Are Marketer Procurementists Adding Value to the Media Buying Process? - Steve Grubbs - MediaBizBloggers

I’ve watched with dismay and chagrin the growing influence of marketer procurement teams over the media buying process. There is an air of McCarthyism surrounding the work of these media procurementists. Companies have granted them broad authority in media negotiations. Yet, there seems to be little public debate about the effectiveness of their methods or results, because they have intimidated those industry experts who would challenge them.

How did the procurement teams gain influence over the media buying process? They became the new rock stars in many corporations, as they successfully reduced the costs of their company’s commodity goods and squeezed the fat from their vendors’ margins. They accomplished this in a stagnant economy where their efforts have helped preserve their own corporate margins. It’s no wonder they are heroes to the c-suite execs, and it was predictable that they would turn their attention to most companies' single largest marketing expenditure at some point… their media ad spend.

Here’s the thing. The media marketplace is very different than the other marketswhere the procurementists have been so successful… but they haven’t yet grasped this. There is little cost transparency in the TV market. There is a wide range of legacy base costs across the spectrum of advertisers. There are qualitative judgments required in analyzing TV plans that are difficult to value. There are a half dozen or so variables that impact inventory pricing. And most importantly, media cost inflation or deflation is impacted primarily by the increase/decrease in market ad demand. This is a complex market. Very few people understand the nuances of it… and most of those people are the senior media buying and sales execs.

The procurement negotiation strategies that have been so effective elsewhere are not succeeding here. The procurementists have been unable to re-engineer the existing buyer/seller negotiation process. They haven’t offered brilliant, new, negotiation strategies or tactics. They’ve tried to break existing contracts and "re-negotiate" deals (but that’s a two-way street). There are some similarities between the media marketplace and more traditional commodities markets, but the media sellers cannot be leveraged with the most popular procurement tactic… their threat of revenue reduction. The simple fact is that any of the major media sellers can walk away from even the largest media buyer and just say, “No, thanks, keep your money”… and this was evidenced in the most recent upfront TV market. The media agency buying experts understand that sometimes you use a “carrot” and sometimes a “stick” in their negotiations… depending on market conditions. Most procurement specialists prefer the “stick”, and they are baffled and frustrated when they’re unsuccessful with it. (Apparently, they’ve ignored Teddy Roosevelt’s advice, “Walk softly and carry a big stick”)

In my opinion the greatest value of the procurementists has been their role as “bad cop”. They have successfully coerced their media buying agencies into re-focusing their efforts on cost savings (or maybe it was savings at all costs.) With feet held to the fire some agency buying groups have squeezed the media vendor community a bit more. They are also being held accountable as never before.

However, it feels like the procurementists are trying to fit the proverbial round peg into a square hole with their media market approach. In doing so they have forced agencies to spend countless man-hours and expense educating them about the media business, and then they’ve promptly dismissed many of those lessons as “old school”. They have experimented with previously failed media negotiation strategies… and failed again. They believe the buyer/seller relationship is too friendly, and therefore they don’t trust their media agency negotiators. So, they’ve incurred incremental expense hiring independent auditors and consultants … most of whom are less qualified and less experienced than the agency experts. As Stan Laurel would say to Oliver Hardy… This is another fine mess you’ve gotten us into”.

Ok, this may all sound a bit harsh… but my personal experience with procurement teams has unduly influenced me. In my first encounter several years ago, one client’s procurement director threatened to fire my agency unless we saved them $54 million dollars in the upcoming year… a number he later confessed was purely arbitrary. In my second encounter with a Director of Procurement, a new business prospect told me my competitor agencies' media pricing was 40% lower than ours. He intended that we should further reduce our already reduced CPM estimates and “guarantee” them to win the media buying assignment. We later found out he was lying about the cost differential (well, he’d call it negotiating). .

To those procurementists and consultants who believe they’ve saved millions in media costs, I’d just offer this… the most adept media experts can interpret and massage cost data in different ways… and you’ll never know it. Any media buyer who promises to lower your media costs by 20% (without adjustments to plan) will likely throw in a bridge for free.

If the procurementists worked in concert, rather than conflict, with their agency media buying teams, the industry, as a whole, could benefit. They have gravitas within their organizations, and they could drive constructive changes to the media buy/sell process. Their current role as “bad cop” is effective, but they need to put away their “stick” occasionally.

Steve Grubbs is President and founder of Second Act Media consultancy. Second Act Media is an advisor to companies working in the media, marketing, entertainment and sports industries. Steve can be reached at steve.grubbs@secondactmedia.com.

Read all Steve’s MediaBizBloggers commentaries at My Second Act - MediaBizBloggers.

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