Purchase Order

I was recently attending an industry function where a group of agency people were complaining endlessly about the purchasing departments of their major clients.

It’s a well documented shift in the marketing industry that in many cases, brand directors alone are not responsible for determining who they should partner with or how the agency should be compensated. For well over a decade, purchasing departments, marketing services teams, and supply management experts have been more and more involved in screening, selecting, evaluating, and compensating agencies. To hear the agencies’ take on this shift you would have thought that our industry had been taken over by masked terrorists. The criticism runs the gamut from insensitivity to incompetence on the part of purchasing groups. How can the person who is responsible for ordering the pencils also be in charge of requisitioning creative work? Regardless of whether or not a pencil could be highly involved in both situations.

It seems somewhat misguided to me to complain and moan about the fact that our clients are changing the ground rules in how they work with us. First of all, our compensation models in the agency world didn’t totally make sense in the past and could have bordered on unfair. Essentially, we lived in an era for decades that when a clients budgets went up, our fees went up, even if our work effort or outputs didn’t. Let’s admit it. That’s a pretty strange model and a pretty good one for the agencies. It also, unfortunately, created a misaligned approach to negotiating. Because the discussions focused around the percentage. It also provided a very easy and obvious target for any buyer worth their salt to provide a quick cost savings win for their company.

But that’s too simplistic of an approach to be sustainable for the long term, and we are now seeing an evolution of the role of the Purchasing Group interaction with agencies. It has progressed far beyond cost. It has less to do with the absolute reduction of expense and more focus on value creation. There is still a tremendous desire for transparency and accountability, it’s not something we should be offended by. Let’s face it, everyone knows an agency or two who has taken advantage of clients with unnecessarily steep fees, markups, padding, and outsized profits.

In my opinion, the easiest path is to be prepared.

• Be prepared to be asked for budget detail much earlier in the process than you are used to. The brand team may nod understandingly when you say $$$ has been set aside for signage or Snapchat filters. The purchasing team will want to know how much signage. Or what is a filter?

• Be prepared to have your math checked. Let’s face it, we are an agency not an actuary. But our math still needs to make sense. During the quotation period you would be shocked at how many times what seems defensible, isn’t to someone who has never built a program before. So prepare yourself by looking at your own budget upside down and ask yourself the basic questions. Like why spend three dollars shipping a two-dollar lighting rig? Why not just buy a new one in town X? Maybe the purchasing team doesn’t realize there are none to be bought in Town X or for 100 miles around!

• Be prepared to have your math checked. You won’t be the first agency who submitted a budget with an error.

• Be prepared for ridiculous questions. I’m sure you know full well how many t-shirts your field team needs for a tour and why. So don’t be offended when you’re asked to justify it. Preempt the question with detail in the budget.

• Be prepared to educate. Most purchasing people just want to know. They aren’t really doubting you. They just want to be informed. They are in the business of due diligence. So help them due their duty. (I meant that misuse of the word due. Get it?).

If you’re prepared, open, and willing to learn, you will be pleasantly surprised at how purchasing teams are actually on your proverbial side. They aren’t out to get you, unless you deserve to be got. Plus, we shouldn’t assume they know nothing about our business, just because they come from a department that doesn’t sound glamorous or exciting. In fact, they often have former marketers embedded in their teams or as advisors.

Another serious consideration is to think of Purchasing as a gateway to more business for you. Often they alone have enterprise in wide knowledge of budgets and there may be a department you never imagined needing your services, who needs your services. A great relationship with purchasing could turn into a great referral for you.

The bottom line to me is simple. If you’re a great agency, shouldn’t you welcome scrutiny and assessment? Doesn’t it provide for you a unique level of security and longevity with your client. Built by the client themselves. I recently had a lead on an RFP with a minor client, that we got shut out from because Purchasing advised Marketing they wanted their vetted suppliers involved. That’s great news for the incumbents and even harder on those of us on the outside.

There is no reason to moan and complain. We are all better off building our plans on how to get in the inside, and stay there. Because I can tell you there are no sweeter words in this day and age of agency life than “We got the P.O.!”