It wasn’t that long ago when agencies encountered procurement executives during contract negotiations, and rarely beyond that. But procurement executives’ roles are expanding, and they’re more visible than they’ve ever been. You might be seeing them at more industry events, but you’re also seeing them in more meetings every step of the way. And that’s because the needs of marketers have evolved. AI is upending the industry, performance metrics are critical to success, and technology stacks are ever-changing. As marketing departments respond to these market changes, procurement executives’ scopes are evolving in parallel.
On the agency side of the equation, the business is under pressure to prove value, and the expectations for the quality and effectiveness of the work are only going up. Shops these days have an opportunity to work with procurement as a strategic partner, one that seeks to help marketing drive impact and one that can help agencies show that value and effectiveness.
Here are a few ways I’m seeing the agency-procurement relationship evolving, and how agencies can better work with an increasingly crucial client-side role.
Embrace value-based pricing.
Procurement leaders are increasingly in favor of moving away from billable hours and are keen to structure fees based on outcomes. The time-and-materials fee model is not going to be viable much longer, and despite widespread industry conversation, agencies have not adapted. It’s time.
Value-based pricing can mean different things depending on the client and the work, but agencies should prioritize these new models, whether that’s a fixed fee plus performance bonuses or pricing based on the value of each deliverable. When it comes to pricing by deliverable, it’s important to remember that each deliverable has a different level of impact. And in a world where AI is commoditizing some deliverables, there are still plenty that require human ingenuity and complex thinking. Those should be priced higher because they create more value in the end, while assets created with a heavy helping of AI can be a flat fee (oftentimes these are downstream production deliverables).
Charging hourly rates is outmoded; procurement is ready for next-gen pricing models that align with impact, creativity and technology-powered value, and value-based pricing is how we get there.
Be transparent about the details.
In the past, agencies sometimes didn’t talk a lot about the tools they used or go deep on their proprietary processes, mainly because clients cared more about what was produced in the end. But with the next wave of innovation coming from AI, and the proliferation of tools that use it, there’s a greater need for transparency with procurement executives. They want to know how you plan to use AI to propel shared ambition while managing risk.
This will ultimately play into your value-based pricing strategy. So when you’re discussing your use of AI, whether that’s for concepting or versioning hundreds or thousands of assets or some other kind of automation, procurement can see exactly what goes into your workflow. Transparency around your process and the tools you’re using will strengthen the relationship and enable you to charge a premium for your higher-value and more strategic deliverables, even if you’re making less on the lower-value ones.
Enable procurement to redefine its partnership with marketing.
Many procurement executives are looking to build stronger relationships with their marketing departments and agencies because it gives everyone a more comprehensive sense of the work, where agencies stand and where there is an opportunity to work more cohesively across scopes. In the past, procurement was included mainly in downstream executional work related to contracts and budgets. But in the future, they have the opportunity to be more involved in higher-level annual marketing planning and road map development.
In an effort to get a more strategic seat at the marketing table, some procurement executives are working toward taking on stakeholder-management roles, where they coordinate across all budgets, scopes, agencies and internal stakeholders. This can lead to their inclusion in more upstream strategic initiatives managed by the marketing organization.
And agencies can help them succeed in that. Agencies can help procurement executives strengthen relationships with colleagues by bringing procurement into the agency’s work early on, partnering with procurement and marketing to define growth, metrics and value at an engagement level.
At a more executional level, agencies can help procurement get in the weeds to define the needs of reporting, familiarize them with existing dashboards and provide client-side analysts access to data. They can also proactively keep procurement up to speed on project milestones and share case studies so procurement can then illustrate the value of the investment to their organization.
Ultimately, procurement executives are trusted partners, and building a stronger partnership with them is the key to unlocking more budget for bigger projects. As their role evolves further, agencies have the opportunity to better understand what procurement needs to be successful and the ability to help them achieve that success.
Feature image credit: getty
By Michelle Douglas
Find Michelle Douglas on LinkedIn. Visit Michelle’s website.
