Marketing Procurement is one of the toughest assignments in large corporations. They are tasked with adding value to the business but often the focus for this value creation is in savings costs. This is not in conflict with Marketing. Marketing want to save money and to achieve a greater return on their investments. The challenge rests in how those cost savings are achieved.
The priority of Marketing is in influencing customer behaviour. Their focus is about ensuring that all their investments are as effective as they can be in motivating a positive change in the way that customers connect with the brand. Cost efficiency is less important. Why? Well if the activity they invested in, doesn’t influence customer choice in any way, then whether they saved some money or not is immaterial.
“The reality if that the role of Marketing is to influence the customer and if they don’t achieve this, it doesn’t matter how much cost Procurement has saved.”
This is the challenge. Marketing is focused on creativity, breakthrough, innovation. They do not want to be constrained or limited in their ability to develop something that provides a competitive edge. However, Procurement if they are too heavily focused on reducing prices can find themselves seeking to consolidate investments in order to obtain leverage. This is where conflict with Marketing can arise.
“Any investment is only valuable if it is of value to your customer, so you must always evaluate success through their eyes.”
So how can Procurement still achieve its cost savings objectives whilst at the same time enhancing the opportunity for innovation? It is very simply a question of changing the approach you take to achieve your goals. It is a question of perspective.
Here are five key ways to deliver both costs savings and innovation
1.Place supply chain management over procurement
“Total Cost of Ownership” (TCO) is a financial concept that originated back in the 80’s. In very simple terms it was developed to help buyers determine all the costs associated with a supply chain, both direct and indirect. In Marketing there are highly complex supply chains, with a high proportion of people and time investment. By just looking at material cost, a significant percentage of overall investment can be ignored. Innovation originates from people so make your application of people resource more efficient and you can unlock the door to many more concepts and ideas.
2.Focus on waste removal rather than margin reduction
Too often it is easy to focus just on the final price to be negotiated. The problem, is that if you only look at price in isolation of everything else, what you are really doing is forcing your suppliers to take margin reduction. If on the other hand you focus on the entirety of the supply chain with the objective of removing waste (where no value is created), it becomes a win : win for both you and the supplier. This helps promote joint innovation.
3.Evaluate success based on customer impact and not internal deliverables
Marketing efficiency has no value to an organisation if the activity itself hasn’t had a positive impact on customer behaviour. This is why Procurement MUST assess the benefit they have brought to the role by focusing on customer outcomes. This switch has a very positive impact on innovation as influencing customer choice is about creating the most compelling and immersive experience possible. Success can only then be achieved when creativity takes precedence over commoditisation.
4.Embrace continuous improvement over static contracts
Marketing is subject to continuous evolution and marketing teams need to be agile and able to adapt immediately to changes in the marketplace. The best way to ensure that Marketing can successfully respond is to embed a continuous improvement program into every supplier relationship. This will result in a constant stream of new innovative ideas being presented and provides a far more dynamic and valuable use of external supplier resources.
5.Value and reward innovation rather than commoditising it
Innovation provides a means for differentiation. It is highly valuable and needs to be recognised as such. Suppliers will provide their most innovative ideas to clients who recognise and reward the additional benefit that they bring. If innovation is marginalised and materials and services are commoditised then very simply suppliers will take their creativity and innovation elsewhere.
“If you don’t recognise and reward innovation, over time all the best ideas will go to your competitors.”
It is a mindset. It is being able to see the business through the eyes of your customer. It is a simple and easy switch in focus but it can have far reaching implications on the ability of Marketing Procurement to deliver real value back to the organisation.
If you would like more information on how LG&P and LeanPie can transform your shopper experience supply chain, please feel free to contact David at firstname.lastname@example.org