Will 2023 be the Year of Marketing Procurement?

As we are wrapping up the last quarter of 2022, many of us start to think about what 2023 has in hold for our organization and for our team. 2022 has been focused on the lingering Covid-19 effects, remote vs. in-the-office work, talent shortage, uncertainty in the supply chain for certain categories and of course — the dreaded inflation.

The good news for procurement is that during uncertainty and potential recessionary markets, procurement is in high demand. During 2020 and 2021, procurement was in very high demand in most organizations to help manage risk, cutbacks, and revise contracts to meet slower demand. The old-school cost savings procurement individual was seen as a hero. In 2022, we saw marketing come back quite significantly and agency partners have reported record revenue growth — from a low base — and larger profits. Publicis announced extra-ordinary bonuses this week due to such high earnings.

In 2023, we believe the strategic procurement individual will be our rock stars. In marketing procurement, the individuals who can build strong relationships with their internal stakeholders — including marketing, finance, legal and the c-suite will be successful at executing the large and small marketing procurement projects to demonstrate value to their organization — and thereby become a trusted advisor to the stakeholders. We see a couple of areas where marketing procurement should focus their efforts in Q4 2022 and 2023.

Inflation

Inflation will be a big part of the marketing procurement agenda in 2023. However, it is important to understand where the inflation will impact the advertiser and where marketing partners will claim it is an issue. We have seen reduced media budgets across several clients already, and undoubtedly, we will see more to come in the next few months. This coupled with higher media prices in general will be a key concern for advertisers in 2023.

However, as marketing procurement reviews scope of work, tech charges and other marketing charges for the next year, inflation pressure will be a key argument for higher fees across the board. It is very important to review each charge in the light of inflation. Many of the costs that marketing partners have are fixed or regulated by contractual terms and thus will not be impacted by inflation, or at least, not as much as media pricing. Marketing procurement will need to do a deep-dive analysis before agreeing to any inflationary charges.

Contract Maintenance

As we move into 2023, we will see a more stable agency partner environment than the past two years. During the Covid years, many advertisers agreed to accept fixed media pricing, affiliate partner programs and we saw more spend move into programmatic. All this took place as advertisers wanted to reduce media pricing during the time of uncertainty and lower demand. Now is the time to better understand which agreements are in place, what the specific approval process for moving spend into these non-transparent areas look like. It is also important to try to establish as much transparency as possible and the need to push back on agencies while negotiating this is key to success for marketing procurement. Ask the hard questions. Educate yourself. And there are no stupid questions.

With the talent pressure that we are seeing in the marketing space, it is important to ensure transparency into agency partner personnel working on your business. Adding contract language around open positions, seniority and burn reports are key to be able to validate transparency around talent.

Path of least resistance to build stakeholder relationships

Marketing is one of the largest spend categories in many organizations and thus the CFO is keen to identify and support transformational programs which will generate large savings for the organizations. While these projects are sometimes imperative, it is important to go about the marketing spend category carefully as the marketing team have well established channels and partners that they trust and collaborate well with.

For marketing procurement to build trust and show value to the marketing team, we recommend driving smaller, but impactful projects that truly support marketing. This will help increase trust and increase collaboration across procurement and marketing. When marketing procurement develops the 2023 marketing procurement plan, items like commercial updates, contractual hygiene and agency benchmarking are projects where marketing will appreciate the support and benefits to the organization while not feeling threatened by the impact on campaigns and marketing partners’ delivery of their services.

Agency partner compensation, bonus, and savings delivery

As media pricing increases, advertisers with any sort of commission will be impacted. It is important to discuss and evaluate if the increased compensation in actual currency is acceptable. In this case the marketing procurement should analyze the actual compensation paid — not the percentage — and compare to the 2023 cost of buying media will be. Several advertisers also have different remuneration across different media channels. This can drive conflicting commercial priorities among marketing partners. These situations need to be reviewed and validated by marketing procurement to ensure transparency.

While non-transparent media increased during the Covid years, now is the time to evaluate those agreements and better understand the commercial consequences of these agreements. Many contracts state that “if the use of non-transparent media is beneficial to the client” it should be implemented. Marketing Procurement will need to put in place better approval process and require the agency partners to demonstrate the specific benefits the use of non-transparent media delivers to the advertiser. If an agency partner recommends a subsidiary, marketing procurement should validate that this is indeed the best option and approve the commercial agreement is disclosed to validate the overall agency partner revenues from the advertiser.

Agency partners are becoming more agile and meeting the demand of advertisers to quickly adapt to changing market conditions. Agency partners are also increasing their share of wallet of advertisers. This makes for a good reason to introduce a bonus — or PRIP — element to the current remuneration. As advertisers and marketing partners collaborate to achieve pre-Covid growth and revenues, it is key to align priorities around the advertiser’s goals. Implementing a solid bonus will allow marketing, procurement, and the agency partners to focus on what is important. Marketing procurement will be responsible for tracking this through-out the year and findings should be part of the quarterly agency partner meetings.

We still have another 10 weeks to think about, develop and formalize the 2023 Marketing Procurement Agenda. Good luck!

RAUS Global is a management consultancy company, focused on supporting marketing procurement in strategic development and execution of projects to drive value for the organization and build trust and enhanced value creation with internal and external stakeholders. www.RAUS-Global.com