Promotional Leveraging The Power of Aggregated Buying The Procurement Process Terry Goldston, Executive Director, New Business Development Nowadays, many shareholder updates from major pharmaceutical companies focus on cost discipline and savings — often in the same sentence as projected sales growth. Savvy brand managers, saddled with shrinking marketing budgets, recognize that finding new and more creative ways to capture the next prescription is the Holy Grail. Traditional marketing tactics are being scrutinized and marketing budgets are being challenged by management as pressures mount to justify marketing spends and prove return-on-investment in a marketplace where solid metrics are hard to establish. The solution to the “savings” challenge sweeping the industry is leveraging existing resources creatively. Promotional leveraging is an emerging procurement strategy designed to provide sustainable, year-on-year, volume-driven savings without the client having to change current marketing or procurement processes. Cost-driven procurement models have squeezed the margins for promotional materials so tightly, for so many years, that it has become increasingly difficult to meet aggressive procurement targets using traditional paradigms. And, some tactics, such as reverse auctions, have harmed client/supplier relationships. Future, sustainable procurement methods for generating savings won’t come from price negotiations or reverse auctions, but rather from client/distributor/supplier collaboration and the power of aggregated buying. Who Benefits? Client Companies By hiring a promotional leveraging broker to purchase their marketing materials through their contracted preferred providers, companies benefit from significant savings. Brokers can aggregate the total spend of several large companies, leverage that spend in the supply base, and achieve incremental, volume-driven savings beyond what any single client can achieve alone at their current volume level. Just as importantly, these savings can be accomplished without disruption to the client company’s marketing or procurement processes or their relationship with their contracted preferred supplier providers. Preferred Suppliers Preferred suppliers receive the significant financial benefits of the brokerage services and the power of a large buying consortium, potentially without any fees. And, in one unique buying model, the broker’s services are funded through a “shared savings” philosophy where the client and the broker share incremental savings to fund the aggregated buying process. Additional benefits may include better cash flow and risk management, as well as opportunities to increase their margins by leveraging their total volume through the broker and receiving a share of the savings for their non-brokered clients. Manufacturers/Suppliers Manufacturers and suppliers whose margins repeatedly have been squeezed by savings initiatives have focused on cost as a sole negotiation strategy. Through a collaborative promotional leveraging process, a forward-thinking broker can work with client companies, their preferred suppliers, and the manufacturers of promotional items and services to aggregate spend, maximize savings, and leverage innovation within the supply base. A strategic approach to procurement will lead to the most cost-effective and strategic solutions to marketing budget challenges. The Bottom Line Savings generated from promotional leveraging can be reinvested in the brands to drive market-share growth or taken directly to the bottom-line. This winning prescription creates a good news story for the brand, the company and for shareholders. The solution to the “savings” challenge sweeping the industry is leveraging existing resources creatively. Compas Inc. Compas Inc., Pennsauken, N.J., an innovator in media and promotion buying, is the largest corporate buyer of healthcare media and the only media buying service specializing in all categories of healthcare media. For more information, visit compasonline.com. March 2007 VIEW on Advertising

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