We all know that procurement delivers significant benefits to acquire the appropriate materials or services at the best available cost. Do you think procurement should use the same tools & techniques in marketing procurement? Nowadays many companies are encouraging procurement to manage marketing spend, let’s see how this step can make a difference to companies.
Marketing is identified as dynamic, creative & innovative. It is driven by intangible elements such as insights & creativity which are slightly different from procurement. Generally in Procurement, negotiation is the key requirement and they make sure that they have best strategic supplier portfolio at the best possible price. Same is the case with marketing, they have the suitable agencies working for different brands at some specific cost. In marketing the main agenda is to get more value & innovation out of agencies. Procurement should treat marketing as more of an investment to maximize rather than the cost to minimize. We should find out how we can bridge the gap between procurement and marketing to get more value from both sides.
There have been many views regarding the marketing procurement function. Few practitioners believe that agencies which marketing teams work with, are different than direct or indirect suppliers which are handled by procurement; and procurement tools & techniques should not be used while dealing with the agencies as it can hamper the relationship of marketers and their agencies, which might also effect the performance. But there is other side of it as well! Even though there is difference between agencies and suppliers, procurement can apply its core techniques in marketing area which they already use in procurement especially “supplier relationship management and strategic sourcing”. Procurement can contribute to marketing by; managing the marketing spend in better ways with just not seeing the cost side , but at the same time measuring the value and creative side of agencies. This all can be possible only if the marketer has confidence & trust in procurement. Here the challenge for procurement is to help marketers by ensuring that their agencies are suitably managed, rewarded and incentivized to deliver their optimal value.
Learn More: eProcurement Software
Recently Pepsi scrapped its marketing procurement function which hardly consisted of 10-12 employees who looked after agency relationship & media. Pepsi has decided to assign procurement activities to its brand executives. Marketing decisions “are being made more often in real time,” said a PepsiCo executive. “You can realize better effectiveness and efficiencies by putting this responsibility on brand teams who are closer to the consumer and allows them to more quickly balance cost value and quality in all of their decisions.” “We continue to evolve our operating model to be more efficient and effective. These changes are made with careful consideration and are necessary for us to stay competitive while meeting the future needs of our business,” a PepsiCo spokesman said in a statement to Ad Age. “Unfortunately, as a result of these changes, some positions have been impacted”.
As said by PepsiCo, “Decision is a result of evolving their operating model to be more efficient and effective”. Isn’t that what made them start the marketing procurement function in the first place? Removing this functions seems like contradicting the motto of improving efficiency and effectiveness
PepsiCo has created comprehensive procurement tools for marketing professionals to fall back on, thereby eliminating the need of marketing procurement department. For example, the brand/marketing executives now can rely on handy little procurement notebook. Howsoever brand/marketing team may not have the same skills as marketing procurement, who have great proficiency in contracting, supplier management, negotiation & risk management.
At last, we want to say that Procurement department of PepsiCo may not have been successful in convincing their board about looking marketing as an investment or PepsiCo may have given up on trying to make the two functions work in coordination. Their decision of scrapping marketing procurement may burden the brand executives spending more time on financial systems rather spending the time on innovation & strategies. Overall it’s true that reducing costs is desirable in business and procurement has a big role to play in it. But by bringing marketing and procurement together we can work on balancing cost & value creation better.
What do you think, was PepsiCo’s decision right? Please feel free to share your views in the comment box below.