Procurement is key for Coke, Premier Foods

24 December 2009

LONDON: Companies like Coca-Cola and Premier Foods are trying to balance the roles of their marketing and procurement departments, both internally and when appointing their advertising agencies in the UK.

As previously reported, Procter & Gamble, the FMCG giant, has been rolling out the Brand Agency Leader model across its portfolio, where one lead shop takes overall responsibility for managing campaigns.

The owner of Tide and Pampers has also changed its policy with regard to remuneration, so that it bases payment on the success of its advertising and marketing, rather than fixed fees or hourly rates.

Coca-Cola has started to implement a similar model, and Jane Dormer, the beverage maker's head of procurement for Great Britain and Ireland, argued this can be a "win-win situation".

"Where previously, procurement may have tried to hardball an agency, demanding discounts but not really explaining or understanding why, now we have a much more collaborative approach," she said.

"Agencies must also build relationships in this area and help procurement understand their business models, drivers and what's important for them. This will ensure better results for both parties overall."

More broadly, Dormer suggested that marketing and procurement professionals must "respect each other's skills", and realise that they share a number of common interests.

“I believe marketers on the whole are very commercially minded and are looking to deliver the best return on investment, but if they spend all their time focusing on the commercial elements, they can limit the opportunities they have to work magic on our brands," she continued.

"I recognise that marketing is an investment for the business, not a cost, so my aim is to focus on this investment to ensure we get the best value and increase ROI."

Ciara Dilley, marketing director at Premier Foods, further asserted that communications specialists need to ensure that sound financial controls are in place, rather than relying on others to do so.

"I have concerns that the general perception is that it is the role of procurement to cut costs. Whereas a good marketing team should see that as their role," she argued.

"We should not forget that, while procurement can be a valuable ally, it is the marketing teams who understand the services they are buying better than anyone else."

To receive the maximum payback from their creative and media partners, clients should also establish what constitutes a "fair price", but their networks must similarly realise the benefits of flexibility in this area.

"If you foster a good relationship with your agency teams, and pay them fairly, then you will get the best from them. The last thing I want to do is squeeze someone so tight they can't make any money, because you won't get the best people or good work," she said.

"Wouldn't we all prefer it if we could invest in all those key opportunities if the funds were available? Remember, strong negotiation can often deliver the additional budget to make that happen.”

Drew Thomson, chairman of Iris Worldwide, agreed that the shift to rewarding "outputs" rather than "inputs" was a positive one, as long as the terms were mutually beneficial.

"Agencies and clients need to agree clear partnership frameworks, rather than have one party telling the other what the parameters of any deal are," he argued, something that is not always the case at present.

Data sourced from Marketing Week; additional content by Warc staff