How to fix the relationship between agencies and procurement

The highest order of agency-client relationship is that of the trusted advisor, argues Jim Hubbard of White Door Consulting. A value-based relationship is now vital.

Agencies are creative businesses but their creativity all too often exceeds their business success. This was highlighted in the most recent report on agency performance from Kingston Smith, which showed a decline in operating profit per head among the Top 50 ad agencies. Due in part, said Kingston Smith, to a situation where “many agencies are agreeing to service more work for the same fee for existing clients and heavily discount rate cards for new ones. This behaviour isn’t sustainable in the long term and it’s those agencies that can separate themselves from the price competition that will deliver sustainable profits.”

Of course, improved process, structures, people and technology, all underpinned by a positive culture, are fundamental to achieving this, but a more effective approach to dealing with marketing procurement will also benefit agencies. Working with clients’ procurement professionals needn’t be a negative experience but agencies are too often faced with highly trained people who are much more skilful at negotiating than their agency counterparts.

On one level it’s surprising that agencies, individually or collectively, haven’t done lots of work to address this. That’s why it was so encouraging for us to be asked by ISBA to run its recent ‘The Savings Won’t Save Us’ event, attended by 60 senior marketing procurement professionals (representing well over £2bn of marketing spend) who spent the day debating and developing the body’s ‘Value Beyond Savings’ initiative.

ISBA has recognised that building a value-based relationship between procurement and agencies is vital and has rightly recognised the dangers of excessive downward pressures on agencies at a time when marketers are looking for access to the best talent and creative.

In essence, the benefit of procurement shifting their focus from cost savings to value is that by focusing on driving efficiency and effectiveness, the economy will then follow. On the flipside, when you put economy first, efficiency and effectiveness decrease, for example through the resultant ‘junior-isation’ of agency talent.

The ISBA event confirmed our belief that what’s most in demand from agencies is outstanding work. Yes, some procurement folk are still targeted purely on savings but it’s clear that there is a growing change of emphasis towards value in the procurement camp.

This is no time for complacency from agencies though. They need to adopt new value based approaches and invest in more mutually efficient and effective ways of working together with brands. Building this relationship is worthwhile, especially at a time when so many marketers, and those in marketing procurement, are reviewing their operating models and taking creative work in-house and decoupling production from the creative source.

Building these closer connections with procurement can deliver excellent results – we’ve had great success helping to bring agencies together with their clients to focus on smarter and more effective ways of working in partnership.

And agencies should always recognise that procurement people tend to come from a different angle. They’re likely to be scope-focused and numerate, and their prime objective won’t be getting the meeting over with and moving on to a friendly chat about life outside of work over a glass of something cold. They also tend to be direct and identify objectives with startling clarity, expecting and getting results on each of these.

Better processes, along with training in how to work with procurement, will help to address the issue at a local level but it’s even more complicated when dealing with procurement on a global scale. This explains, in part, why marketers and agencies are turning to companies such as ICP, and the ‘de-coupling 4.0’ proposition from SDL Marketing Solutions, which takes the pressure off and allow clients and agencies to focus on creativity.

The highest order of agency/client relationship is that of the trusted advisor. The client trusts the agency to do what’s best, not only for their business but also for the agency’s. They share information openly and willingly with the agency. They seek the agency’s advice and act on it. Better, value-based relationships with procurement are an important element in progressing to this level, and realising the twin goals of better creative work and improved commercial results for both the agency and the client.