Q&A: Building Trust Between Marketing and Procurement
IJAM welcomes guest blogger Ken Beaulieu, Senior Director of Marketing and Communications at the Association of National Advertisers. In the following post, Ken recounts his interview with Matt Jauchius, Executive VP and Chief Marketing Officer of Nationwide Insurance.
When Matt Jauchius was named executive vice president and chief marketing officer of Nationwide Insurance in 2010, the mistrust between marketing and procurement was palpable. The marketing team believed procurement didn’t understand the purchasing of marketing and working with ad agencies; procurement was suspicious of what marketing purchased and the potential to measure success. “Because each side didn’t speak the same language, they became frustrated,” Jauchius recalls.
Jauchius, a featured speaker at the 2014 ANA Advertising Financial Management Conference, May 4-7, in Naples, Fla., explains how he helped to increase the levels of influence, trust, and credibility between marketing and procurement, why it’s important for both parties to work harmoniously, how he judges marketing performance, and more.
Q. Tell me about your relationship with chief procurement officer, Andrew D. Walker. How did you gain his confidence in marketing?
A. I have a wonderfully collegial relationship with Andrew. I meet with him at least once a month. Having procurement in my background has certainly been beneficial. To improve the marketing/procurement relationship, Andrew and I aligned on two important issues: talent and process. The marketing and procurement teams partnered to hire someone from outside Nationwide who had specific experience managing marketing procurement as a purchasing professional. By working together, procurement got “their guy” to work on spend and marketing got “their guy” who understood the professional purchasing of marketing services. The second piece, the procurement process, is not something most marketers are familiar with, and that can cause some anxiety. We had procurement walk marketing through that process to make both sides feel more comfortable when negotiating with an ad agency. It has served us well.
Q. What are the secrets to maintaining a non-contentious, two-way relationship with procurement?
A. Too often, marketing and procurement will only talk when there’s a “live situation,” such as an agency fee negotiation. Marketing is worried about procurement upsetting the agency and ruining the value of what they get; procurement, feeling pressured to show cost savings, is worried about marketing spending the company’s money irresponsibly. My pragmatic advice is to get the two groups together before any live situation to talk about each other’s goals, how each group is evaluated, and what they’re trying to do for the company. Marketing wants to get wonderful creative work, and they’re willing to pay a fair price for it. Procurement, on the other hand, wants to safeguard the company’s expenses and make sure they’re getting proper value for every dollar. If both sides are talking to each other, they will better understand how they can help each other achieve their goals.
It’s also critical that both marketing and procurement view their company’s agencies as “strategic partners,” not vendors. If procurement is overly focused on piece price or dollars per hour and they take an antagonistic view of agencies, then marketing’s concerns will be justified and you won’t get the agency’s best work. If marketing views an agency as a vendor and is cavalier with scope, highly volatile, and makes ridiculous requests, the agency’s going to charge you through the nose. That’s where marketing’s not being responsible. If both marketing and procurement view an agency as a strategic partner and try to normalize the scope, normalize the workflow, reduce the volatility, and help an agency with their operations, the agency will reciprocate with more rational fees and appropriate talent assigned to the work.
Q. What are the main benefits of a marketing/procurement partnership?
A. Cost savings and scope clarity are the main benefits. No matter the size of a company or agency, if you install a rigorous process that includes gaining clarity on scope, your agency will begrudgingly admit that it helps their operations. We recently consolidated our media work. IPG Media Brands now handles all our digital and traditional media buying and planning. By doing this and being very diligent on the scope of work, we were able to save money and create a stable environment with the agency. Our procurement people were very comfortable consolidating spend with one supplier because it fit with what they understand in terms of getting scaled economies, and marketing was comfortable because they saw how you could get skilled economies.
Q. How do you judge marketing performance and use measurement to create value for the organization?
A. For marketing performance in general, we look at a combination of standard metrics and custom metrics. Standard metrics include unaided brand awareness, brand consideration, brand linkage, and brand recall. These metrics are highly correlated with our ability to generate demand — for example, calls placed to our agents’ offices or to our call center to buy auto or home insurance, as well as requests for quotes on our Internet quote system. Custom metrics are usually related to specific equities we want our brand to be known for. For example, you’ll hear, “We put members first, because we don’t have shareholders” in every Nationwide Insurance TV spot. So we test for “members first” as a core equity driver of our brand health. That equity has been shown to help drive demand (i.e., calls, quotes, clicks on the Internet). This combination of metrics helps me know, relative to the media budgetary spend, if I’m generating demand from customers that view our brand as being for someone like them.
Now, concerning the procurement role, I ask for an apples-to-apples analysis, using detailed hourly scope comparisons from one year to the next, of what the agency cost was to help us generate the creative, media, and other promotional content that drives the marketing metrics I mentioned. The marketing metrics help me quantify the quality of the work performed, and the media spend helps me quantify the cost of getting the message out, but it’s the scope equivalent procurement analysis of my agency fees that helps me quantify the cost of actually creating the promotional work itself (i.e., the creative and content). The goal is to increase the marketing metrics to drive increasing demand for our brand’s products and services, match the media spend to the business needs, and balance the need for quality work at a fair cost from my agency partners.