Why Marketing Needs to Work More Closely With Procurement
Updated: Sep 26, 2022
Why Marketing Needs to Work More Closely With Procurement
Hint: It has nothing to do with office supplies
You’re probably thinking, “Procurement is the people who buy the copy paper. They’re a necessary step I’m forced to bring in once I get my agency/partner candidates whittled down, so they can swoop in and get the cheapest price, regardless of value.” Well, that has changed.
Yes, there’s still a lingering perception that procurement doesn’t understand marketing. The problem comes down to misaligned aspirations—and that means that innovation is at stake. While the chief procurement officer’s job is to mitigate risk, get services as cheaply as possible, and get the most value for the firm, marketing’s remit is to take risks by doing new things to stand out. If marketing mitigates risk, they fail.
Here’s the shocker: Procurement can actually make marketing much more innovative.
Building an effective relationship
KPMG recently published research on this subject, “Smart Spending at Speed.” And what we found is that by developing a contextual relationship and getting procurement involved up front, marketing can use its partnerships more effectively.
It can create more efficient and strategic relationships with software vendors and use that software in new and different ways. Procurement, when involved strategically from the get-go, speeds up time to market.
When procurement is actively involved, the vendor selection capabilities are more mature. These include a vendor’s industry standing, secondary features—like IT security and data privacy practices—and price competitiveness. Having these selection capabilities up front leads to a faster and smarter process, which leads to better outcomes.
Plus, procurement helps prove the business value of marketing. With procurement as its bargaining partner, marketing gets the most value for its expenditures. More efficiency leads to greater value capture. That means that marketing can do more with its dollars. Instead of just doing X with $10 million, you can now do X plus Y with that same $10 million.
As part of KPMG’s research, we talked to companies like E&J Gallo Winery. Before tapping into procurement’s expertise, its team made creative agency sourcing decisions based on personal conversations and needed to curb the winery’s spend and selection. The company created a small procurement team inside its marketing organization that facilitated the selection process with formal RFIs and RFPs and sped up the process by about four months. Thanks to procurement, the vendor quickly got to know the key stakeholders and their expectations for success.
So, what’s the key to creating a productive marketing-procurement relationship?
Find a shared purpose and understanding. Marketing and procurement come from two different angles. That’s by design—and that’s a good thing. But they still need to agree on their north star. Take time to ensure that each side shares the same goal, while coming at that goal from diverse points of view.
Change management exercises are crucial for transforming the relationship from transactional to strategic—and the CMO must lead this new way of working through the entire organization. Marketing needs to understand the value that procurement can bring and vice versa. When procurement understands what marketing needs to accomplish, how it utilizes sourcing decisions, and how it works with partners, it creates a better outcome.
With procurement as a strategic partner throughout the process, marketing will save a lot of heartache and wasted time. They’ll benefit from understanding the value derived from sourcing decisions and from questions asked early on—instead of at the end of the process.
Knowledge sharing sessions and cross-functional training can go a long way. In fact, according to KPMG research, 78% of marketing leaders in “very effective” working relationships with procurement “tend to involve digital/ecommerce functional groups in marketing sourcing decisions.” There’s work to be done on both sides—and the person who’s procuring the copy paper shouldn’t be the one procuring the ad agency.
Defining RACI (responsible, accountable, consulted and informed) models helps create efficient and effective relationships. These predefined metrics measure working relationship performance and governance, leading to greater speed and agility. Eighty-six percent of marketing leaders in “very effective” relationships with procurement say they have formally defined RACI models, according to KPMG’s research “Smart Spending at Speed.”
B-to-c is ahead of b-to-b in forging successful procurement-marketing relationships. With the increasing consumerization of b-to-b—where b-to-b customers are acting more like consumers—the majority of them don’t want to talk to a sales rep until later on in the process. They want to transact digitally, and they want an omnichannel experience. This requires new tech, CX and agency relationships, which in turn require procuring those services.
B-to-c gets this with 42% of companies sharing that procurement is actively involved in their business model, as compared to 11% of b-to-b companies, according to the KPMG research. That’s why b-to-b companies that want to get ahead and become more innovative need to look at b-to-c for best practices—and that includes ensuring that marketing and procurement work side by side.
The key is defining your shared purpose, bringing procurement into the process from the beginning and ensuring a smooth transfer of knowledge. You’ll get a lot more value from your marketing—and you may even get better copy paper, too.
Bret Sanford-Chung is a customer advisory managing director at KPMG in the marketing consulting practice. A globally renowned builder of brands, Bret brings the unique experience of having practiced marketing from every perspective—as agency creative director, CMO, Global agency leader and educator.