Where the Full Value of Marketing Procurement is Recognized

The relationship between marketing and procurement has often been tumultuous since “marketing procurement” appeared on the scene more than two decades ago. The good news is, the relationship has improved. In a growing number of companies, procurement and marketing professionals are now working together as a cohesive team. But recent research also shows that many companies have more work to do to build a productive partnership between their marketing and procurement teams.

This summer, the World Federation of Advertisers published an important report about the current state of marketing procurement and how the function needs to evolve to reach its full potential. The Project Spring report is largely based on a survey of senior VPs and directors conducted in 2018. Respondents were affiliated with 65 companies representing more than 16 industry sectors.

It’s probably not surprising that most participants in this survey were confident that it’s viewed in a generally favorable light by other parts of the business, including marketing. Twenty-five percent of the respondents said marketing’s perception of marketing procurement was extremely positive, and another 62% said the perception was somewhat positive. However, 92% of the respondents also said that the way the function is viewed in their organization could be improved.

Delivering Value Beyond Cost Savings

Demonstrating that marketing procurement can deliver value beyond cost savings has been a long-time goal and a persistent challenge for professionals. Most thought leaders agree that providing benefits beyond just cost savings is critical to improving how other business functions perceive the marketing procurement function.

The Project Spring survey identified several factors correlated with greater organizational recognition of the broader value that the function provides. Here are four of the factors that I found particularly interesting.

Size of Marketing Budget – Seventy-eight percent of survey respondents from companies with a high level of annual marketing spend (more than $1.2 billion) said their colleagues recognize that marketing procurement provides value beyond cost savings, compared to only 42% of respondents with “small” (less than $300 million) marketing budgets.

Reporting Structure – It is less likely that marketing procurement will be recognized for providing value beyond cost savings when it reports to the finance function. Fifty-seven percent of survey respondents whose team reports to finance said their company recognizes the broader value created by the function. That percentage rises to 67% when it reports to an operations or supply chain function.

Initial Point of Involvement – Marketing procurement is more likely to be seen as providing benefits beyond cost savings in companies where it is involved early in the sourcing process. Seventy-nine percent of survey respondents whose team gets involved at the budget stage of the sourcing process say their colleagues recognize the broader value created, compared to only 44% of respondents whose team does not typically get involved until the RFP stage.

Mandated Involvement/Low Threshold – The value of the function beyond cost savings is more likely to be recognized in companies that require marketing to use the function, but only if the involvement threshold is set at a low level. Eighty-eight percent of respondents whose companies have no minimum involvement threshold said their company recognizes the broader value of the function, compared to only 50% of respondents from companies with a minimum threshold of more than $250,000.