Here's why the procurement guy is called 'The Reaper Man' of the ad world

Ever seen a customer bargaining to buy a designer dress, getting into the specifics like cost of fabric, beads, thread and artist's labour, to determine the right price? Our friends in advertising and media would say this, in a nutshell, is what characterises a procurement head aka a supply chain manager or executive leech.
Industry old-timers recall a golden age when advertising and media budgets were untouched. But as companies grew in size and recession became a fact of life, marketing spends were subject to a greater degree of scrutiny. At this point, the procurement guy, tasked with saving the company large chunks of cash on raw materials and other such expenses, was tasked with putting a leash on unwarranted marketing costs.

As procurement grows stronger, agencies claim it is increasingly difficult to win pitches on pure merit, if it isn't also coupled with the lowest bid on the account. Budgets for print, film, activation, and sundry marketing initiatives are getting slashed simply because the supply manager wants everything to be done at the lowest cost. Creativity is getting butchered at the hands of procurement.

At the same time, you hear of instances like MediaCom Australia pocketing discounts and price-offs instead of passing them on to key clients that instantly make marketers wary. Not to forget the commission model makes agencies wont to inflate marketer's budget because that's how they make more money. In that case, the procurement head has to intervene to safeguard the client's interest.

So, is procurement a necessary evil or just plain evil, as many creative and media folk insist it is? Read on the debate where Agencies represent Group 'Evil' and Procurement speaks for 'Necessary Evil' and form your own opinions:

Evil: We, the agency, present our pitch-work to the CMO. He shortlists us. Right after, we find ourselves in the Procurement Torture Chambers where agencies are pitted against each other. Prices are negotiated till we settle for an abysmal figure. Media agencies in the fray remember a telco review that happened three years ago. Shortlisted agencies were held in locked rooms without food and water till 1am.

Necessary Evil: How about learning to say 'No'? If you quote 10 as a price for something, say it with conviction and stick to it. When agencies don't dispute haggling , our trust antennas get active. If you came down to 8, what are the chances you wouldn't have settled for 6? And if that's the case, you're not being transparent to us about the cost of the process. (Retort by Ajay Kakar, CMO - financial services, Aditya Birla Group on behalf of the supply chain fraternity)

Evil: Good move, pinning it down on us. We submit to your bargaining because these are desperate times. We are accountable for numbers. Seven Cannes Lions don't mean anything to the network unless the account books are in the black. (Taken on by Pratap Bose, president, Ad Club & former COO, DDB Mudra)

The margins are shrinking and you're making us bleed for fee. You got us here.

Necessary Evil: No buddy, you got us here. You use big client's clout to win other clients. Make false promises of getting the lowest rates, then rob Peter to pay Paul. Your creative counterparts are worse. They would narrate scripts that open in London when all you have to show is a gravel street. Shoot locations are decided basis which country the creative hasn't visited yet. So much for collecting passport stamps.

Evil: Like procurement guys know what film-making is all about. If they did, one of them wouldn't have suggested their CMO to replace Kareena Kapoor with Karisma Kapoor as brand ambassador. His rationale — The latter is also a celebrity, a Kapoor and will come at half the price.

Necessary Evil: We might have missed a listicle on 'Which Celeb Suits Your Brand' but we do know a thing or two about filmmaking. There have been instances where agencies have quoted Rs 18 lakh just to get the necessary permissions to shoot a film and we have brought that number down to Rs 3 lakh. (#TrueStory says Geetanjali Bhattacharji, CEO, marketing services at Spatial Access, that specialises in media audits)

Evil: Before you start gloating in the glory of your argument, know that your community has MNC giants who ask for a fee to be pitched. One of the largest media planning networks has a global policy of not pitching to this health products major. And that's not all. A famous media review in the telecom category had terms like paying five times the difference between the marketer's target and the number actually achieved. Chargeable as a half yearly penalty. If that wasn't enough, the indigenous marketer wanted the audited rates of the agency's existing clientelé and demanded lowest rates. Not to forget — lowest rates on print and television for titles and channels that aren't a part of Top 5 in the agency's list. Only the winning agency knew which terms made it to the final contract but aren't you all too proud of yourself now?

Necessary Evil: We don't speak for every bad apple in the basket and we admit there are a few. The outrageous terms you mentioned are sometimes a part of negotiation tactics. Some of you are desperate to get business and quote extremely low rates. To safeguard our interests, we put the penalty clause to catch the foul players.

Evil: Say what you will, you buy rubber, chips, glass, metal, sugar and then you think you're qualified to procure media? You treat us like material vendors. Some of the senior media professionals have been addressed as vendors in your meetings.

Necessary Evil: It's very convenient for your ilk to knock us out by these accusations. Yes, we come from a strong performance metrics background. We don't get carried away by personalities, their designations, moustaches or Filmfare Awards. What bugs you is that you're no longer free from the claws of checks and balances. You have to cut the gloss and talk about the value of my cost. That makes you uncomfortable.

Evil: By performance metrics you mean all you care about is cutting the cost, right? Because that's all you do like it were your KRA.

Necessary Evil: Our remuneration follows a fixed metric, just for your information. It's dependant on the company's profitability. If advertising brings more revenue, it'll benefit us as well. Adds Neeraj Chawan, demand manager for ATL procurement at Diageo: If the quality goes down because of reduced cost, I'll be the one answerable for it. So, we don't mindlessly cut costs. If there are constraints, we try to squeeze in the media plan within the budget."

Also, thought you'd like to know — The Advertising to Sales ratio for the FMCG sector is a meagre 10 per cent. Most global conglomerates outsource media planning but their in-house units control the buying end because there's Rs 1,200 crore worth of monies at stake. Trust is hard to come by. So, many media agencies have been reduced to doing the grunt work — sending ROs etc.

Evil: Why don't you just admit that the root of all issues is that you don't get how advertising works?

Necessary Evil: Then pray tell us how. Explain why we have to put money in a 12 midnight to 6am slot when the only people watching TV at that time are jetlagged NRIs with high tolerance for home shopping anchors. Give us a break-up of your Rs 4.5 crore film budget down to the detail of which camera and how many of them.

Tell us why we have to spend X on English channels and Y on vernaculars. Have a good reason for why a YouTube campaign will cost X to reach masses but 5X to reach a niche target group. We agree we don't understand it all. So, we ask questions. Many of us are trying to invest in people to understand and explore your discipline. But don't badmouth us because we ask fundamental questions. Give us logical answers and make life easier for both of us.

Finding Middle Ground

- Procurement, have two performance metrics for agencies. List out all the points on which they can be evaluated in the short term and those for the long term.

- Agency, make two lists before you head out for a meeting. Of things you could give in to, and those you won't. This is what Joseph George, CEO of Lowe Lintas + partners India, advises his business heads. "It's a successful meeting when both the parties walk off the table thinking they've won," he adds.

- Procurement, be present at the time of the pitch. Don't get agencies to surrender to your terms before you've seen the work they present. It'll give you a better idea of what they're bringing to the table. One Detroit based auto major follows this practice for pitches across regions.

- Agency, remember you are knowledge merchants. Says Mallikarjun Das, CEO - India at Starcom MediaVest Group: "You'll be respected only if you know more than the client. Be more planning driven in your approach. If you present a sound rationale for your choice of media mix, it's possible to have a fair discussion with them."

- CMO, don't hide behind your supply head when it comes to monetary conversations. And if you want to protect your relationship, tell your procurement guy you trust the agency. Convey to your agency — 'I've made the qualitative decision, now you better justify the quantitative aspect to the cost master.'

- Agency, stop talking about cost. Start talking about the value it'll bring. That's key in establishing harmony between the two parties, says Saurabh Verma, CEO of Leo Burnett India. Their agency network has inhouse procurement heads who deal with the supply chain end on the client's side. That helps in cases where clients don't hire procurement guys who are familiar with the advertising business.

- Procurement, when in doubt, seek the council of your marketer, says Debabrata Mukherjee, VP - marketing and commercial, Coca-Cola India and South West Asia. Don't be the process-robot. And remember that given your role, you'll always be in the eye of the storm.