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Why the ‘basket of goods’ approach is flawed for marketing services

There is no dispute that the use of a “basket of goods” approach is well suited to sourcing standardised products where the pricing can be imported into the purchasing software to ensure the savings are realised.

However, it’s surprising that many companies continue to use the traditional “basket of goods” method for the marketing services category when the majority of spend is tied up in bespoke and highly variant products and services.

Why, and this may shock you.

Firstly, it’s most always built on a ‘representative’ sample of products which do not reflect the actual products sourced.  Suppliers know this so they’ll price the basket to win the contract, even at a loss to ensure success because they know it rarely, if ever, represents the company’s actual spend.

Secondly, given the time it takes to complete a basket of goods process, (typically over 6 months from start to implementation), the average project cost can be well over $80k, a high price to pay before any savings are realised.

And finally, while procurement is focused on top line price, marketing will favour suppliers they believe they can work with best, and while neither party is wrong they’re motivated differently making the implementation of a basket priced model even harder to adopt.

So, what’s the alternative?

It’s very simple, technology.

Marketing procurement technology is specifically built to enable buyers and suppliers to more easily collaborate in real time over projects, while ensuring a contestable and transparent workflow is adopted by all buyers.

Marketing procurement applications such as sourceit have simplified the process for buyers and suppliers, reducing effort and costs while building standardized processes.

The outcome is two-fold:

  1. buyers are able to continue to work with preferred vendors, collaborate and retain their business IP
  2. procurement is satisfied as all bids are contested across multiple vendors ensuring best price options are being delivered for every product.

Finally, whilst workflow is critical to productivity, having direct access to data is the key to building a sustainable solution that enables a business to create a continuous improvement and savings model. Technology enables companies to build a repository of detailed product specifications, supplier responses, which products/services are not being sourced at the lowest cost and whether buyers are contesting bids or not.

The technology you select is key, whether you are choosing an out-source buying solution or an in-source solution where your buyers will have a direct relationship with suppliers. Invest time in reviewing the various software options that are available and don’t just settle for a demo, ask if you can access a sandbox site so you can actually test the software out for yourself.

Easily implemented technology solutions such as sourceit allow marketing and procurement to quickly realise the savings and productivity benefits that are available to them.

To find out more, or arrange a demo use the link HERE to book a meeting or email us at hello@sourceithq.com