A marketing procurement consultant’s perspective
There’s more and more evidence now that agencies and brands know that the value of work done is more important than what it cost, and the impact it had on the consumer, the brand metrics, and the top line, are more important than the price.
This study from Forrester, commissioned by Google and 4A’s is one example of such a conversation. Project Spring, written by the World Federation of Advertisers Global Sourcing Board – the marketing procurement leadership from many of the world’s biggest spending brands – stated that shifting from a savings outlook to a value creation approach is key.
So why do we still see rate cards as the most common language in this value exchange?
In a pitch situation, procurement want to run a fair process where everything is easy to compare. This makes internal alignment on the result easy to achieve.
There will often be a scorecard being used by the brand, with weightings that cover things like the quality and relevance of case studies brought by the agencies; the response to the brief: the strategy and creative, the team set-up, etc; cultural fit; and price.
While the scores given to most elements are pretty subjective, the price is easy to compare, and – if a specific template has been provided by the brand, with no flexibility in it’s format, while it is easy for the brand to compare apples to apples, the agency is hamstrung, seemingly unable to price how it wants to.
Selling time – cost + margin – is the easiest way (alongside perhaps commission-based fees in some specific areas like media) to compare prices, so becomes, and remains – the default.
Time & Energy
Agencies building solutions for brands are, naturally, spending the bulk of their effort on thinking strategically or creatively about the work, about the thing to be created. The price tends to get added on at the end after some estimates of time are plugged into an excel doc.
The same goes at the brand. Marketing procurement are building this big tender document that will guide the whole pitch, (and it’s objectively a pretty long and unsexy process to build these!) The mindset is to simplify the pricing part and make it as easy as possible.
For either the agency or the brand to come up with, push for, or co-develop a pricing structure not based on time, (when it has not been common to do so yet), simply takes a bunch more time and effort to craft, and often they both default to the way it has always been.
The closeness of the relationship between the brand’s marketeers and their team-mates in marketing procurement (as well as potentially marketing finance, who will have to reconcile the bills!) has a trickle-down effect on the agencies and the way they’ll be engaged.
Picture the difference:
a. procurement and marketing have been working together for years, built trust, shared wins, solved problems, established a slick way of working, and share information early and freely…. In this situation, procurement probably have access to consumer insights and marketing’s strategic objectives, probably also the wider business and commercial objectives.
Here there’s a good chance procurement and marketing could generate some ideas or starting points about performance based remuneration, and provide a flexible format in which the agency could propose some performance metrics, safe in the knowledge of the concreteness of the business intelligence that’s being shared.
b. Marketing and procurement are at an early stage of their relationship, or there is lower trust and engagement for whatever reason… procurement may actually be feeling guilty constantly for taking up too much of marketing’s time, afraid of not being invited back unless they do something quick and easy to benefit the process. This will force the process to be pretty basic and arbitrary, especially on the pricing. Procurement will try to do their thing and then get out of the way quickly.
In essence, the more strategic the relationship between procurement and marketing, the more strategic the tender process will be. The agencies will feel more like they’re being invited in as collaborators to solve a problem, rather than idea-machines forcing their pricing into a reductive format.
Confidence and capability
Conversely, as they say is sports: ‘if you’re good enough you’re old enough.’ The age – the length or tenure- or the length of the relationship between procurement and marketing, shouldn’t matter if procurement is hiring and training great people.
I prescribe to the way of thinking that if procurement treats itself like an internal agency, whose purpose is to help marketing solve their problems and reach their goals by bringing the best of the outside in, they should be doing all they can to make themselves indispensable to marketing.
In 2021 it is more clear than ever that brands are ready to pay agencies differently, they just need it to be made clearer how. A marketing procurement function who can make the change easy – and who can show the value it’d bring to use some value based pricing – will be able to bring that to agencies, breaking the cycle of time and materials.
Brands, help the agencies to help you. What are you trying to get the consumer to do, think or feel? Ok, so how do we measure that, who measures it, and how often? Then ask the agency to articulate the pricing in terms of ROMI: this is what it’d cost, and it should drive results x, y, and z.
But agencies, don’t wait for the stars to align and the above to happen by chance or hard-fought success, you can take more control of the pricing discussion.
It’s your solution, your brains came up with it, your blood, sweat and tears will execute it. Don’t be afraid to challenge a pricing template. Yes, procurement want to guide and simplify the process and tee themselves up for a nice, easy price negotiation, but they are not the budget holder or key decision maker.
My advice, fill in the template, but all through your pitch refer back to the business needs, the consumer, and orient your response around the fact that you’re putting some skin in the game. You’re all about partnership and shared goals. Then kindly propose an alternative way of getting paid; an additional way of looking at things. The best sales people use packages and options rather than single proposals, and if you invite the brand in as a collaborator, you’re again raising your chances of differentiating yourselves from the competition, and also swinging the pricing conversation your way, to value, rather than time.
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