"Once, Mad Men ruled… They’ve now been eclipsed by Math Men." Celebrated author and industry watcher Ken Auletta made this observation in May in his Annals of Communications column in The New Yorker.
Auletta’s forthcoming book, Frenemies, focuses on the marketing and communications business in the 21st century. He recently spoke at the ANA’s 2018 Advertising Financial Management Conference, heavily attended by procurement leaders, about modern-day procurement and other issues impacting relationships between clients, agencies, and the customers they’re both trying to influence.
The bottom line - procurement is a necessary part of doing business for all agencies. Return on investment is increasingly the name of the game, and clients that substantially spend on communications and marketing rely on their procurement colleagues to help manage costs and maximize ROI.
This has significantly altered the dynamic of agency-client relationships. Procurement pros have become influential gatekeepers at the new business and contract renewal table.
Some agencies might consider them disruptive third wheels, but client CCOs, CMOs - and especially CFOs - consider procurement vital in effectively managing client resources.
The trick for agencies is to work with procurement pros to win and keep profitable clients.
"Although there are many enlightened procurement professionals, a large segment of PR procurement staff doesn’t understand the value of communications and lack understanding of the economics of our business," says H+K Strategies’ global chief operating officer Mark Thorne. "The onus is on agencies to bring awareness to these issues."
"Their primary responsibility is cost savings," adds Pan Communications CFO Gary Torpey. "In many instances, they have more control over contracts than their CCOs and CMOs."
But cultivating close and mutually beneficial relationships with client procurement pros is essential for overcoming their lack of familiarity with how our industry functions.
We need to provide them with fact-based, data-driven information demonstrating agency impact and illustrating cost structure. This information should include case histories rich in data proof points that verify communications’ impact on increasing client sales and revenue; building reputation; and PR/communications agency salary ranges, benefits data, and other overhead costs.
In negotiations with procurement, "agencies should avoid strictly focusing on price and should instead focus on providing data-driven insights and analytics that demonstrate the agency’s ability to ‘bring home the value-bacon’ for clients," says Citizen Relations global CFO Christopher Burns.
Edelman’s worldwide CFO, Victor Malanga, adds: "If you want partner status, you have to demonstrate your value-add and maintain, if not improve, the value you provide to clients over time. If procurement only sees value in lowering your hourly rates, you’re toast."
And it’s never too early to engage with a client’s procurement team.
"Why wait? It’s best to develop relationships with procurement well ahead of rate/contract negotiations," advises Malanga. "It’s important to spend time educating procurement about the agency while also developing an understanding of their role and objectives. You want to enter into more difficult negotiations with a sense of mutual understanding, trust and respect."
It’s helpful to invite procurement pros in-house to shadow their agency team. This can help them better understand that agencies are not commodities.
For example, seeing and understanding the intensive work necessary to collaborate with an influencer and generate a positive story in The New York Times would be an enlightening experience. The procurement leaders I know would welcome this.
"More often than not, we, as agencies, just accept the terms of the client’s procurement department in order to win business," says M Booth CFO John Lesniak. "Unfortunately not all business is good business, and if agencies want to avoid being treated as a commodity, they must insist on transparency and always focus on demonstrating the value they bring in growing their clients’ business."
Renee Wilson is president of the PR Council.
