Does marketing procurement need a new remuneration model?

Marketing procurement has come into the spotlight at the ProcureCon Marketing conference in London, with…...

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Marketing procurement has come into the spotlight at the ProcureCon Marketing conference in London, with one expert arguing that the remuneration framework is in need of urgent reform.

The conventional model pays marketing agencies according to the amount of time spent on account rather than according to results and effectiveness. Simon Tilden, Global Category Director Advertising at Diageo, told delegates that a new remuneration model was needed, adding that: “I like the commission model. It’s very simple. The agency will earn good revenue out of content that is used and used.”

Paying agencies by the hour, he maintained, has the perverse effect of encouraging some to “spin it out for as long as possible” to make more money, rather than doing the most efficient job.

Tilden believes that the time has come for an industry group, including academics, to be set up to evaluate marketing procurement and devise a new algorithm for a “results-oriented remuneration policy.” This would allow agencies to create content whose results could be measured, for which they would receive a due reward.

A recent survey was cited during a panel discussion at the conference indicating that 55% of clients were dissatisfied with the existing agency remuneration model. Three quarters were already reviewing their structure, and a similar proportion (74%) reported a preference for agencies to become “true business partners.”

For Tilden, the latter brings distinct advantages: “When you have an agency that’s really embedded, they can get under the skin of where the brand needs to be.”

Mattel’s Director of Global Procurement EMEA, Tigran Avakian, told delegates that an agency’s preoccupation with cost per hour and spreadsheets had backfired. His company ended up being billed for the cost of coffee during a marketing shoot. He said: “We felt they were nickel and diming us. A couple of years later the relationship came to an end.”

Meanwhile, Harbour Collective CEO and founder Paul Hammersley agreed that current remuneration model encourages agencies to put more people on the account, a process that drives up costs but adds little value.

Source: Supply Management

Nick Ford

Nick has over 30 years procurement experience in consulting, outsourcing and line roles within industry with international experience across many sectors and industries and led many procurement programs with blue chip organisations.

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