The Dark Horse of Indirect Procurement

By Indrani Vohra

Marketing Services Procurement is an integral part of indirect procurement in today’s fast-changing business environment. Indirect procurement refers to all the purchasing activities, which don’t involve acquiring resources that go into manufacturing the actual product, or service which the business offers. In other words, indirect procurement is the process of sourcing all those services which enable maintenance and development of business operations like marketing, legal, office spaces, etc.

Dark Horse of Indirect Procurement

Recent studies reveal that indirect spending can account for up to 50 percent of a company’s purchases; manufacturers can specifically spend 20 percent or more of their total revenue on indirect expenditures. Out of this, marketing procurement is the largest indirect expense for consumer product companies. Thus, making indirect procurement the pivotal elephant in the room.

Indirect Procurement

What’s worth noting is the fact, that the advertising landscape is constantly changing, and marketing is constantly evolving with respect to the way it interacts with its customer base, to keep up with these changes. This could imply a change in how budgets are allocated across digital versus traditional channels, or simply prioritising the objective of the advertising campaign. These factors can be considered and one can invest accordingly.

Indirect Procurement
Dark Horse of Indirect Procurement

Since we are living in data driven times – where you can track the consumer from the first click till s/he bounces off your site, consumer behaviour and journey can be well assessed. In terms of marketing procurement, a standard spend analysis should be done which largely entails:

1.     Gathering data

2.     Cutting out noisy data to focus on what Is relevant

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3.     Categorising it according to supplier spends

4.     Analysing it

The objective of marketing procurement should not be cutting costs but creating value. For instance, it is better to spend a little more on a creative agency whose output has displayed proven success in terms of sales numbers, brand recall or creative execution.

  • It is crucial to remember that we are in the business of perception, and perception is an ongoing process of constantly calling outsmart creatives that play to the consumer insight, a fact that marketers oft forget.
  • Marketing is an investment, and investments are not cut, they are maximised.
  • It is imperative to critically examine the marketing value chain and focus on how one carries out the agency-client relationship in terms of briefing, renumeration, yearly agency reviews etc.
  • Award winning work by an agency that has contributed to your top-line, has to be adequately remunerated to earn trust of the agency supplier, and to also foster a long-term relationship.

Boutique agencies or niche agencies have to be screened regularly, mainly because they can yield exceptional results in terms of output and quick turnaround time. A network agency can help save cost by offering a range of services such as creative strategy, media strategy and event strategy – all under one roof. Having a slew of suppliers also reduces your dependency on one agency supplier, giving you ample negotiating power.

Arbitrarily, cutting agency fee in normal market conditions will have an adverse effect on your ‘cost savings’ because lower agency fee could mean poorer creative output, or inexperienced and unprofessional people working on your account.

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Indirect Procurement
Dark Horse of Indirect Procurement

Cutting agency fee should be an option, only if a review has proven that the agency didn’t perform up to the mark, or if there is an external economic factor at play. In such a case, ‘cost savings’ would be there on paper, but would not be effective in reality.

Allowing your agency adequate breathing space will encourage the employees to show initiative and innovation in terms of ideas on a regular basis. In fact it is a good idea to have ‘idea sessions’ or workshops from time to time, who knows the next ‘Eureka moment’ might change the trajectory of your brand!

Indrani Vohra has an MBA from Rotterdam School of Management, The Netherlands and has worked in advertising in New Delhi for over 8 years

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