In tough economic times, companies turn to their procurement departments for more fiscally-disciplined policies that help rein-in unchecked spending and wasted resources. Increasingly, companies are subjecting strategic and creative services to standardized procurement processes across the board without differentiation. And while this is great for their bottom lines, it is restricting their ability to come up with the innovative ideas necessary for brand leadership.
So, is procurement helping or hurting your brand?
There’s a fundamental flaw in the logic of applying commodity pricing tactics to creative ideas. The problem with procurement is that it assumes all ideas are equal – but all creative ideas are not created equal and great creative is extremely valuable. Having your accounting department drive creative decisions is about as logical as having your creative team manage company financials, but that’s the absurd reality of modern procurement.
On its website, a major oil company describes a job in Contracts & Purchasing as “purchasing and supplying everything from pencils to pipelines.” Creative and strategic ideas can’t be valued in the same way as office supplies or raw materials, and agency relationships shouldn’t be subjected to the same process as manufacturing goods.
Client-side marketers and agencies alike are seeing the real-world impact of procurement, and it’s not pretty: more paperwork and process, less incentive and focus, and end-results that ultimately satisfy only the accountants. Procurement is forcing marketers and agencies to find ways to work around an inefficient, inflexible system, instead of one designed for the realities of client-agency relationships.
Sure, any agency worth its salt will adapt to the budget constraints that come with tightened economic belts, while striving to deliver quality work. But more often than not, working with procurement is a horrible experience – grueling pitches, unnecessary project delays, fluctuating budgets, requests for mountains of information that nobody reads. As it is now, procurement is shifting the focus from great ideas to short-term, lowest-cost creative solutions, and hindering long-term client-agency relationships—all at the expense of your brand.
It’s clear that most blanket procurement processes are not yet nuanced enough for managing agency relationships. Companies who shape procurement processes to create an environment that fosters agency relationships yield vastly superior creative results. Agencies and client marketers must be willing to fight for great creative and finance departments must find ways to pay for it without all the red tape.
At the end of the day, agencies, marketers, and accountants all want business success—and great branding has the capacity to impact great business results. Of course companies should look for better ways to get more for their money, but if procurement is hurting your brand, it’s your responsibility to ensure that it’s not at the expense of brand value, brand agility, and ultimately, business success.
Absolutely agree with this perspective. Concrete and creative can’t be evaluated in the same way.
Hank Blank
I have an adjacent question: I am curious about the effect of procurement on branding and brand leadership in communities for which procurement is a social and political issue.
I work with a USAID funded project in South Africa that, as part of our overall mission, promotes supplier diversity and preferential procurement in order to make corporate supply chains more inclusive toward qualified black owned suppliers.
How do you think the politics of procurement would influence branding in this environment?
http://blog.saibl.co.za/ come check out supplier diversity week on the SAIBL business Forum….we welcome your input and ideas
I fully agree traditional methods of Procurement harm the innovativeness of companies. In my opinion, both the targets and the organization of Procurement are preventing it from helping a customer-focused Marketing/R&D department. Traditional procurement will always clash with Marketing, no matter how hard they try to understand Marketing: they’re trying to understand the wrong customer
First, Procurement is focused primarily on contracting savings and risk reduction. Marketing often sets similar targets for Procurement: reduce the price or TCO, ensure security of supply, etc. This is remarkable because these targets only reflect a small part of Marketing’s targets towards the customer. I think Procurement focuses on the wrong targets. Procurement should be part of the team delivering the complete end product to the customer, not just the final price-tag. For this, it will need to thoroughly understand the needs of the external customer. This requires Procurement to intensively collaborate with Marketing / R&D to understand the full package. Only then will it be able to fully tap into the potential of the supply base, to ensure proper selection and involvement of (potential) suppliers and to balance traditional cost-related targets within the full package.
Making the shift to a truly contributing Procurement department requires Procurement to change its focus from internal to external customer, which impacts the target setting, the procurement activities, the timing of procurement involvement in projects, the required competencies etc.
Robbert den Braber
Twitter: InnoProc