The CPG Marketing + Procurement Dilemma
For Consumer Packaged Goods (CPG) companies, Marketing is a mission-critical function and a major barometer for overall brand health. The same reason we know the names Nike, Budweiser and Kleenex is the reason why Marketing is king within CPG. On the shelves, on TV and on the Internet, it’s the core function that connects products with customers.
Marketing is fast-paced and ever-changing. To function, it requires a significant amount of services and materials to support core brand activities — including media, event, point-of-sale and packaging. In many CPG businesses, Procurement takes on the role of sourcing for these needs.
The challenge is the Marketing / Procurement partnership isn’t working. The relationship can even be contentious. Here’s why:
- Not delivering value | Rarely do you find a CPG company where Procurement consistently engages, empowers and drives significant value to their Marketing business partners. Procurement is seen as a tactical function versus a strategic partner. Too often, Procurement is focused on meeting savings, compliance and other financial metrics without considering the broader business impacts.
- Not listening | Procurement typically doesn’t fully understand Marketing requirements and hasn’t invested enough time with Marketing stakeholders to comprehend their needs. While Procurement attempts to position itself as a functional colleague, too many Marketing stakeholders feel Procurement doesn’t understand what they need and how their requirements support the broader product strategy.
- Too tactical | Procurement often takes a tactical approach and waits for formalized service agreements or Statements of Work to drop on their side of the fence before taking action. This tactical relationship is where value begins to erode and the relationship starts to falter.
You don’t want to be seen as transactional and as getting in the way of business being done – Fortune 100 Chief Procurement Officer
There’s a better way
The stakes are high. CPG businesses typically spend between 10% – 13% of their total revenue on Marketing activities — with a shifting mix of channels and technologies. Marketers require help to make the right choices about what to buy, how to buy and with whom they should partner.
These decisions have always considered cost, but lately, marketers are more focused on maximizing impact. While marketers perform the complex, evolving, and essential work for CPG companies, it’s imperative to have an engaged, focused Procurement group to support them.
Moving away from pure cost analysis allows Procurement to align with Marketing, and together, they can drive towards strategic goals while measuring performance along the way.
It’s time to talk
A conversation is the first step. Procurement needs to educate Marketing on the support it can provide and – in turn – must listen to what Marketing requires to function better. Often the highest area of corporate spend, Marketing needs a high-performing Procurement team that can give fact-based analysis while maintaining sight of the strategic objectives. Whether it be managing suppliers, handling poor agency performance or analyzing data to deliver better ROI, Procurement has an important role to play.
We need procurement to play a bigger role to help us do our job better – Fortune 500 Chief Marketing Officer
For example, here are three specific areas to increase Procurement impact:
- Go beyond cost – Develop and measure detailed performance metrics against Marketing’s stated goals. Find out what is important to your stakeholders — impressions, reach, cost of acquisition, market share?
- Drive innovation – Engage early and often with Marketing while priorities are still being formed. By being proactive, Procurement will inherently be in a better position to understand Marketing needs and source capable and innovative solution partners.
- Communicate and demonstrate value – Share insights and opportunities based upon your unique marketplace perspective. Ask for feedback from Marketing stakeholders and fine-tune the approach to better meet their needs. Being a service provider to Marketing isn’t easy so make sure the work is valuable.
- Spend the money last – Enable Marketing to build solution-oriented requirements that are supplier agnostic and match critical objectives. Once a clear and well-defined need is established, Procurement can help find strong partners to do the work.
Only when Procurement focuses on providing exceptional support and value creation can the imbalanced dynamic between Marketing and Procurement at CPG companies be solved. Procurement must be an enablement engine and be nimble enough to match Marketing step-for-step in a complex, fast-moving space.
This means building trust and delivering value — making sure Marketing retains its crown as king of CPG.
Tags: Strategic Sourcing, Collaboration, Sourcing and Procurement, Buying as a Service, CPG