations. These two responses show a desire on the part of procurement to create meaningful engagement with the parties on the front lines of the sourcing process. Involvement from the beginning of a project as well as participation in negotiations are the preferred tools that procurement uses to achieve cost reductions and create value.

Where do you feel you can add most value for marketing?

44% Consulting on strategic direction for future projects

39% Unlocking value in vendor negotiation

7% Identifying new technologies

7% Identifying areas to reduce existing costs

2% Other

“In the next twelve months, we are going to be looking at some of the longer standing agency relationships we have, really going in and evaluating the contracts to make sure we’ve got optimized terms and conditions and KPIs. From a compensation perspective, we want to make sure we’re paying the appropriate ‘should cost’ rates that are fair and equitable for both parties. Transparency is key to understand all cost elements of direct labor, overhead, and profit.

Our primary focus is on our top 80 percent of marketing spend in the company. This includes ongoing relationship monitoring and making sure all contract deliverables are being fulfilled. As part of our process, we’ll continue to have strategic business reviews with our critical supply base (quarterly, semi-annual, or annual basis). We have those to make sure we’re aligned as partners, that everything is going as planned, what we agreed to contractually is happening, and simply asking about the state of the relationship. We want to make sure that we have 360-feedback sessions on each other and identify areas of improvement and new ideas. ”


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Research Analysis

Gaining transparency and controlling the spend within supplier relationships

How many different agencies / suppliers does your marketing department use?

Part of procurement’s central mission is taking stock of and managing relationships with a broad range of suppliers and agencies of record. For 61% of procurement teams, this means managing a number of sixteen or more. Out of the remaining number, 15% manage a group of suppliers within the range of eleven to fifteen, while another 5% fall in the range of six to ten. 15% are only engaging with up to five suppliers, and another 4% aren’t sure of the exact number their business engages with. As procurement’s influence grows, often in tandem with the expansion of marketing budgets, the number of supplier relationships they have a hand in maintaining will often expand correspondingly.

0-5

6-10

11-15

16+

Don’t know

15%

15%

5%

61%

4%

Do you feel you currently have true financial transparency in the client / agency relationship?

In order for procurement to efficiently manage spending with their suppliers, the accurate and transparent reporting of financial relationships is imperative. At this point, 28% of procurement executives feel that they are being granted financial transparency on par with what they need. 72% feel that they still need to take steps with their suppliers to gain a level of transparency required for full effectiveness.

28% Yes

72% No

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Research Analysis

While working towards the realization of more transparent reporting, procurement teams are also expected to actively reduce the operational costs associated with the marketing departments they work with. For 33%, this is partly managed through regularly reoccurring contract negotiations, which allows procurement to adjust SLAs or push for discounts as the needs of departments evolve. 21% of procurement executives use their RFP process to ensure that they are able to secure the suppliers they need at the optimal price point. Another 18% create savings through pushing for volume-based discounts during the negotiation process. While 10% employ a bonus program to incentivize suppliers to hit targets, 8% have implemented contract structures that explicitly tie vendor fees to their performance levels. Out of the 10% who responded “other”, 5% did not employ any of these tactics, while the remainder were split between using all of the above and limiting agency services to creative work only.

What tactics have you used to try to reduce agency fees?

Regular contractual renegotiation

Request for proposal process

Bargaining for discount based on volume

Bonus program for hitting cost/service commitments

Other

Introduced a program to tie agency fees to performance

33%

21%

18%

10%

10%

8%

“We are starting to standardize some of our tasks in ways that provide consistency for benchmarking activities. We have recently benchmarked all of our agencies to each other, which brought a lot of transparency to the fees that we pay today and understanding the nuances around job titles. When we do RFPs, we try to capture as much information as we can to put into that particular database so that we can see how our agencies are stacking up.

In summary, we need to review and understand the whole relationship with our agencies and partners from Account Management, Planning, Buying, Research, Analysis, and Financial Management and then determine what to measure and what data and reporting to require. “


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Key Recommendations

Identify ways to further integrate procurement with marketing

The goals of both procurement and marketing are better served when there is alignment between the two. Procurement’s ability to drive down costs and maximize value ultimately serves marketing through providing the highest mileage from their working budgets, while by involving procurement earlier in their processes, marketing is granted a broader range of options to choose from, as well as the assurance of a secure relationship. Foster strategic cooperation through earlier engagement with marketing, emphasizing the consultative aspects of procurement’s involvement.

Protect value and cost objectives by working to build transparency into supplier relationships

Many procurement executives feel that they are not getting the full level of transparency that they would like from their suppliers. Building more transparency and accountability into relationships enables procurement to more systematically identify where business requirements are being met, creating the means to more effectively reduce costs. A more accountability-based relationship with suppliers will also make procurement’s role in risk avoidance and key business holder satisfaction more tenable going forward.

Define KPIs that reflect a growing strategic role for the procurement department

As procurement finds itself granted further involvement in spend management of the marketing category, it will be increasingly called on to demonstrate that it is creating value beyond the core KPIs of cost avoidance and management. Defining and pursuing KPIs related to building innovation, diversity, and security into the supply chain can further support procurement’s rise as a valued strategic partner through quantifying positive results.

“I think we as a profession and as a support function have legitimized what we do, and I think that’ll continue into the future. Now, is there going to be an area where we look at and determine there’s only so much we can take on to support? Of course, because there are bandwidth concerns and constraints. We then might say, going back to the business, this is the self-enablement or guidance we want to give back to you to help make sure that you’re doing things in the right way, going through the right due diligence, following the right processes when/if they have to do things on their own. We can always provide consultative guidance to make sure that they’re following the right steps, and ultimately getting the best deal on the table.

I feel there’s definitely room for that balance of how we, as a procurement/strategic sourcing function, continue to partner to drive the best results for the deals that we focus on and continue to be true consultants to make sure that we’re each guiding our companies towards the best decisions possible.”


“In the last few years we have diversified our indirect talent. We have people from different backgrounds. Our team consists of people with procurement, contract, agency, and marketing operations experience. Because we are a fast paced and growing organization with have multiple segments and brands, we are trying to show the business units across the enterprise where we can leverage services and spend and share ideas and opportunities. Providing transparency to the work happening across the enterprise is helpful to individual business partners.”


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Appendices

The results analyzed in this report were gathered from responses to an on-site benchmarking survey delivered at ProcureCon Digital and Marketing 2015. Interviews with sources were conducted after survey data was compiled, and centered on discussion of benchmark results.

Methodology

Demographic Information

How long has your organization had a marketing procurement department?

Do not have one yet

Under 3 years

3-5 years

6-10 years

11+ years

9%

26%

16%

28%

21%

What is the geographic scope of your marketing procurement role?

56% Global

26% United States

18% North America

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Charterhouse is a leading Marketing Services Production company. We specialize in managing enterprise-level marketing print, collateral, and point of sale materials on behalf of global organizations. We contractually guarantee cost savings, manage supply chain efficiency, and ensure brand compliance through aggregation and leverage

solutions on an enterprise level. We think globally but understand and deliver enterprise solutions locally. Our most successful client engagements are those in which Charterhouse marketing production professionals engage on-site within our host clients’ marketing organization. Our dedicated client teams are empowered by proprietary technology to offer dynamic procurement, management and reporting solutions; while our global presence provides a well-positioned partner to execute marketing strategies through any channel on behalf of the worlds’ leading brands.

Charterhouse works closely with clients to truly understand their goals to deliver cost-effective, sustainable and innovative production solutions. Our key services are Print Management, Color Management, Merchandise, and Point of Sale Insight and Production. Because we are not a printer, we provide independent print consultancy to our clients enabling them to take full advantage of the newest and most innovative production techniques and substrates.

For more information on Charterhouse please contact Patrick Fogarty, CEO Americas on (203) 848-8157 or visit our website www.charterhouseUSA.com

WBR Digital connects solution providers to their target audiences with year-round online branding and engagement lead generation campaigns. We are a team of content specialists, marketers, and advisors with a passion for

powerful marketing. We believe in demand generation with a creative twist. We believe in the power of content to engage audiences. And we believe in campaigns that deliver results.

Charterhouse

WBR Digital

http://digital.wbresearch.com

enabling marketing excellence

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