Warc, 1 May 2014
BRUSSELS: Fewer marketers are leading the negotiation of contracts with agencies as the participation of the procurement function within major businesses has almost doubled over the past decade, according to a new study.
The World Federation of Advertisers surveyed 43 of its members, which include many of the world's largest marketers, for its Global Agency Remuneration Trends report and found that in just 6% of cases was the marketing team solely responsible for negotiating contracts.
At the other end of the scale, procurement teams alone carried out the process in 11% of cases.
For around half (51%) the procurement function now led the way, with support from marketing and finance – this was an eight point increase on a similar survey conducted in 2011. Conversely, the proportion of negotiations led by marketing and supported by procurement and finance stood at 20%, six points down on the 2011 measure.
For the rest, 6% said it was sometimes all of these and a similar proportion said there was no formal system in place.
Steve Lightfoot, communications procurement manager at the WFA, was unconcerned at this development, referring to contract negotiation as "the back office stuff of marketing".
He told Marketing Week that "marketing is about building brands and finding creative solutions to business challenges, not finding the right remuneration method to pay an agency".
Regarding remuneration, the report observed an increase in advertisers adding performance-based elements to their contracts – 11% compared to 7% in 2011. Many more (37%) were planning to go down this route.
In addition, 36% said they wanted to explore value-based compensation, while 66% were keen to link agency income more closely to their own performance.
Lightfoot thought this reflected the growing role of procurement. "This is about rewarding an agency for doing a job well, not penny pinching or trying to screw the agency out of extra cash," he said.
Data sourced from WFA, Marketing Week; additional content by Warc staff