David Wilson, Ex-Procurement Head of Mattel, provides some insights
The article I wrote, published in the ISP’s Sales Promotion sets out to explain the importance of a proactive approach for agencies and their engagement with procurement.
Since then, there have been a number of articles written – and Suzy Bashford asks, in Marketing, Is Procurement killing Marketing Creativity?
Those who deride this business function have overlooked its ability to motivate agencies to produce even better work, writes Suzy Bashford.
Procurement should facilitate creativity by fostering the conditions in which it can flourish. That is the theory, at least. So why, then, do procurement professionals have the image of bureaucratic bean-counters who would not recognise a creative idea if the Tango man slapped them in the face with it?
This is because, so far, there has been little evidence to show how procurement can be a friend of creativity. By contrast, there are many car-crash stories about how it has gone beyond being a necessary evil to hinder the creative process. However, while agencies continue to ask whether procurement is killing marketing creativity, it may be time to move on from this debate.
In the wake of the recession, as companies seek to wring the maximum value out of every pound spent on marketing, procurement is here to stay. Questioning its role will serve only to cast marketers or agencies in a poor light. Instead, they should be asking how they can ensure that the involvement of procurement helps to support the creative process. Fortunately, there are plenty of ways marketers and their agencies can help shape this agenda.
‘At the moment getting good creative is really tough. There’s a very risk-averse culture in companies due to the highly volatile economic climate,’ says procurement specialist Richard Woodford, who is category manager, advertising and marketing, for News International. ‘Procurement these days often involves bearing bad news about budgets being slashed, but that is not our decision or what we want and, in many cases, agencies shoot the messenger. They then start thinking that procurement is all about making savings, but that’s not true.’
Woodford suggests that his current priority is to find ways of using less budget to deliver more, and ensuring that, although agencies might earn less, they maintain the quality of their work. He acknowledges that they may not be happy with this situation, but has little sympathy for them.
‘Agencies need to deal with that. You don’t hear Coke saying to consumers that it’s not earning as much money, therefore the drink is not going to taste as good this year,’ he adds. ‘In many ways agencies should be trying harder to impress clients and come up with really insightful, creative work. They need to stop bleating and get on with it.’
Some straightforward measures can make the procurement process smoother. This, in turn, can improve life for the creative department, increasing the chance that it will come up with good-quality work.
For example, creatives will not feel very motivated if they waste time generating ideas that are rejected because they do not fit the brief. Procurement can prevent this by ensuring the right decision-makers are in the room at the right time.
Andrea Bottke, purchasing manager for Danone, is convinced that her involvement in marketing can help the inspiration to flow. ‘To secure creativity, you need to have the best people working on your account,’ she says. ‘To get this right it is important to understand what motivates an agency and it’s not necessarily just money.’
She is a strong advocate of payment by results (PBR), as long as the key performance indicators are appropriate. ‘Why should an agency with a fixed fee give you the best resource? They would rather put it toward a new account, to increase revenue,’ she adds. ‘However, if they know that they have to be excellent and can earn more money on your account, they will make sure they have their best talent available.’
Bottke also believes that too many agencies are creating work to win awards, rather than sell products, and that PBR will help to avoid this, a view echoed by other marketers. ‘Concerning PBR, the discussion about common targets will drive a cultural change for sure, but it will take time and training to make people on the agency side understand what really matters,’ she says.
However, others take the view that PBR is outdated, and there are better ways to measure an agency’s performance that can also pave the way for braver, more ground-breaking work; one oft-cited example is revenue share. Yet, as ISBA director of consultancy and best practice Debbie Morrison points out, while many people talk about this, few are actually doing it.
Some agencies are also seeking to take greater control of negotiations and coming up with their own variations on the procurement theme. Multidisciplinary agency Anomaly, for instance, has positioned itself as ‘fixing’ the ‘broken’ fee-structure model and is a pioneer in the intellectual property-sharing model.
Other agencies are less radical, but have also started to behave more commercially in response to demands for accountability. Digital agency The Viral Factory faces a constant demand for executions that consumers will actively seek out and forward to others. Its successes include the ‘LED Sheep’ clip promoting Samsung’s LED TVs, which attracted 18m views, and Diesel’s 30th birthday viral, which was seen by more than 20m people.
The agency’s managing director, Toni Smith, believes that the agency requires certain conditions for creativity to thrive. She has found, for example, that it performs better on a project basis, so none of its clients is retained. She also has learned that creatives become demotivated if they churn out ideas that are not then bought, so The Viral Factory charges for all creative work, including pitches.
The biggest hurdle to overcome, driven by procurement, is the pressure to set the number of days the creative team will work on a brief. For instance, procurement may want to set this at, say, three-and-a-half days, when there is no way of knowing how long the process will actually take. Smith gets around this by assigning a ‘creative management fee’ for additional days.
Nonetheless, she believes there still needs to be much more ‘give and take’ in these negotiations. She notes the agency is ‘always in discussions about PBR’, but clients get ‘scared’ before agreeing to this model. ‘The conversation usually goes like this: “We’ll pay you by results when the viral reaches 2m, but we want to cap it at 3m.” That doesn’t seem very collaborative,’ she adds.
Former Omnicom director Jim Houghton, now a partner at marketing communications consultancy Results International, suggests that until both agencies and clients are more willing to share in each others’ successes and failures, neither will reap the full potential rewards. He believes agencies should take on more risk, in the hope that a few projects will pay off handsomely.
‘A good business to look to is talent management. Tiger Woods is the prize asset for IMG, and he and a handful of others fund thousands of less successful IMG stars each year,’ he says. ‘IMG and its talent share in the risk and equity value. For this model to work, agencies effectively need to be co-owners of the brands they work for. Value has to be measured as a function of value created, not costs incurred, and until we get there, the system will remain unfair to the agencies, which drive so much of the goodwill and sales of the brands they promote.’
CASE STUDY – UNILEVER
Unilever’s procurement department has been working with promotion risk specialist Umbrella in a drive to make its sales promotions not only more effective, but braver and more creative. Umbrella’s brief is to support brand teams to maximise their sales promotion budget. It shares its expertise on mechanic use and redemption forecasting to aid the creative process.
‘This removes the fear of the unknown – a reason that brand teams can be more inclined to reject a wild and wacky creative concept,’ says Umbrella client services director and founder Beth Johnson. ‘It’s a daunting prospect for brand managers to run a new campaign without any historical redemption figures and that’s where we come in. No matter how outlandish the creative, we’ve got the knowledge to forecast correctly.’
In sales promotions, a big part of the creativity is about coming up with a great headline offer to entice consumers and retailers. ‘Our expertise is in making small adjustments to the mechanic that significantly reduce redemption costs, but don’t diminish the strength of the offer,’ adds Johnson. ‘This gives creatives much more freedom and confidence to build a campaign around a really strong headline and gives procurement reassurance that redemption costs are being minimised.’
Procurement at Unilever recognises that having a ‘numbers’ conversation too early in the creative process can limit promotional ideas. So, Umbrella offers its advice later, in the conceptual stage. Nevertheless, even slightly later on, Umbrella can identify where small adjustments to the mechanic can significantly reduce redemption costs without diminishing the offer’s strength, which helps the procurement department fulfil its brief without compromising creativity.
MAINTAINING CREATIVITY – Finding the right balance
– Ensure procurement is involved from the start.
– Keep procurement abreast of discussions with agencies.
– Avoid blaming procurement for budget cuts, so they are seen as ‘the bad guys’.
– Avoid hassling procurement to get the contract signed quickly – realise that it might take time to get right, but this will ultimately benefit the creative process.
– Invite procurement into the agency and explain how the company works.
– Give procurement access to the numbers they need, particularly production costs.
– Put forward an appropriate person to negotiate fees, such as a financial director – not a hapless account executive.
– Spend time doing the boring stuff: filling in forms is an inevitable part of the new era of accountability. Don’t complain about it.
– Say ‘no’ more: if a contract isn’t fair, say so, but do it clearly and suggest alternatives.
– Resist being defensive.
– Force the client to be more efficient in how they deal with you by considering offering them a smaller fee in return for better briefing and feedback or hitting deadlines so creatives have enough time to work on the brief.
– Ensure the upside of a PBR deal is attractive enough for agencies.
– Avoid trying to have your cake and eat it: capping PBR is a prime example of this.
– Align KPIs so they are the same for the agency and the marketer.
– Ensure that the contract is flexible, allows for changes as the relationship develops and gives agencies enough time to come up with creative ideas.
– Try to understand better the motivations of your agency.
– Avoid using pre-testing scores as a measure for PBR; this can identify terrible ads, but can also rule out extremely creative ones that could go on to be incredibly successful.
– Design a briefing process that uses time most effectively and allows for efficient client feedback.
– Set targets: these are rarely genuinely jointly agreed, with clients often dictating the terms.
– Trust each other and be transparent.
– Consider using an intermediary, such as the MCCA, to advise on devising a PBR structure that works.
– Be braver.
David Wilson, ex-Mattel, also highlights the issues surrounding agency and their ability to understand and engage with procurement in this article.
Navigating the emerging landscape
#typed notes explores the emerging landscape from an insiders perspective, commenting on futurology, social media, brand planning and anthropology. And inspiration
He is Founding Partner at Metropolis Partners