We featured the proposed Conservative policy on advertising agencies that are involved in ’sexualising children’ last week.  I said then that EU procurement regulations would probably mean that ‘banning’ such firms may well be impossible under procurement regulations.

While many of us may sympathise with the issues the Conservatives are trying to address, and may feel that this is a typical example of ’stupid EU rules’,  I will (unusually) stick up for the principles the EU are following here. The Commission wants to make public sector contracts as open as possible to all firms from across the EU.  They therefore do not allow governments to impose what might be seen as arbitrary or national constraints on who can bid; the EU are concerned that such restrictions are often a way of favouring the home country’s firms.  So the reasons for excluding bidders are very tightly defined, and I don’t believe the UK government could just add “any firms that sexualise children” to the list of exclusions.

On the subject of excluding firms, the GUIDE TO THE COMMUNITY RULES ON PUBLIC PROCUREMENT OF SERVICES (great bedtime reading…) says

“Thus a service provider may be excluded if he: …

… has been guilty of grave professional misconduct proven by any means which the contracting authorities can justify;”

So I take this to mean that the UK would have to show that firms who promote this sort of advertising were guilty of ‘grave professional misconduct’.  I suspect the lawyers would have fun with that.    And, outside the legal issues, simply from a personal point of view, I might (if I had the power) add all sorts of companies to the list of firms that could be excluded from government contracts. For instance:

• Firms that engage in bribery anywhere in the world
• Consulting firms that put millions into sponsoring sportsmen who turn out to be immoral, cheating hypocrites
• IT firms who mislead buyers about the real capability of their products
• Equipment leasing firms who prey on and rip off uninformed and naive buyers in schools and other public bodies

Ban ‘em all, I say.  But….if I continued through everything that bugs me, and invite you to add to that list, we will quite quickly exclude pretty much everyone who supplies government.

So I will be amazed if this policy flies – worthy though the intent may be.  It will probably be legally impossible; and even if there is away round this, defining exactly when an advertising firm crosses the line and gets ‘banned’ will be so subjective that challenge would be almost inevitable.

There has been a lot of comment recently around procurement / purchasing involvement in Marketing Services spend and how organisations ensure they get value form their investment in this area.  This is not new of course – in 1980, I was a Mars Confectionery graduate trainee (in the Operational Research team), researching advertising effectiveness.  I moved into Purchasing a couple of years later and was somewhat involved as we started getting to grips with marketing purchasing.

Anyway, Spend Matters has had a series of (as usual) insightful articles about the subject.
Various marketing folk have also been getting excited about the impact procurement is having on their margins.  They accuse us of not understanding their business, being overly focused on cost, and not understanding their true genius / need for vintage champagne and honey-coated virgins (of both sexes) in order to stimulate their creative juices.  Here’s a recent quote from Supply Management magazine:

“Meanwhile, speaking at another event – the Association of National Advertisers conference last week – Ad Age editor Jonah Bloom said Purchasing’s increasing influence on marketing spend and “obsession” with securing return on investment cannot be ignored.”

And when you get into the detail of his speech, the top 100 advertising agencies, in the heat of the biggest economic downturn of our generation, have seen their margins drop from 12.2% to 10.5% (as reported by Procurement Leaders Blog). So…an obsession about return on investment because margins are almost down to 10%?  Whatever next?  Cancelling the winged chariots on which the advertising people fly to work?  What world do these people live in?

Now, to be fair to Mr Bloom, he has written an excellent rebuttal of the Procurement Leaders piece (see ‘comments’ on the Procurement Leaders blog page linked to above) and has been supportive of procurement involvement in marketing spend.  His biggest beef is with procurement people who have no experience of marketing, and firms which are driving down price with little consideration of value and service.    Which is fair enough.  So…accepting that procurement professionals have every right to provide input to this spend area, as long as their organisations want them to, let’s not have closed minds as to why we might be partly responsible for this outburst of hostility.  How can the purchasing profession make sure we are doing the right things?

The fact is that too many procurement people do approach complex categories like this with an attitude of arrogance, fear or naivety.  This makes them act too aggressively or defensively, neither of which are appropriate.  People who believe their ‘usual’ procurement processes will work fine in this category.  People who don’t feel it is necessary – or who don’t have the skills – to really engage with a complex market.  People who don’t listen to what their colleagues – or their suppliers – are telling them, and measure their success by simplistic ‘savings’ measures.

So don’t be one of those people…here are three things, just for a start, that procurement people can do to be successful in this spend area (and indeed in other specialist spend categories).

1. Make sure you really understand the category; research the market. Who are the key players? What are their strategies?  How do they manage their supply chains? What does the P&L for an agency (and different types of agency) look like?  How do they measure their performance?
2. Understand what your internal stakeholders want from the category.  How do they perceive value? And even more importantly, how will they measure it and know it has been delivered? What information do you have (or do you need) to support this?  (And don’t believe the marketing person who says measuring marketing effectiveness is impossible – Mars were doing it 50 years ago).
3. 10 years ago I was a CPO trying to get us a role in marketing procurement.  The most powerful thing my excellent category manager ever said to the Marketing Director was this; “you can choose the suppliers”.   But the deal is …procurement will help you to define a fair and competitive process, set the parameters for evaluating suppliers, and draft the contract.  But marketing – as long as you work within that framework – you get to choose.  If this supplier really can offer better work and therefore more demonstrable value, then we will pay them more.  (And yes, ability to form a good working relationship can be an evaluation criterion within our supplier assessment process).

When supply-side people see that procurement folk understand their business, understand value, and know how to work with their own internal marketing teams…then we have a deal, and no more apoplectic agency guys getting irate with purchasing!