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The Evolution of Procurement In Event Marketing

Introduction

The infiltration of procurement teams into marketing departments continues, with purchasing peeps gaining more control over expenditures and supplier relationships.

It was bound to happen at some point. Corporations spent the last few years making their products more efficient by wringing every penny out of manufacturing processes and logistics structures. Fulfillment came next, followed by operations and warehousing. "We always let the marketing piece go unchecked," says Ken Heinz, global event marketing procurement manager at Hewlett-Packard. "But procurement departments are now taking closer looks at those services that previously went unchecked."

The Evolution Continues

Are they ever. At a growing number of companies, procurement teams—often prompted by recommendations from large accounting firms—are taking over the financial end of virtually every marketing matter involving a dollar. RFPs are often designed, fielded, and initially reviewed by procurement folks before the marketers even get a look at the first contenders. Vendors soliciting business from prospective clients are now directed to purchasing, which is demanding suppliers become certified before they're allowed into the family. And ROI seems to be collected almost as much for procurement teams as the marketing departments.

Procurement crews are also diving down and taking hold of specific marketing disciplines. H-P, for example, has transitioned from having procurement teams overseeing all marketing to having specific purchasing reps in change of specific branding disciplines.

Not that there's anything wrong with it. In fact, across company after company, procurement people are slowly dissolving some of the initial apprehension from marketers with programs that legitimately have gotten brands more for less amid consolidated vendor pools. "We've had some pretty big wins around here," says Heinz. "We're proving our worth."

Brand managers, who initially had their feathers ruffled by procurement officers watching over their shoulders, are beginning to see some benefits. "As a marketer, I'm now delighted," says Larry Loper, strategic events manager with Cisco Systems. "The procurement people have forced me to think through what I'm asking for before I ask for it. If I don't, they'll ask for it anyway."

Benefits

For marketers, there are benefits. One, procurement can absorb responsibilities from shrinking marketing departments. Two, the finance crew offers a layer of protection between a multi-million-dollar purchase and a marketer's direct accountability over it. Three, vendor-certification programs ensure a company is doing business with a viable supplier, gives agencies and vendors a true picture of what the brand can truly spend, and makes cutting checks easier for both sides (in theory). "Vendors now know what we'll really spend," says Loper. "And they get a guarantee that money is waiting for them once the event is completed. Suppliers who figure this out will find there is a bigger market for them because of these changes."

Loper's brethren are beginning to agree with him, saying procurement is helping them become smarter marketers and allowing them to focus more on marketing and less on numbers. "Procurement recognizes the economies of scale achieved by smarter event spends," says Jody Weber, event marketing manager with Bank of America. "But many marketers are embracing procurement because they're just going to take over anyway—and a unified front is better than no front."

Not All Smiles

Of course, it's not all smiles. Marketers used to running their own shows have been given a substantial wake-up call.

After all, most procurement people don't have brand-management degrees, which throws a wrench into things when they become part of strategic marketing decisions. "Success depends on who you ask," says Heinz. "We know these efforts do step on toes. Some people are bitter, some aren't."
Most agencies are bitter, few aren't. After years of building relationships with clients, there are new sheriffs to contend with. "When procurement leads the charge, it can be backwards," says Michael Westcott, vp-marketing at Auburn Hills, MI-based The George P. Johnson Co. "In an industry driven by big ideas, apples-to-apples is fine, but ideas should be valued first."

For agencies, there are more hoops to jump through than ever. Even brands with agency-of-record relationships will issue an RFP simply to check on its own vendor's rates. Such "procurement exercises" are becoming common, with agencies left wondering which RFIs are legit and which are simply fishing trips.

"Agencies have to know that this isn't a trend. It is really happening," says Weber. "They have to start gearing their pitches toward procurement officers."

"Agencies should understand that I'm not a marketer, I'm a procurement person. I'm their worst nightmare," says Heinz. "We've seen different prices given to different divisions of the company on the same service from the same supplier. That shows us that marketers need help leveraging buying power, and many of them don't know it."

As a result, the traditional RFP structure has all but been retired and replaced with reverse auctions and electronic RFIs. Procurement teams say it's the only way to get to true value. Agencies, however, smell trouble. "This is going to kill marketing as we know it," says one event agency ceo, who spoke with EM on the basis of anonymity. "Big ideas will be replaced by a Wal-Mart pricing structure, and event campaigns will cease to be as effective as they once were."

Take-Aways

Drama aside, there is some truth hidden in that statement. If RFPs focus more on dollars and cents and less on creativity and execution history, "it may lead to problems," says Weber.

It's a debate without a hands-down winner. Marketers do need to be spending smarter, and procurement officer are the only ones who can achieve real economies of scale. But agencies have spent years converting themselves into strategic partners and are now at risk of being turned back into simple suppliers. Shops should be forced to be competitive, but procurement may not be the right legislator of creative ideas. "Designing a mutually beneficial relationship requires procurement," says Westcott. "But it needs to be used properly, not as a way to ratchet down rates."

"There is an impact on the relationship between marketer and agency, but the fact is that we can no longer execute until the work order is approved, and suppliers have to get used to it—or start working with smaller clients," says Loper.

Brand marketers expect the system to jell over time into a structure that does work for everybody.

"We're not looking to lowball suppliers, but there are important things that need to happen for them to win the business," clarifies Heinz. "We're not looking for the best price; we're looking for the best value."