Industry bosses: Procurement is here to stay

By By David Blight | 27 July 2012

As discussions around agency discounting continue to raise heated debate, leaders including Ten’s James Warburton and Kraft’s Sophie Madden have argued procurement departments aren’t going anywhere, despite the industry’s disdain for them.

Earlier in the year, Slingshot Media Ventures boss Simon Rutherford lamented a culture of steep discounting on remuneration deals as agencies fight to win over clients’ procurement divisions. He argued this could bring the industry to its knees by damaging agencies’ value propositions.|

The ‘price war’ topic has generated significant buzz within the industry, and at a recent event hosted by the Media Federation of Australia’s young talent organisation NGen, some of the industry’s heavyweights waded into the debate.

UM chief executive Mat Baxter was particularly critical of many procurement departments, suggesting many look only for short-term value. “Businesses like Telstra may have the ability to afford a procurement department which specialises in marketing,” he said.

“But it does get very difficult when you have a procurement department that one day is literally doing a deal to buy paper clips and the next day is in media negotiations. It can be difficult to get a well educated procurement person who really knows what they are assessing.

“Less sophisticated procurement people will go every time for something they can pin a decision against today, versus something that might benefit them in the future.”

However, while most on the client and media side spoke of the need for value, they stressed price and procurement are here to stay, and increasingly so.

Ten chief executive James Warburton said: “It’s absolutely about the poacher and gamekeeper, the cheapest price possible. If a brand is totally happy with its agency, it will only move business because of a global repositioning or because someone got a better price. This may not be true for every business, but it is for most pieces of business, especially if the bottomfeeders are there.”

Kraft Foods Australia head of marketing services Sophie Madden said procurement is not going away but argued it still needs to mature in the local market.

“Five years ago they weren’t really part of the industry, and now they are," she said. "When I worked overseas procurement was on that spectrum where they were marketing partners, but I don’t think it has gotten to that point in Australia yet,” she said.

“You don’t want to compromise to get something super cheap, but from a marketer’s point of view media is one of the biggest costs, so procurement has to be part of that.”

This article first appeared in the 27 July 2012 print edition of AdNews.

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