Why the agency pitch is no longer good corporate governance
Too often we hear an advertiser goes to market at the end of a three-year contract to fulfil good corporate governance. Often this is mandated in the organisation as good procurement practice. But here we outline why, when the agency relationship is healthy and performing well, tendering is a waste of time resulting in a poor outcome for advertisers. Do you agree? Discuss.
I believe the mandate to go to market at the end of each engagement is a flawed methodology. Such strategy is also often underpinned by a mission given to Procurement to achieve $XX savings yoy. Hence the requirement to tender that requirement again.
Instead of cost savings, we should look for improving % managed spend, and to increase efficiency, synergy between internals and externals as well as governance.
IT (software and systems) and marketing (creatives) are two categories where, during tenders, I'd recommend withholding the commercials and evaluate on the services first. These two are force multipliers; when rightly sourced and fully implemented, their results can greatly outweigh the spend.
Instead of re tendering, I'd suggest getting into a longer term gain sharing agreements, agreeing on incentive clauses and/or floor and ceiling spend clauses if possible. And if the organisation is wondering if they are getting the best quote/costings, perhaps consider setting up a panel of vendors. A panel setup gives the vendor/s continuity (50% of pie over 6-10years is better than losing all the pie after 3 years) while ensuring competitive tension, gives the internals a choice somewhat, and gives Finance that P2P channel for governance.
If you are serious about procurement you will be in the process of bringing the cat spend in house sorry can go into more detai nut have set up my own business www.corporatespec.com but join me on linked in if you wish https://www.linkedin.com/in/edward-murphy-1b2397a9/ best regards Edward Murphy Director 07743621221