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Opportunities in Marketing Procurement March 26, 2010

Posted by solutionsbconsultants in 1, Business Improvement, Increase Profitability, Marketing, Procurement.
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Thanks to Robert R. of New York City for his question, “Steve, I am a CFO of a medical supply manufacturer. Our marketing spend has spiraled out of control. What suggestions can you provide to help put this cost center in check?”

Great question, Robert. Marketing spend oftentimes represents a large portion of a company’s indirect spend. Without specific targets or a look at your detailed spend, I am going to provide a generalized list of items that you can focus on.

1) Rank marketing spend by dollars.
2) Focus on top 20% of spend.
3) Use agencies and outside creative ONLY for idea generation and development of concepts whenever possible. Never use them to outsource printing, video production, web-design, etc. unless you want to pay a large 25% or more premium. (Note – even though agency commission might be 10% they will always use the high cost provider (since they make a percentage of the final price).
4) Create an in-house agency to take advantage of agency discounts.
5) Resource top 20% of spend – print, video, web-design, seo/sem, etc. And source out to 7-10 supplies instead of the industry standard of 3 potential supplies. The advantages of engaging multiple suppliers in the quotation phase are based on statistics – you cannot locate innovative, competitive, and quality-oriented suppliers with a small sampling.
6) Require that all completed digital files are supplied to the marketing department including original files, fonts, images, etc. This way your in-house graphics/video person can repurpose graphics and video at no additional charge to your organization. (When I use the words “original files” I mean the original source files (such as a flash .fla file or layered photoshop file) instead of the completed file (flash video .flv or .swf or merged photoshop file). The reason for this is that you can only edit the source file. My experience is that you must require this to be done when you place the original purchase order.
7) Marketing has a tendency to go with who they know and oftentimes they have a personal relationship with many of these suppliers. Sometimes this can be useful but once a supplier knows there is no competition you can guess what happens – price creep (and it never creeps down).
8) In the web-space be careful of trying to reinvent the wheel. Chances are that someone has created that special widget or function that is needed. There are great sources for inexpensive quality code, Search Engine Marketing and Optimization, and other web services. Make sure to be careful when creating the scope of services document so nothing is left to chance and make sure to involve multiple suppliers. Even if you are in a major metropolitan area, you will need to conduct a national search. Research can help you target your sourcing.
9) Take the time to understand and document your company’s marketing strategy. Early involvement by Finance and Procurement can eliminate any rush procurements which is used as a tactic to avoid best practices.
10) Never allow marketing to unilaterally select suppliers and negotiate with suppliers. This is true with all departments, not just marketing so don’t think I am picking on marketing folks in particular.
11) Consolidate suppliers whenever possible to leverage spend.
12) Create a preferred supplier list of suppliers who provide quality service at approved pricing.
13) If you shoot video, this category has huge potential for savings. The economy and technology have produced a wide variety of talented individuals and equipment who can take your (or your agencies) concept to successful completion. Even if you are in a small market, a few phone calls can lead you to a wide variety of suppliers. Hint: Stay away from suppliers who use hardware based Avid suites or non-digital solutions Currently the best bang for the buck are editors who use Apple’s Final Cut Pro Studio.
14) Limit long-term contracts for marketing services – that means not signing any agency contract – business is tight and competitive so you as a buyer are not compelled to limit your options.
15) Develop strategic partnerships with suppliers – concentrate on value-add services, payments terms and other benefits that they can provide.

Yours in Supply Chain,

Steve

Remember what the Aberdeen Group says……….

“For a typical enterprise, it takes an increase
of $5 in sales to equal the impact of
a $1 reduction in procurement costs.”

Solutions is happy to complete a complimentary audit of your firm’s expeditures. Just call or write to get started.

If you have a topic of interest you would like me to discuss in our blog, “in-person”, or if you find a typographical error, just send me a comment or email me directly. I would like to hear from you!

Respectfully,

Steve Gordon
Senior Consultant
Solutions Business Consultants
http://www.costavoidance.org
__________________________________
”Bringing Service, Value, and Efficiency to the Supply Chain”

steve@costavoidance.org
(865) 356-3575
Skype: stevegordskype
Blog: https://innovativeconsultant.wordpress.com/
Linkedin: http://www.linkedin.com/in/stevegordonthecostsavingsguy

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Where to spend your marketing budget? April 14, 2009

Posted by solutionsbconsultants in Business Improvement, Marketing.
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With the new economy, you should have automatically received more bang for your buck from your traditional outbound marketing vendors. If not, then you should call them into the office and begin renegotiation of your current contract/future business. Often times, you may not reduce the total dollar amount but you should receive additional frequency, improved position and have a free promotion or two thrown in as well. (Here is a shameless plug: if you haven’t lowered your cost of goods and overhead, give me a call) That being said, this post is not a tactic to squeeze your existing vendor pool, rather, it is a request for you to look at your marketing spend based on the new economy,  current consumer behavior and the channels available to you.  You may find that it is time to shift part of your spend into newer channels that will garner more return on investment or you might want to just dip your toes into the social internet soup.

Background: From a consumer point of view, marketing is either pushed at them (traditional outbound marketing) or pulled toward them (referred to as permission marketing, Web 2.0 or inbound marketing). Traditional outbound marketing guarantees that every day we are bombarded by emails, popup ads, billboards, radio commercials, television spots, telephone calls, newspaper and magazine ads.

Does this traditional outbound marketing still work?  Not like it used to – consumers are shellshocked by the shear volume of push to buy this product messages – emails are deleted without being read and direct mail pieces hit the trash. Many consumers have abandoned traditional commercial-ridden radio and switched to XM. And who reads a physical newspaper anymore?  Finally, I believe that most consumers give little or no credence to the celebrity spokesperson or radio personality or printed brochure when it comes to chosing a product or service for their family. I could be wrong but at the least the effectiveness of these modalities have weakened considerably.

Example: Let me digress and add a personal example of consumer spend. While not scientifically accurate my experience has to represents a chunk of consumers:

My heat and air unit went out last year. We have no home phone so I couldn’t look in the yellow pages. So, I asked a couple of my neighbors, my dad, the head of facility maintenance at my old employer, and a realtor who they thought the best heat and air company was in our area. I then contacted these companies along with four others selected at random to submit bids for replacing my current unit. Not surprisingly the bids had a $2000 spread (some vendors were more hungry then others) and I ended up buying my unit from the company recommended by the facility maintenance manager ($600 off the low mark)  The key decision factors were that the winning bid was not out of line with competitive bid for units of similar specifications and that I had a recommendation from someone I trust. That means that all of that traditional advertising was wasted on me – Not only did radio, television, cable and newspaper ads failed to sway me and the slick literature and even the brand name had little influence. Sadly enough, I never even checked any of the companies fancy internet sites.

No, I relied on independent research and a referral from someone who used the product and the company and was happy with the service. Statistically, I should of included more companies to bid but just like you my time to spend on heat and air units is constrained. Most importantly (for this post and my decision) I seeked out and found someone whom I trusted to give me a referral.

The future: Now the new “pull” marketing certainly interests me as a consumer. It is more polite, I like the fact these applications ask my permission to join a group – linkedin, facebook, tweeter, etc.  and some of them provide me great content. It allows me to build a relationship in Facebook with people and companies that interest me and makes me feel like I am in the decision-marking driver’s seat. But and this key, there is noone in this social media pool whom I trust to help me make the heat and air decision. Don’t get me wrong, I have made some serious contacts via social media but the newness and remoteness of the relationship makes it near impossible to influence this buying decision (as of today).

Wouldn’t it be great: It would be great to do a search on (my city) heating and air companies and be presented with the local installer blog complete with pricing and  local references near my address. That would give me more of a comfort level. I would also like to see integrated complaints and compliments from third party consumer sites. Yes, sites such as Bizrate exists but isn’t comprehensive and doesn’t provide phone numbers and addresses for me to follow up on.

My point is that social media may be worth spending a little money on – after all, how much is a facebook page or tweet or blog cost to produce. But I would not expect huge results overnight. Why, because the same computer that displays my facebook and linkedin page is constantly trying to sell me into being an instant millionnaire or provide me cheap drugs I don’t need. Scams I don’t need, Relationships I do. But, relationships take time and they must develop along a logical course which means actual human interaction over time to produce a trusting relationship.

How to determine whom to trust is going to be difficult without more face to face (video) interactions and physical interactions among social media participants. The social evolution is going to have to clean up the spamming and profiteering it it expects to seriously influence  consumer and business spend.

Thanks for listening. I welcome your comments.

Steve Gordon is a former Apple Employee and Procurement & Logistics Professional who is now Chief Operating Officer of costavoidance.org. Costavoidance is dedicated to

• Develop strategy and implement goals
• Supply Chain and Cost Efficiency
• Project Management
• Interim Executives
• Process Improvement
• Marketing and Sales

Steve
costavoidance.org

Solutions Business Consultants are specialists in cutting costs and expenses without sacrificing employees™. We take an enlightened look at a company’s spend and create innovative cost savings methodologies which bring money to your bottom line! Many of our services can be enjoyed on a contingency basis – based on our success!