Communication Improves Agency-Client Procurement Talks

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The procurement process may continue to be a sore spot between agencies and clients, but a discussion Tuesday suggested improved collaboration could offer a smoother path going forward.

Agencies represent talent -- and that isn't a supply-chain commodity, said Tara Ennis, who works in marketing services procurement at J&J. "The biggest difference is you're buying people, not the product," she said at an Advertising Week event.

Melissa Sassi, who works in marketing sourcing and vendor management at Blackrock, did not disagree with the view that agency services can't be handled like a commodity.

"You're not just buying widgets; you're not just buying paper and pencils," she said.

Their comments were in striking contrast to some of the Madison Avenue undertones that companies have an all-encompassing staff charged by the C-suite to negotiate with WPP as they would Waste Management.

On the agency side, some of the most olive-branch-type comments came from Taxi CEO Rob Guenette, who said that "in the last five years, procurement has gotten really, really good -- it's not that battle it used to be." Part of the reason is that executives in the departments have a better understanding of the value of marketing services.

He did note that an issue can still flare up that's rooted in internal communication at the client. A marketing department can select an agency in a review and the two could begin working together with a satisfactory compensation agreement, but procurement may still need to go through approval channels.

Still, in a signal of a potential new era, Horizon Media CEO Bill Koenigsberg said the unfathomable has happened: a procurement department has come back and said the agency should raise its fee. That can happen, he indicated, when the trio involved in the process -- the agency, and the marketing and procurement departments at the client -- work in tandem.

"The process has become a lot more collaborative," which brings trust and understanding, he said.

One way to smooth the process is to have a procurement executive sit in on presentations during a review or visit an agency and learn about the ins and outs of the services. Sasssi said there must be an understanding of mutual value.

"It's not about beating up the agencies [so they don't] make money," she said.

Mark O'Brien, president of DDB in North America, said one client asks for a fee cut annually, but that's simply not sustainable. "You can't continue to save money for 10 years with an agency," he said.

He also said to remember that agencies bring value to clients by being in the procurement business themselves. If creative executives negotiate lower costs for production or media executives get lower CPMs, that helps the client.

Taxi's CEO Guenette had one idea that could benefit all sides: Companies should decentralize procurement. In other words, merge procurement executives into particular divisions -- the oil expert into fuel acquisition, the tech pundit into information technology and an agency pundit into marketing.

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