‘There’s a revolution coming’ says Nathan Hodges; ‘agencies need to take control of the procurement process’
Agencies need to take control of the “rigour” and the “process” to procurement when pitching, Nathan Hodges told a room of independent agencies.
Speaking at yesterday’s SAGE conference in Sydney, TrinityP3 general manager Nathan Hodges defended procurement’s role in the pitch process.
Nathan Hodges: Take control of the procurement process
“Procurement brings a rigour, and a logic and a system and a process to agency-client relationships and negotiations that is just not there if its left to the marketers and the agencies,” he said.
“That could mean you could lose some money but it could also mean you’ll get paid for what you do. There’s swings and roundabouts there.”
Hodges said agencies need to take better control of conversations led by procurement and prove to them that they are more than just a cost.
“As an agency if you’re in a conversation and it is being led by procurement, it is a cost conversation – you’re a cost, you’re not an investment. You’re a cost, and as an agency you need to get out of that conversation,” he said.
“You need to be demonstrating the value you can bring as a result of the investment made in you. Procurement people aren’t stupid, they understand that, too. In the end, it’s about them making a better deal for that business; that’s all they’re there to do.
“As long as you understand that, if you can put the evidence that you can generate value and you’re bringing something extra and if you can put that into your remuneration proposals as well, and can say we’ll be paid by 30% or 50% PBR or entirely be paid by results, you’ll get procurement’s ears to prick up.”
Hodges said if clients are pitching “just to get a better deal” the question is “how do you break out of a commoditised, procurement, price-led conversation?”
“That’s quite hard to do if you’re a multi-national holding company with a lot of real estate and a lot of overheads and you need the revenue to feed that. It’s a lot easier for the people in this room who are not so incumbent of that. I push it back on you and say ‘how can you do that?’
“Because that’s what you do for a living, break your clients business out a commoditised, price-led situation. How many times do you say to your clients ‘it’s not about price, it’s about value for your business’?
“We’re constantly doing that ourselves to our clients. You’ve got to do it to your own business as well. Work out what is unique or distinct or salient about your business, what can add value to your client’s business and then jump up and down on that nerve-ending and that becomes a non-commoditised, not price-led conversation.
“You want to be chased after. People want what they can’t have. They don’t want people coming to them saying ‘I need your business, can you please give it to me and I’ll give you 20% less?'”
Hodges continued to push his point by saying independent agencies need to take control of the process.
“There’s a rigour and a process and a logic there that you need to take control of. I see so many times agencies, as soon as procurement walks in, they lie on their backs and put their legs in the air and say ‘do what you like – tickle my tummy, take all my money, it doesn’t matter, I just want the business’,” he said.
“That’s the difference between chasing revenue and chasing profit. As independents you can chase profit, you don’t have to chase revenue. If you’re held by a global holding company then you’ve got revenue targets.
“That global holding-company model has got its days numbered because the whole conversation has become commoditised. That’s the calm before the storm. There’s a revolution coming and independent agencies are absolutely in the driver’s seat.”
John Turner, marketing practice director at Infosys Portland, said: “Procurement does play an active role” and encouraged incumbent agencies to improve their relationships with procurement.
“Procurement people are people, too. You’ve got to get to a relationship level with procurement, particularly if you’re the incumbent, because they do have a role and it’s identifying what the particular role is as dependent upon the organisation and the marketing function, procurement may play a passive role or a more active role,” he said.
“There’s people in procurement that might one day be buying widgets and the next day be involved in a marketing conversation and the whole ‘idea economy’ they don’t really get.
“One of the things I recommend is actually getting to know the procurement people and helping them understand what your agency brings to the party.”
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Easy to say for a pitch consultant who wins either way, regardless of who wins the contract. He’s still going to pocket his nice little consultant cheque. In a pitch-off, there are going to be agencies that show value through innovation and the ability to influence client businesses, and there are going to be agencies who show value through a price point. In experience, its the latter that are winning. As soon as that starts changing, you may see a greater degree of agencies selling themselves as such.
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Lots of dubly speak here. Straight up – the trick with procurement is to ensure you can tangibly demonstrate value – compared to other suppliers and other prospective agencies. It’s that simple. Yes and do get to know them. Most of them wish to see you succeed.
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The procurement people make a percentage of the money they ‘save’ the client. That’s the reality of how they make their money.
To put it bluntly, they are financially rewarded depending on how much they screw the agency.
To the client it looks like they are saving the client money (on paper) and then when the projects start coming in and the reality of the costs are seen the client still ends up paying the full price in addition to paying the procurer.
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