Procurement’s Secret to Driving Profits


What is the secret to a Fortune 500 brand’s success? Brands fail not because they lose market share, but because they lose competitive differentiation and profits. The conventional definition of a brand’s value in the provider-driven market used to be the price that the brand could command over a generic competitor. In today’s consumer-driven market, the power of the brand seems to have become separated from its origins: the ability to create and sustain a long-term flow of profit by making people want to buy the product or service, and be willing to pay a higher price for it.

This shift has caused sales and marketing teams to become fixated on driving sales without regard for profitability. We are no longer living in the provider-driven market of decades past, where the company held the power and the information, and could use that to sway the consumer toward purchasing. I can’t think of one industry today that is not impacted by the consumer-driven market that exists. Consumers now hold the power with more access to information, they are the ones driving the purchasing decision, and the providers are now at the mercy of the decisions they make.

Consumers’ attitudes toward a company’s brand have three important implications that impact their bottom line: willingness to buy, perceptions that the price is worth paying, and future growth potential. Millward Brown’s 2017 BrandZ Top 100 Global Brands ranking and report analyzed the results from more than 3 million interviews to evaluate how consumers determined which brands are most valuable to them. In Brown’s ranking, brands that scored high on both power and potential returned a profit margin 31% higher than brands that scored low on both measures. Additionally, the top 100 global brands increased in value by 8 percent from 2016 and are now worth $3.64 trillion. The technology giants Google, Apple, Microsoft, Amazon and Facebook took the top five spots in ranking and combined are worth 25% of the total value of all 100 brands ranked.

So, what is the secret to a Fortune 500 brand’s success? If we know that that value of the company is directly impacted by consumer perceptions of the brand and the price they are willing to pay for the brand’s product or service, how can companies have any effect on their profit margins when the purchasing power lies in the hands of the consumer?

The answer – the power of sales, marketing and procurement.

We know that is it the job of the sales department to generate new and returning customers, and that marketing is responsible for developing the brand and delivering that brand to potential customers in the company’s target market. These two departments directly contribute to a consumer’s perception of the brand and their willingness to buy from that brand. The consumer-driven market has caused every industry to become hypercompetitive, and most brands can only control the competition through the price they charge to the consumer. This is why sales and marketing teams are so narrowly focused on driving sales, because they now have such limited ability to control profits, and must focus on meeting the consumers’ expectations of providing a high value product or service at a competitive price.

This is where procurement comes in to impact future potential growth and the bottom line profit margin. In most Fortune 500 companies, procurement is responsible for acquiring all of the goods, services and work that is vital to an organization. That means everything from office supplies to the parts that the company’s products are made from to janitorial services are being sourced, vetted and verified by procurement. This is where the journey begins to increasing profit margins in a consumer-driven market.

The power of procurement is in its ability to source anything from anywhere at any/best price. If the procurement team understands the core of the company’s brand, and the value that brand delivers to its consumers, then they have the capability to source the products and services that meet the consumers’ expectations of the brand, and to source them in the most cost-effective way possible. That’s why procurement is the secret element in the equation of driving profits. Marketers work to ensure that their brand is seen as meaningfully different from its competition, sales works to turn prospects into loyal customers, and procurement finds the services and supplies needed to meet customer expectations and drive profit to the bottom line. 

Heather Young, Senior Marketing Manager, SIG

Heather Young is the Senior Marketing Manager with SIG. She has more than 10 years of experience in business and marketing. Prior to joining SIG's marketing team, Heather was leading digital marketing for outsourcing, recruiting and workforce management at Allegis Global Solutions. Before joining Allegis Global Solutions, Heather managed the marketing department at a consulting company in Washington, D.C. Heather has a passion for philanthropy and is actively involved with non-profit organizations locally and nationally. She was the spokesperson of a two-year nationwide campaign to increase awareness of missing persons and teach safety education. Heather has a BS in Corporate Communication from the University of Baltimore.