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Minimising the Commoditising Effect of Marketing Procurement

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I recently gave this presentation to the Annual Leadership Forum of AMSRO held in Coolum, Queensland. The feedback from the audience of almost 50 research company business owners led me to think there is perhaps many professionals in the marketing category that are suffering from the application of what could be considered traditional procurement practices. This presentation is based on my 12 years consulting experience and 15 years advertising agency experience. It highlights strategies for dealing with procurement to move beyond the focus of price to encourage the evaluation of value. Of course there is no guaranteed, foolproof strategy here, but there are many interesting approaches and practical ideas for possibly increasing your success rate or minimising the waste of time of filling out endless RFPs, RFQs, RFTs and RFIs.

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Minimising the Commoditising Effect of Marketing Procurement

  1. 1. How to Minimise the Commoditising Effectsof Marketing Procurement TrinityP3 March 2012 CONFIDENTIAL marketing management consultants
  2. 2. Show me the money •  Procurement is almost invariably not the end user of the process. They are acting as a service provider to internal stakeholders.•  Procurement almost never have their own budget but must convince the budget holder that they bring value to the process.•  Procurement are therefore focused on justifying the value they provide in the form of cost reduction and risk mitigation. marketing management consultants
  3. 3. Hands up who wants to complete the RFP? •  The Request for process (RFX) is designed to create a level playing field to allow comparison across supplier proposals.•  Almost invariably in marketing this relies on breaking down and filtering proposals into measurable units.•  The outcome is that proposals are reduced to the lowest common denominator being cost and sometimes a measure of quantity. marketing management consultants
  4. 4. Avoiding the traps •  The RFP, RFT, RFI, RFX is a request to participate in a business process.•  You need to assess the circumstances and business opportunities before committing to participate.•  Like a “date” you should not appear “too easy” or be “too difficult”.•  But you can and should request some basic information so you can better assess if this is a request you want to accept. marketing management consultants
  5. 5. Work out the odds of winning before you play •  The first step is to assess the RISK, the REWARDS and the potential RETURN •  This is a numbers game so ask questions such as: How many companies are participating? How long will the process take? And what is the value of the contract on offer and over what period? marketing management consultants
  6. 6. If it is too hard then it is not worth doing •  Next you need to know what will be involved if you participate in the process.•  Then you need to consider: •  How many steps are planned for the process? •  How much time will you need to commit to participate in the process? •  How much will it potentially cost to participate? marketing management consultants
  7. 7. Know who is requesting you to take part •  As procurement is rarely the end user, there is usually a stakeholder group within the organisation what will be making the decision.•  It is important to know who they are and how engaged and involved they are in the process.•  Do some research into the organisation, their culture, structure, personnel and requirements. marketing management consultants
  8. 8. Pitching is like a box of chocolates •  Forrest Gump was right. You never know what you are in for unless you have done the homework.•  Use LinkedIn, talk to other suppliers, use your networks, online search and research to identify alignment and connections.•  Look for what you need to enhance and what to minimise – should you be nutty, a hard centre, a soft centre or a chewy caramel? marketing management consultants
  9. 9. Make sure they are comparing like with like •  Ask about the evaluation criteria. What attributes, features, or services do they value? Are any more important than the others? And how will these be evaluated?•  Realistically assess if the criteria fits the profile of your business, your offering and your expertise. Think about the competitive set to see if the criteria could be skewed to another companies advantage. marketing management consultants
  10. 10. Set the criteria in your favour •  Just because the evaluation criteria does not suit your company or offering does not mean you should withdraw.•  If there are any glaring omissions in the criteria helpfully inquire if they were considered, especially if they are strengths of your offering.•  Provide an industry or category “best practice” list of evaluation criteria, especially with those attributes that play to your strengths. marketing management consultants
  11. 11. Seen one you have seen them all •  Much of marketing is a people based business, but in procurement people are resources which are measured at FTEs (Full Time Equivalents).•  People are a cost to business in the procurement world and in determining the cost they can determine the minimum they need to pay.•  You need to present people as value creators and not a cost of business. Define key staff for the value they create. marketing management consultants
  12. 12. If price is everything you don’t have anything •  Many times price is left to the last stage, which is good for procurement but not for the supplier. •  Don’t negotiate on price alone but include variables such as quality, mix and level of resourcing, payments terms and contract conditions, increased scope of work, etc. •  If it comes down to price, put it in a context other than cost, such as overall investment, planned ROI etc. marketing management consultants
  13. 13. Value is what someone is willing to pay •  Ultimately the buyer sets the price so you need to be realistic about the price of your offering.•  Know which components of your offering are a commodity, as these will be the target of the price negotiation.•  Identify the components of your offering which are unique or different and develop strategies to establish value here.•  Isolate those components that drive value and develop pricing strategies based on returns or performance. marketing management consultants
  14. 14. So you are above the benchmark •  Benchmarking is a useful technique in establishing value in relation to a pre- determined level.•  But the benchmarks must be relevant. Rather than question the benchmark level, ensure the benchmarks being used are relevant.•  If you are over benchmark it means you offer “premium value”.•  If you are under benchmark it means you offer “discounted value”. marketing management consultants
  15. 15. Make it harder to say NO •  RFX documents often have very specific formats for providing information and cost proposals which must be completed to be compliant.•  But you can go beyond this and provide options that make your proposal more attractive.•  These options can include various resourcing options, pricing options such as volume discounts, performance options etc. marketing management consultants
  16. 16. The devil is in the detail •  As early as possible you should get an opportunity to review the proposed contract to ensure it is acceptable.•  Specifically check IP and copyright provisions, liability, insurance, payments terms, terminations etc.•  Be willing to give and take, and focus on the 6 – 8 deal breaking clauses in the contract.•  Flag and suggest acceptable alternative positions to the ones proposed. marketing management consultants
  17. 17. Don’t make promises you cant keep •  In competitive situations it can be easy to go beyond your acceptable position.•  Make sure you never make promises or agree to term that you cannot keep. You can re-negotiate but it can damage the new relationship.•  Do not accept terms or conditions that you will regret later because they are damaging to your business.•  In the negotiation it is important to have a “walk away” position on those issues most important to you. marketing management consultants
  18. 18. You can’t buy relationships •  The most important, but often unmeasured component of marketing procurement is the relationship.•  Insist on a meeting with the end user of your service as early as possible in the process.•  If the relationship chemistry is good you have a good chance of winning the business.•  If not, no amount of discounting will win the business. marketing management consultants
  19. 19. Sometimes you should swim away Everyone likes to win new business, but remember it is a business decision to participate. Few people like filling out endless RFPs, RFQs and RFIs so before you say YES find out if you should say NO. If procurement do not your take your requests seriously, why should you take theirs seriously? Ultimately swimming away from a bad situation will always have longer term benefits for your business. marketing management consultants
  20. 20. Thank you •  There is no guaranteed winning formula, Darren Woolley but hopefully this has provided some thoughts on ways of increasing your chances.•  By being more selective in what tenders @trinityp3 you participate in can certainly increase your win / lose ratio. TrinityP3.StrategicMarketingConsultants•  Ultimately the best way to add business is not through a tender process, but if the dazzaP3 tender process is well run and fairly managed it can be the sweetest win of all. marketing management consultants
  21. 21. For further information contact TrinityP3 Pty Ltd Sydney +612 8399 0922 Melbourne +613 9682 6800 Hong Kong +852 3478 3982 Singapore +65 6631 2861 marketing management consultants