An in-depth understanding of consumers sits at the heart of what we all need to do, but we know it’s not always easy to uncover insights that will unlock a true innovation opportunity.
Conflict between marketing objectives and procurement can result in poor budget decisions and stifled brand growth. So how can organisations ensure things run more collaboratively?
We speak to marketing leaders, business executives and industry experts to discover why procurement and marketing often can’t see eye to eye, and what can be done to better align both teams’ visions to achieve better business outcomes.
“Conflicts arise because procurement wants to drive cost down, while marketing wants to undertake value-add,” CEO of market research firm Forethought, Ken Roberts, told CMO. “If marketing can’t give evidence of their value-add activity, they must expect that the ‘night watchman’ will shine their torch on them.
“And of course the arch-enemy of procurement is the ‘spiritual marketer,’ with their optimism bias. There’s still a massive proportion of marketers who fall into the category where they’re simply incapable of dealing in real data – and marketing is becoming more and more a call to be more accountable.”
Co-founder of self-storage solutions provider, Spacer, Roland Tam agreed there is growing conflict between the functions.
“Marketers are by nature risk takers, trying to generate an edge by predicting the next trend before it happens,” he said. “Sometimes the result is binary. This can be difficult for procurement to manage, who prefer certainty of demand in their forward planning models.”
Strict budget control and the effect on innovation
What’s obvious is that if procurement is too strict on budget control, then there is a real risk that innovation will be stifled.
“Flexibility is important for any business, and in any department within a business,” InSkin Media’s general manager, Matt Newcomb, said. “Flexibility and innovation go hand-in-hand, and innovation is what we’re all driving for these days, isn’t it?”
Newcomb pointed out BrandZ measures the world's most valuable brands each year using five key factors: Presence, relevance, performance, advantage and bonding. In 2016, the 100 most valuable global brands saw their value rise 3 per cent to a combined US$3.4 trillion. Driven by 'transparent innovation,' Google pushed its way back to number one, taking the position from Apple, which now comes in second.
“If a procurement department took a look at these numbers, it would be a huge encouragement that flexibility adds value – especially in marketing initiatives,” he said.
While procurement fills an important check-and-balance role in the supply chain to reign in marketing visionaries, it can't keep doing the same thing and expect to generate sales growth, Tam said.
“This means procurement should set aside ‘new ideas’ funds as a type of play money for marketers to use to build out new product ideas,” he said.
On the other hand, Roberts argued there’s no reason why procurement should be soft or be more flexible to marketing budget needs. Instead, he stressed they should be as strict as an organisation demands.
“Procurement places little value on the unfulfilled promises of marketing and creative agencies that their work will deliver growth,” he claimed. “It’s up to marketing to be able to convince procurement of their value-add.
“Marketing should be a science, not a creative pursuit to chase growth. Marketing must move out of solely focusing on communications, embrace data and analytics and contribute their skills across the wider business.”
But perhaps it is this strictness of procurement in larger organisations that is part of why startups and entrepreneurial thinking is disrupting the market, said content marketing agency Cartelux’s managing director, Josh Williams.
“Top-down decision making from finance departments stifles innovation because it tends to be risk averse,” he claimed. “These days, most of the opportunity is in risk, and smaller companies are investing where larger organisations might have too many departmental hurdles to jump.
“To cite a personal example, as a small business with a large client, we took a risk on developing technology our client was reluctant to develop alone. We collaborated and the end result has been of enormous benefit for both parties. We’ve now secured a global deal with the same clients from our base on the Sunshine Coast, and it’s all because we invested in risk.”
According to Williams, marketing departments need to learn more about business, and procurement departments need to learn more about risk.
“Businesses need to take risks to thrive,” he said. “In fact, the best opportunities lie in the unknowns, and exploring those opportunities requires you to put down your numbers and projections, and take a leap of faith. But embracing risk is something that procurement departments aren't really built for, and ‘calculated risk’ is often just a way of packaging up conventional wisdom.”
In a rapidly diversifying and evolving economy, numbers and projections often don’t exist because opportunities are just too new, Williams added.
“After all, if there were always numbers and conventional wisdom to back up your new business opportunity, it wouldn’t be an opportunity – everyone would be doing it,” he said. “That being said, marketing departments can often run on a treadmill of tradition that makes sense to them but is nonsense to other departments. The visibility digital has brought to market has shifted the perception of traditional channels out of the realm of conventional wisdom and made them look like untested propositions.
“This second-guessing is largely a good thing in my view, because it dissuades marketing departments from promoting channels in isolation, and will likely force them to take a closer look at all elements of their business. Integrating your marketing approach across all business streams should be the first port of call for marketers looking to deliver an omni-channel brand experience to customers.”
Show us your drawers
In order for the two departments to better work with each other and have a more aligned relationship, Roberts said it is analogous to ‘keeping your drawers tidy’. By this, he means managing your items by folding everything neatly and consistently every day, instead of pulling everything out and trying to tidy it once a year.
“Marketing shouldn’t wait for procurement to knock and say ‘show us your drawers’, but must take procurement on the journey to show evidence of how they are creating organisational value, whatever form that takes,” he explained.
The challenge is that a lot of what marketing creates is intangible, such as aligning colleagues to organisational intent, Roberts said. This means marketers can collaborate more effectively with procurement by using techniques and language, which turn the intangibles of marketing into tangible constructs that procurement can appreciate.
“By applying data analytics to dissect consumer behaviour into its constituent motivators, both rational and emotional, marketers can frame their work on those scientifically derived drivers, driving business outcomes and proving the value of investments,” he said. “Via the rigour of advanced analytics, marketing can accurately predict the effect on acquisition and retention strategies for growth, equipping finance and management with the certainty to make investment decisions and action.”
Simplify your proposition
Newcomb suggested marketers simplify their proposition and make it something that can be easily shared between departments.
“Marketing and procurement teams could align their ambitions to achieve these goals and create top-of-funnel demand, and then support it with a consistent and effective media plan,” he said. “Get it right, like Apple, and you can charge premium pricing and drive huge volumes of sales. Get it wrong, and well, you can imagine what happens then; doing your job starts to feel like a pitched battle for both sides. Transparency across departments and an aligned vision is essential for avoiding the kind of standoffs that sometimes hamper marketing and branding efforts.”
Thanks to digital, Newcomb believed next-generation metrics around brand measurement are on the horizon.
“The depth of insights we can glean from digital is only going to enhance,” he explained. “Digital has already enabled brands to understand and measure brand value and consumer reaction more easily and more quickly than in the analogue era.
“In future, procurement and marketing will have more data to help them skillfully play their human hunches. We’re heading towards a better place for both marketers and procurement. We’re seeing brands like Air B'n'B or Uber that can be created incredibly quickly in sales and marketing led organisations.
“So in an era of disruption, marketing and branding-building, when executed well, has a crucial role to play in a company's success.”
Setting up the right roadmaps
For online food delivery company Deliveroo, getting the balance between procurement and marketing right is about aligning the business roadmaps and calendars.
“Each department within our company, from sales to account management, marketing, operations, HR and management, all have very different roadmaps and calendars," Deliveroo's country manager, Levi Aron, said. “These often don’t tie up. However, one thing we do very well, most likely due to some quick failings, is to have the leadership teams come together once a week and overlay the calendars. This results in healthy, productive discussions and aligned relationships.”
According to Aron, marketing is the creative side of the business and very often can get too excited about marketing, partnerships, general activations and larger brand awareness campaigns.
“This means we don’t properly model and predict the result each of these can have when it comes to understanding the stress extra growth causes on a business that is already scaling rapidly,” he continued. “This can result in not having enough of riders scheduled to handle the extra load or not giving enough warning to our restaurants to expect a spike in orders which can result in bad customer experience, directly impacting customer retention.”
While it would be great to be able to always add on an extra 20 per cent in procurement orders to cover volume spikes caused by marketing efforts, this is not always feasible for companies.
“In a startup, where every single dollar counts, we have to report back to stakeholders that include investors, senior management and shareholders,” he said. “To me, more transparency is required and it is as simple as letting the department sitting two seats away from you know what you are doing on a daily basis. In a more structured way, do a weekly stand-up meeting between both procurement and marketing to help facilitate the transparency level and align goals.”
Too many cooks spoil the broth
According to strategy director of digital innovation and creative consultancy The Frost Collective, Cat Burgess, things can become especially problematic when external procurement firms are brought on board, as they are often paid to deliver process rather than deliver marketing outcomes.
She noted an experience where her team was kept at arm’s length from a client due to probity, yet the procurement firm didn’t have a strong understanding of the brief or what might be required as they were unfamiliar with branding projects.
“This meant we needed to base our proposal on putting forward assumptions rather than having a clear understanding of what was required. Ultimately, when we won the project the client also had questions about what had been scoped as they had been distanced from the process.”
Burgess said procurement needs to focus on driving qualitative cost returns rather than looking for options that could mean a compromise in quality or creativity.
“Some of our clients set up supplier panels so that when the time comes to commission a project all the relationships are already in place. This can be a good way of ensuring the agility of procurement is there when pressing briefs come through,” she said. “And in an era when innovation is becoming more important to marketing, procurement needs to do scenario planning for compliance that accommodates acceptable levels of risk. Marketers will be looking for more up-and-coming businesses that think outside the square and may find it harder to pass due diligence tests that work for other styles of businesses.”
Why it’s all about collaboration
Sometimes internal conflicts are not always a bad thing, Williams said, as it can invite a fresh wave of collaboration.
“Yes I do agree businesses have internal conflicts between marketing and procurement, but, I don’t think conflict is always a bad thing, especially when it’s managed properly,” he said. “To my mind, conflict that’s civilised and supported by rational arguments on both sides, qualifies as a type of collaboration.
“At least in the short term, this kind of organised debate is often the only workable solution we have in businesses that aren’t properly integrated - which is lots of them. I’m not saying it’s perfect, but testing ideas that come out of the process does motivate both sides to better understanding each other, and interrogates the output in a way it might not have otherwise been.”
Communication and collaboration between marketing and procurement from as early on as possible can ensure a more seamless business strategy from the outset, customer experience rating software company TruRating CMO and COO, Joanne Werker, advised.
“Some of the strongest marketing and procurement intercompany relationships I have had the pleasure of being a part of, are where there has been real collaboration from the moment marketing strategy and planning kicks off - not at execution, and where procurement is integral to setting the vision," she said. “If you get them involved on what marketing is trying to achieve, you open the door to creativity. You allow them to have a voice and in my experience, they often shine.”
Werker also suggested making the marketing vision real for procurement by getting them to ‘walk in the customers' shoes’, which in turn, gives them a different perspective as to why the spend is pivotal.
“I believe marketers need to take procurement on a journey, invest the time in building a relationship, and in turn you will have a very valuable ally,” she added. “It's fantastic to see a procurement or finance person deliver creative ideas with real passion and enthusiasm.
“Don’t assume just because they don’t have the word ‘creative’ in their job title or role, they are not. You will be surprised and it really can add a unique perspective to your plan.”