‘Procurement’s time to shine’
Another lockdown week passes by, and the long-term effects of the pandemic remain challenging to predict for the marketing and media industry. The impending world recession appears to suggest we will dive deeper than the recent 2008 financial crisis, or any dot-com bubble in living memory. Recessions can be notoriously difficult to predict. For advertisers, whose second or third most significant cost is marketing/media, extracting more value and building a return will become paramount. With media costs dropping between 35% & 50%, how should organisations behave?
One profession which now needs to shine through is Procurement.
Marketing Procurement teams will be entrusted to mitigate many of the worst financial effects of the downturn. History however shows us that with the right strategy, businesses can increase market share and profitability during recessions. Therefore, a giant spotlight will be placed on procurement to control costs and create new value with suppliers, as the smart businesses navigate a pandemic exit..
Here are five lessons that our team at Fuel have learnt from the recessions of 1991, 2001, 2008. These steps we have outlined will ensure that procurement teams stay ahead during the economic downturn.
1. Have a contingency plan
Have a plan! Don’t wait for the executive board to book in a zoom call with you and ask for savings. We know that even a simple recession contingency plan helps advertisers act faster and act smarter than their competitors. Having a plan, with clear objectives and clear results in place will enable quicker decisions. The economic shock most organisations will face requires procurement teams to have the ability and importantly, a willingness to move fast. These companies are also shown to be more resilient and emerge steeper and faster.
2. Keep the procurement team agile
Devising and executing a strategy and plan requires human resources, coordination and viability if end-to-end procurement processes are lean and quick to enact. Those advertisers who could adopt multiple programs simultaneously, eliminate waste, could focus on addressing the most strategic elements of the plan. We found that working with specialists to remove waste and create efficiencies achieved faster value-enhancing results. Use external support to ensure that the organisation isn’t building the new normal in a vacuum.
3. Renegotiate contracts
Contract negotiation is a crucial strategy for generating cost savings and mitigating risk during a recession. This process isn’t rapid. Also, you may need to source new services from your suppliers, as keeping OpEx low will also be a focus. And those Advertisers who moved fast to build new terms extract long-lasting and beneficial terms quicker. Renegotiate terms with all suppliers, Ad Agency, Media Agency, Shopper Marketing, Tech & Data providers and your auditor.
4. Consolidate vendor base
A large supplier base is a good idea in terms of generating innovation and mitigating risk, but not ideal in a recession when efficiencies should be sought, and contracts are consolidated with single suppliers to create cost savings. Encourage marketing teams to strengthen knowledge of the marketplace and consider new ways of working.
5. Tighten spend scrutiny
Without a doubt, the whole marketing team will be familiar with the higher levels of spend scrutiny. Especially as during a recession expect to see higher scrutiny of PO approval and sign off. Although teams may be cut back and major projects put on hold, there is a silver lining for procurement in a recession. A downturn can provide procurement with the “burning platform” they’ve been waiting for to roll out a fundamental change or transformation. CPOs and their teams are also likely to find their influence in the organisation grow as a result of a downturn and leadership’s renewed focus on the bottom line.
