Can Procurement Fix Madison Avenue's Mess?

They say the followingLegacy brands are languishing in the marketplace The consumer transition from Baby Boomers to Millennials has been rocky and unsuccessful for too many large marketersCMOs are being held responsible for the lack of growth and their tenure is only half as long as that of CEOs39 The average CEO will go through two CMOs and see a lot of marketing smoke and mirrors In marketing there39s uncertainty about what media mix to use and there are major concerns about the effectiveness of digital and social media even though the spend level in these areas is growing There is rampant experimentation with digital and social executions but much of this is whistling in the wind the hope that some of it will work CMOs focus on cost reduction to generate improved results Marketing looks less like an investment and more like an ongoing cost that is being reducedAd agencies have been marginalized as strategic partners Agency fees are relentlessly cut despite the growth in Scope of Work SOW workloads Agencies downsize to generate holding company profits amp160agency people are stretched by the increased workloads and discouraged by poor pay and the lack of longterm prospects Client relationships last no longer than CMO tenure two to threeamp160years Agency morale is at rockbottom The AOR concept is dead or dying as clients work with an increasing number of specialized agencies To manage their portfolio of agencies clients take control of media decisions Scopes of Work and production decisions Some advertisers take this further by creating internal agencies for creative executions and media planning This further marginalizes their agenciesProcurement by contrast has become more influential Procurement39s focus on cost reduction has generated an endless list of activities Procurement has examined agency salaries overhead rates and profit margins They39ve scrutinized investments in media planning media buying and production costs They39ve exploited the media transparency issue to audit and change media agency contracts They39ve explored the opportunity to create internal agencies They39ve spawned an industry of specialized consultants to support them in their efforts amp160benchmarking consultants media auditors search consultants contract specialists compensation specialists and pure costcutting consultantsAd agencies view procurement39s growing power with horror Procurement is the acknowledged enemy This shortsighted view of procurement may doom agencies to further attacksThere39s another way to go What agencies as suppliers have ignored is procurement39s historical mission and success as an engine for positive change that focuses on quotquality improvementsquot not just costreductionProcurement drove the quotlean productionquot innovations that allowed the US automotive business to compete successfully with the Japanese car companies after 1980 Procurement was the hero rather than the villain as outlined in The Machine that Changed the World the 1990 bestselling book about the revolution in manufacturing and distribution brought about by the resurgence of Japanese industry after World War II Procurement led the advances in supply chain innovations that saw the empowerment rather than the enfeeblement of suppliers Procurement was an important engine for change as described in Reengineering the Corporation the 1999 manifesto that set the stage for revolutionary improvements in corporate processes to improve customer service and satisfactionThe high level of customer service that we enjoy today from such companies as Amazon Boxed Netflix Uber Open Table and others owes a great debt of gratitude to smart work by procurement over the yearsProcurement has a natural role to identify and fix process inefficiencies and dysfunctions like those that plague advertiseragency relationships poor SOW documentation planning and tracking poor feesetting methodologies inefficient briefing and ad approval processesamp160and inadequate problemsolving about the reasons for brand underperformanceProcurement has focused on marketing costreduction because costreduction provided a limitless well of opportunity Agencies accepted annual feecuts without finally saying quotNoquot amp160even though the consequences have been devastating for them Their passive acceptance of fee cuts has only encouraged procurement to cut further andamp160the absence of agency pushback has sent an erroneous signal that there is still quotfatquot in the systemWell there39s no more fat to cut and procurement needs to step up to different challenges They can only do so if agencies embrace them as potential allies rather than as enemiesProcurement39s new priorities ought to involve the following for advertiseragency relationshipsEnsuring that there are quality processes and analyses to identify why legacy brands are underperforming relative to their quotfull performance potentialquotEnsuring that planned media mix and spend levelsamp160along with planned Scopes of Work are jointly planned and specifically designed to solve brand underperformance problemsEnsuring that advertiseragency relationships enhanceamp160rather than minimize the role of the ad agency as strategic problemsolving partnersEnsuring that a fewer number of empowered agencies rather than a greater number of commoditylike agencies are engaged as strategic partnersEnsuring that agency remuneration is based on quotwork to be donequot by quotthe right number of peoplequot Improved SOW documentation and planning will make this possibleEnsuring that the briefing and ad approval processes minimize wasted time excessive rework and moralekilling frustrations from badlyrun relationshipsThere are other possible priorities to be sure but this list represents the key ones to set a new positive direction amp160Madison Avenue39s mess needs to be cleaned up amp160Shareholder value is at stake The current gameplan is not workingAgencies need to acknowledge the need for these changes and to view procurement as the partner that can make it happen amp160Procurement needs to restore its credibility and reputation as a positive engine for changeIs procurement up to the task Are ad agenciesamp160ANA should give this some serious thought and so should Marla Kaplowitz newlyappointed CEO of 4As who is in a position to make 4As newly relevant for its beleaguered membersCartoon Credit Jack Ziegler The New Yorker The Cartoon Bank With permissionClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this article are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated bloggers

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Can Procurement Fix Madison Avenue's Mess?

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Michael Farmer

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Can Procurement Fix Madison Avenue's Mess?

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