Procurement Is A Protection Racket, Isn't It?

I have been chewing the fat with the great and good in the London digital marketing scene recently around procurement. It has been a thorny issue for quite some time -- particularly in media, where procurement teams are often not only seen as the bad cops screwing agencies in to the ground for a better price (on media they have yet to buy!) but also running relationships thereafter. 

The power of the money men is spreading, and it's putting noses out of joint as marketers find that accountants are picking their agencies through criteria where price is much too heavily weighted against intangibles such as culture fit, creativity and flexibility. This leaves executives being judged by the work produced by an agency they may not have picked in the first place.

OK -- so all this is known, but there was one very obvious point that came up in a conversation with one very smart executive, which left me wondering whether procurement has not become a bit of a protection racket. 

To get the point you have to imagine that the agency you're dealing with has, say, four top clients, of which you are one. Now, just imagine that three of those four brands have fully embraced procurement and one has not. Ask yourself a very simple question --which of the four do you think will get the worst prices? Which of the four do you think the agency will lose some large bills against, allowing them to offer other clients keener pricing? Crucially, which of the four do you think will be last on the list when the agency decides where its best talent goes?

Now, I can tell you for a fact that there is one household name I could mention that was effectively told by an incoming agency that its prices were so competitive because it was able to take some shared cost across several clients and apply it to those that were not so hot on procurement. So this is real. It's really happening out there -- it's not just a "what if" question.

So we have the rather ironic situation that the best reason I have ever heard for why a brand should embrace the dreaded procurement process is that if it doesn't, its rivals will, and probably are. Don't get me wrong --  procurement, if done well, has obvious advantages of getting a good deal with the people you want to work with and showing accountability for budget. It is even being used strategically to streamline work across different fields and channels so brands don't pay two unrelated agencies for doing much the same thing. That is good procurement.

Too often, however, it just focusses on price and not the value that working with the best-suited agencies can provide. But after weeks of talking with the great and good, I can safely report back that the one universal reason why procurement should be accepted is that if you don't do it, someone else will be doing it to you. Exactly what that means when everyone has embraced the accountants, however, is another question.

As for now, if you are not signed up to the process you can only imagine whether your agency bills are higher than those sent out to a similar client who sends the money men in to negotiate contracts and keeps them around to make sure everything is going smoothly and according to budget. 

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