Efficiency does not only come from procurement
A view from Claire Beale

Efficiency does not only come from procurement

When clients talk about a new drive towards effectiveness and efficiency in their marketing communications, what they often seem to mean is they're going to cut costs and/or squeeze their suppliers

.But when PepsiCo announced last week that it was evolving its operating model to be more efficient and effective, it appeared to have something rather different in mind. Instead of ramping up procurement, it’s nuking the entire global department, devolving responsibility for agency remuneration back to its individual brands and marketing departments. Even better, a PepsiCo statement described the decision as "necessary for us to stay competitive while meeting the future needs of our business" – usually the sort of rhetoric you hear as the screws tighten and the blood runs.

The news has been welcomed by US agencies – only 10 per cent of which said they thought procurement added value to the client/agency relationship when asked by the Association of National Advertisers earlier this year. Mind you, when the ANA asked marketers the same question, less than half thought procurement added value to their agency partnerships, so they’ll be cheering PepsiCo on too.

Let’s be clear: there are some brilliant procurement heads who are sensitive to the nuances of marketing department needs and the particular nature of the client/agency dynamic, focusing on value-adds such as reducing risk and facilitating innovation. But let’s also be clear: the 2015 ProcureCon Marketing Procurement Benchmarking Report found that cost savings (71 per cent) and "total cost of ownership reduction" (48.4 per cent) came top when marketing procurement professionals were asked to name the two main KPIs for marketing procurement in their organisation. And just under half of them didn’t have clearly defined processes to link their KPIs with marketing KPIs. So agencies are required to deliver savings to procurement departments and effective performance to marketing departments, and there’s no plan for how those demands can be reconciled.

Nevertheless, PepsiCo’s rethink is not so much driven by a recognition that procurement can sometimes get in the way of effective marketing activity and diminish relationships with valued suppliers but by a recognition that marcoms is changing rapidly. Real-time marketing means efficiencies and effectiveness are better-achieved by empowering brand teams who can more quickly evaluate cost versus quality on the ground as they go. Smart clients will already be working out how procurement needs to evolve. And, crucially, the smart marketers will already be demanding full responsibility for cost and growth.