Procurement is a task that marketers rarely find fun, yet all realize that it needs to be done. Given the strain that many marketing budgets are under, skillful procurement processes--supply management, demand management, and process management--can actually net an extra 5%+ of current marketing budgets. There are important opportunities for closer collaboration between marketing and procurement groups.

1. Marketers, Make Procurement
Your Friend
October 22, 2013

2. The big picture
Global Marketing
Expenditures
account for one-trillion
dollars annually.
2
Trillion

3. How to spend $1 Trillion?
- 42 million new cars
- 3.6 million homes in CA
- 4,000 celebrity divorces
- 2,000 space shuttle trips
- 1 bail-out of the US economy
2

4. 15 - 20%
of marketing spend
can be unlocked.
That’s up to $200B!
4

5. Now is the time!
Uncertainty and pressure
Increased
pressure for
growth with less
Traditional
vehicles
less efficient
5
Uncertainty
around
digital and social
Partner networks
complex and
costly

6. Dollars sans sense
%
of CEOs report:
”“Marketers are always
asking for more money,
but can rarely explain
how much incremental
business this money will
generate.”
”
6
Source: Fournaise, Forbes, July 2011

7. Show me the money…
%
of CMOs
“expect ROI to be
the dominant
measure of
marketing by 2016”
”
7
Source: Fournaise, Forbes, July 2011

8. The growth of digital…
%
of TV spend
“expect digital to
reach 85% of TV
spend from 60%
today”
”
8
Source: eMarketer; McKinsey analysis

9. Impact across industries
Telecom
Pharma
Retail
Travel/hospitality
Consumer packaged
goods
Insurance
Banking
9
9

10. What do we mean
by procurement
principles?
10
Image by Frédéric Bisson
10

11. Rethinking the fundamentals
Incorporating procurement
principles into marketing planning
and management
1
2
Manage demand
3
11
Know the supply base
Improve processes
11

12. Know your supply base
Today…
Run RFP processes
Consolidate vendors
Compare rates across
partners
Negotiate contracts with
optimal terms
Emerging Practices
Explore new partner options,
e.g. venture funds, scouts
Selective use of e-auctions
for some agency services
Increased use of trading desks
Decoupling
„Clean sheet‟ models to improve
transparency
12

13. Understand the true costs
Illustrative savings with clean sheeting approach
$ Millions
-14%
20
19
22
17
6
5
Current Fees
Clean Sheeting
Profit Margin
13
Source: McKinsey Analysis
Indirect
Direct
Transparency brings
greater efficiency
without jeopardizing
quality

14. Manage demand
Today…
Emerging Practices
Greater mix of shorter TV units
(i.e. 15‟s) per idea
Drive to alternative media plans
that achieve same goals
Managing production
locations and # of spots
Rethink how many TV
executions make sense
Rethink paper stock and unique
shapes/sizes of direct mail
Manage digital granularly at a
keyword level for search and
at a package level for display
Manage sponsorships; identify
ones with low ROI
14
Image by Cameron Russell

15. Managing digital granularly
Search can be over-credited for
orders, if credit allocated to last
touchpoint
10
In addition:
20-30% of keywords and 1020% of display packages
found to have negative
contribution margins
Poor coordination between
agencies managing organic
search and paid search
•
No use of technologies like
real-time bidding
60
30
40
30
Last touch
Direct
15
•
•
30
Source: McKinsey Analysis
Multi-touch
Display
Search

16. Understanding sponsorship ROI
ROI for every dollar spend
2.50
Often find:
•
•
0.70
0.30
16
2nd
quartile
Source: McKinsey Analysis
Some negative ROI properties
serving broader brand purpose
•
Event revenues impacting ROI
of sponsorships
9X
difference
1.10
Top
quartile
Long tail of sponsorships with
negative ROI
3rd
quartile
Bottom
quartile

17. Improve process
Today…
Create thoughtful, quality briefs.
Align stakeholders and deliver
Streamline advertising
development processes
Adhere to a strict agency
performance management process
17
Emerging Practices
Enabling journalistic approach
to content
Established social media and
content development process
Look internally

18. The „cost‟ of process inefficiency
Agency fees paid for similar work
$ Million
19%
Agency cited:
•
•
18
Source: McKinsey Analysis
Excessive meetings with no
discipline on attendance
•
Company 2
Multiple changes in direction
post-first meetings
•
Company 1
Poor / non-existent briefing
Ever-changing schedules and
postponed meetings

19. Agency of the future
19
Image by D.H. Parks
19

21. Shift in managing ecosystem
Digital
agency
Creative
agency
CMS provider
Company
Marketing
Analytics &
targeting
Customer
Service
Ad
networks
Procurement
Mobile
agency
Data
providers
21
Media
agency
Insights
Sales
Portals
and
platforms
v Partner
v Platform/Channel
Ecommerce
platforms
Search
agency
Ecosystem of
ideas, content
& engagement

22. Future of content creation
SOURCE: Executive Interviews, November-December 2012; Boston Media & Advertising Daily, "Agency of the Year:
Digitas," Dec 7, 2012; Washington Post Style “Oreo‟s Tweeted Ad was SuperBowl‟s big winner” Feb 4, 2013
22

23. I worry about the
cooperation among our
people. The problem with
our people is that the
better they are, the less
cooperative they are.
~ Sir Martin Sorrell, CEO of WPP Group
23 SOURCE: HBR, April, 2013

25. Staying connected
Kushan Surana, Senior Engagement
Manager, McKinsey & Company
Kushan_Surana@mckinsey.com
Jeff Jacobs, Principal, McKinsey & Company
Jeff_Jacobs@mckinsey.com
@McK_CMSOForum
http://www.slideshare.net/McK_CMSOForum
25