THE CAMPAIGN ESSAY: THE PROCUREMENTF PARADOX

Alison Littley says the tension between procurement departments and agencies hinges on a central paradox: both sides want great advertising, but do not agree on how best to accomplish this aim.

In the six years since it arrived via the merger of Guinness and GrandMet, Diageo has consistently argued that consumer insight will be critical in driving the growth of global premium brands such as Johnnie Walker, Guinness, Smirnoff and Baileys.

To engage millions of consumers in 180 markets, Diageo uses the creative talents of several hundred communication agencies. It reinvests more than £1 billion of its annual profits and employs more than 2,000 staff in pursuit of market share. In the drinks sector, competition is fierce, markets often protective of local products and regulatory intervention a growing reality.

Great marketing campaigns that really touch existing and potential consumers are critical to the growth of Diageo's brands and to the company's aspiration to become one of the world's most admired consumer goods businesses.

Delivering these campaigns and ensuring that Diageo has the creative zest that will keep its brands at the forefront of consumer engagement is the role of the company's marketing function. Supporting that function and providing marketing teams across our business with commercial leadership is the core concern of a small group of specialists in Diageo's marketing procurement team.

Four years ago, Diageo recognised the need to build on pockets of best practice scattered across the business, creating a model that acknowledged the fundamental role of a skilled marketing procurement function - a function that would effectively access the best creative talent, build successful relationship frameworks with our agencies and find innovative incentive models, globally and locally, to fuel the onward progress of its brands.

As Diageo's newly recruited global marketing procurement director, I saw an opportunity to steer a middle course between the breezy lyricism of marketing communications and the cold, logical approach of traditional procurement. That was where the fun really started.

At Diageo, we believe in stretch. All of us involved in the business of advertising try to do all we can not to narrow the potential of advertising, but to release and direct its power. Easier said than done, of course: we all know that even with great talent, real passion, rigorous process and intelligent remuneration structures, we don't get it right all the time.

At a strategic level, and by definition, advertising success is recognised after the fact. Predictive response models and the like are really more like comfort blankets, another piece of the lighting array that helps to illuminate tough decisions, but no more. In the field of payment for advertising services, the linkage between value of outputs and cost of inputs, it was ever thus. Yet this tension between the desire for certainty on the one hand, and the sense that the only certainty is uncertainty on the other, informs much of the confusion that surrounds advertising value and effectiveness. Within marketing procurement, we create the relationship framework within which we and our strategic agencies can engage in productive dialogue and create great brand-building ideas.

We must be indefatigable in our interrogation of the big questions. How can we tell what great work looks like? Are we paying agencies in such a way that they have a robust incentive to give us it quickly and efficiently?

Are we getting a fair share of our agencies' best talent? Are we giving them our best talent in return? Are our processes conducive to the business approving great, brave work? Are the agencies willing to set aside old-fashioned ways and show themselves able to embrace new ways of working that suit us better?

The problem is this: clients like arithmetic, agencies like literature.

In general, the fearsome round of monthly flash reports, quarterly brand business reviews, annual-planning cycles and lifetime personal performance monitoring are the chronometers of client existence. We are measured and assessed on what is important to our businesses, and feel uncomfortable when we cannot measure and assess what is important to us. Fundamentally, we are accountable, as businesses and as individuals within businesses. Naturally, we seek to place all manner of reciprocal metrics on the agencies, both in terms of payment structures, and in advertising development. It is a cause of friction between us: we are logical, linear and commercial, but we need business partners who aren't like us, who are intuitive and lateral - that's the soil from which great ideas grow.

That said, we are absolutely right to insist on commercial rigour from our agencies. We should place all of our agencies under strict terms and conditions, protect our intellectual property fiendishly, encourage people to learn and adopt best practice and make our partners and ourselves accountable both to a timetable and a budget.

Ultimately, though, these are the hygiene factors. The real value comes from the comprehension of imprecision, getting the intangibles right: talent; behaviours; motivation; opportunity. Asking the right questions about these will put your relationship on a footing that will be far more enterprising, creative and rewarding.

The wider issue is about talent. Are we getting the right quality of talent on our business? Is it the right agency? Is the agency giving us its best creative thinkers from all over the globe? If our models for incentivising and rewarding the agencies don't hit the mark, we will end up getting the reserve team, the work will suffer and the brand team will be unhappy. We start again - new brief, new campaign, more media money wasted in more advertising that barely registers.

We know that expensive good ideas are a lot cheaper than cheap bad ones.

We need to acknowledge that, like it or not, there is a very limited talent pool out there and market forces operate with some virility. That's a tough one for us, because talent is subjective and unscientific and we like a bit of science. There is an enduring paradox at the heart of the client-agency relationship - I cannot think of another meaningful commercial endeavour where both sides of the deal are in complete accord about what they want ("great ads, please") and yet are so antagonised in how they get there.

We love the idea of payment by results. Most agencies say they do, but despite it being on the agenda for a decade, there remain pockets of resistance.

Surely shared responsibilities must be a good thing? We need agencies to be extremely mindful of the effect their advertising has on our brands, the pressures on our businesses and the horrific cost of wasting money in producing and running poor ideas.

We, in turn, must be diligent in ensuring we are attentive to the agencies' passion, to the possibility that something that seems too different might just be the thing to move our brand on to the next level. That said, we fully acknowledge that, as Diageo, we operate in a controversial industry.

For this very reason, we have developed a stringent code to govern all our marketing and promotional activities, every day, everywhere. We expect our agencies, as partners in our business, to live up to the spirit of our code, as well as the letter.

Right at the heart of all of this is the simple truth that, ultimately, business boils down to relationships and that no matter how good we think we are at relationships, we invariably have a lot to learn and a lot more to do.

By relationships, I mean business to business. Personal histories, culture and convenience may all feature but, ultimately, business underpins everything and is the basis for clarity of understanding, clarity of purpose and clarity of responsibility. Mutual business benefit is the basis for all our commitments.

On this understanding, we need to develop the behaviours and ways of working that will help promote innovation, deliver best practice and engage the best talent. We need to share our goals, our experiences and our passion to succeed. This is certainly the approach we are taking in Diageo.

It has taken almost four years to build, but now Diageo has a highly skilled team of 60 people whose backgrounds include procurement, advertising and marketing. It has taken almost as long again to convince our creative communities that procurement within Diageo was sophisticated enough to distinguish between buying the components and materials used to create our brands and sourcing the creative services that help us reach our consumers.

A serious hurdle we have yet to overcome is the word procurement itself.

Agency people react almost instinctively to procurement - a function they perceive as dedicated to finding the ultimate widget at a knockdown price - being let loose on the subtleties of agency-client financial arrangements.

This means we have a major responsibility to promote a clear understanding of what we do and how we complement the activities of our procurement colleagues elsewhere in Diageo.

There are very specific disciplines and capabilities in sourcing materials and components for our brands where specifications are critical and where relationships will be the outcome of much careful work and planning by both parties.

We also need to recognise that in business, as in the rest of life, you cannot take relationships for granted - they don't necessarily do well left to their own devices. Both parties need to agree on mutually acceptable indicators as to the health of the relationship at any stage. Continuing, preventative maintenance needs to be applied; and everyone involved needs to be able to provide and receive objective challenge, and both parties need to share in the recognition and the reward.

If Diageo takes away from the relationship the dazzling campaigns that convert consumers to its brands, what comes to the agency that has sweated on the creative content of the award-winning ads and the compelling communications programmes? We all know that remuneration policies will always be emotive but we are endeavouring to put in place a transparent cost structure that is in effect a logical outcome of our new ways of working together.

In Diageo, we are in the very early stages of taking this new approach out to the creative community - the approach being to build successful business to business relationships, incentivising agencies based on outputs and performances, the ability to consistently access best talent and using effective and efficient processes.

Obviously, we will not see dramatic changes overnight. However, I firmly believe that this is the best way forward, both for our own brands and for the talented, creative people who help us to deliver and benefit from those critical consumer insights.

It is this kind of recognition of the growing importance of marketing procurement that undoubtedly helps establish our function as an effective business partner, helping deliver real value and tangible benefits for those involved.

- Improving relationships

'Right at the heart of all this is the simple truth that, ultimately, business boils down to relationships and that no matter how good we think we are at relationships, we invariably have a lot to learn and a lot more to do'

- The economy of ideas

'We know that expensive good ideas are a lot cheaper than cheap bad ones'

- Second-class service

'If our models for incentivising and rewarding the agencies don't hit the mark, we will end up getting the reserve team'

- Procurement paranoia

'A serious hurdle we have yet to overcome is the word procurement itself. Agency people react almost instinctively to procurement being let loose on the subtleties of agency-client financial arrangements'

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