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Understanding the Growing Rift between Procurement & Marketing

There has been a lot of debate recently on role of teams in marketing procurement, partly due to the bold decision taken by PepsiCo to remove the entire marketing procurement department and putting the responsibility firmly on marketing teams. If we analyze the comments on various channels, we notice that most marketing teams, (especially those who rely heavily on marketing roadshows or digital marketing) have whole-heartedly backed the decision, while those using traditional marketing mechanisms are a bit reluctant.

Having been involved with marketing and procurement teams, I believe the reason for discomfort (and hence the debate) between procurement and marketing arises due to a lack of understanding of each other's roles.

Barriers to healthy relationships between procurement and marketing:

Cost savings vs. value contribution

It is a known fact that any procurement team's primary role is always cost control. And marketing, who in many cases are the biggest spenders, have no interest in saving figures as they are focused on competitive differentiation and quality. In other words, it is the job of the marketer to make sure their brand is associated with “magnificence,” while procurement has to make sure they do so in the most frugal way possible: no wonder there is a difference in opinion.

What procurement needs to do: It is clear that, lecturing on savings will not work as no marketer will listen to a procurement guy who claims he can do the same task at a lesser value. The trick is to focus on other procurement talents like finding qualified alternate vendors and using their negotiating skills to get better options. However, it is important that procurement team works collaboratively with marketing and identifies areas for qualitative value creation, so that they do not lose time in a wild goose chase.

Balancing innovation & compliance

Marketing teams work a lot with freelancers with specific expertise, technology consultants, artistically inclined professionals so on, and we have seen that such partners are usually not the type procurement professionals are comfortable dealing with. For one thing it is extremely difficult for procurement to identify if a deliverable meets the quality criteria or not (more about that later).  Moreover, it is difficult for procurement to verify their credentials, do a due diligence and onboard them. Hence procurement views such vendors as risky.

Additionally marketers want to gain competitive advantage by focusing on innovation and encourage innovation and experimentation with their vendor by offering exciting incentives. Such incentives are often regarding payment terms etc.

What procurement needs to do: Procurement needs to enforce compliance strictly, but not at the cost of innovation. They will probably need to do draft a scenario based compliance plan for managing such vendors. While marketers will definitely try to get the best out of the vendors by offering attractive incentives, by setting up limits and approval requirements procurement can still have control over this.

Tracking after-effects

At the end of the day, procurement will measure their performance on effectiveness while marketing will measure their performance on number of leads, brand recall, market perception etc. Hence it is essential to build a common baseline for measurement of success or failure of marketing procurement projects. As discussed, the deliverables from vendors for marketing is not measured in terms of quantity, nor or there simple quality checks to ensure there is no defects. The success criteria for marketing are rather complex and deals with external forces much more frequently than other departments.

What procurement needs to do: This is an area, which is quiet risky for the procurement team to govern on their own. Hence it is advisable that they act only as enablers for marketing procurement projects and show their contribution in terms of faster processing time or better management of vendor relationships across different projects.

In conclusion, we believe that there is a lot of scope for procurement's influence in marketing spend, but the efforts needs to be focused towards marketing improvement, so that the constant disputes between procurement and marketing teams are effectively removed.

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