Beware! Do not mix Procurement and Marketing
Much has been said, written and debated about Procure-o-marketing. My friends in the procurement community have advocated the advantages of introducing procurement concepts in marketing. This group in procurement community has seen marketing spend with skepticism and disdain, as an overhead which needs curtailment. So, all these talks of Procure-o-marketing have come as a “novel concept”. The million dollar question, (and this is not figurative alone…) Is a natural “marriage’ of the two enterprise entities possible? I strongly advocate NO.
Let us try and analyze the circumstances which make a procurement exercise successful. From the supplier’s perspective it is the survival of the fittest in the competitive environment. Cost structure optimization, delivery accuracy and reliability, quality of products and services, regulatory compliance and responsiveness to customer’s needs are quintessence of success. There is no room for “creativity” here!! The surmise from a buyer’s perspective is that all suppliers are equal and each one stands a fair chance. In industries where there are supply constraints, buyers go all out to book capacities in advance to prevent supply choking or exceptional spend on late bookings. Mature buyers would resort to hedge procurement to minimize costs and ensure supplies. They do take a beating sometimes, when price fluctuations break “set norms”, but that is what hedging is all about.
A buyer’s buying behaviour is to look for ways and means to deride the “differentiators” projected by the suppliers and try and buy the products and services as “commodity” products and services. The yearly contract negotiations start with price and end with price. Taking the accounting route the objective of any buyer is to “chop off” the COGS and Inventory, to increase EBDIT and have a positive cash flow in their books. Since the procurement experts find it challenging to squeeze more out of COGS, so they have trained their guns on SG&A.
Let us take the case of marketing. The marketing professional is “glass full of ideas”. Their sole objective is to do something unusual to catch the eye of the person on the street. The five critical issues for success are differentiate, differentiate, differentiate, differentiate and finally differentiate….. Else the result is similar to the remakes of the epic movies, which have not lasted the test of time. Let us take the simple case of billboards spend. The location, the message, the colors, the depiction, the face and the expression on it….. these are more important success factors than simple buying fabric. Pepsi would go all out to have a blue attire for their brand ambassadors, what be the price.
So, if one starts probing into the cost structure of marketing spend and try to cut corners, one would surely find a lot of “scope’. But the fact remains that cost of innovation and creativity is simply….. priceless. Some organizations claim to have excelled in their art of procure-o-marketing. But behind the art lies a scientific classification of what is commodity and what is creativity. These organizations cut radically on commoditized products and services, but when it comes to creativity, they spend in millions to nurture it. That is what brand management is. It would be suicidal for organizations to jump onto the bandwagon of procure-o-marketing armed with scissors, if they have not yet mastered the art of classifying commodity and creativity.