For many businesses, it's challenging to carry out all of the core marketing tasks in-house. Organizations may lack the expertise, or hiring full-time staff may not be the most cost-effective approach.
One solution is to work with external marketing suppliers to achieve your marketing objectives.
Depending on the size and nature of your business, you might work with marketing agencies, search engine optimization (SEO) consultants, social media marketing experts, content creators, graphic designers, app developers and web designers.
In this article, we'll provide useful tips and strategies to help you improve your vendor management skills and keep your suppliers happy.
What is vendor management?
A vendor, also known as a supplier, is an individual or entity that makes goods or services available. There are many different types of vendors, but in marketing, they tend to operate on a business-to-business (B2B) basis, selling services to another business as part of a mutually beneficial agreement.
Often referred to as service providers, some common types of vendors you may turn to for marketing-related services include:
- Online marketing agencies
- Copywriters or content creators
- Search engine marketing (SEM) or SEO agencies
- Social media marketers
- Advertising agencies
- Graphics designers
- Website or software developers
- Market research organizations
With this in mind, vendor management is the process of managing contracts and relationships with different suppliers. It includes everything from choosing the right vendors and agreeing on the terms of working relationships to assessing performance, keeping costs manageable and ensuring suppliers receive payments on time.
In the past, vendor management primarily focused on contract negotiations and the financial component of working with a partner, such as keeping costs down.
While this is still a critical component of effective vendor management, there's now a much greater emphasis on managing supplier needs, developing and maintaining positive relationships, developing strategic alliances, retaining services, and leveraging relationships to create a competitive advantage.
Vendor management best practices
Here, we'll explore the main stages of a vendor management strategy and give you some useful tips so you can get the most from your marketing suppliers:
Defining your expectations, goals and budget
Before reaching out to marketing suppliers, it's important to know what you're looking for and what you want to achieve. Do you want to increase sales? Are you hoping to build a bigger social media presence? Is boosting your presence on search engine results pages (SERPs) and attracting more website visitors your primary goal?
Having clear goals help you to understand which vendors to consider. For instance, exploring search marketing agencies with proven track records makes sense if you want to boost your search engine rankings.
The goals associated with working with a vendor should be SMART, meaning they should be specific, measurable, achievable, relevant, and time-bound. That means you also need to decide on the key metrics or performance indicators that you'll use to analyze whether or not the marketing supplier's service is living up to your expectations.
Finally, you'll need to establish a budget during this early phase of the vendor management process. Typically, organizations spend approximately 7% to 10% of their entire budget on marketing.
From this amount, it's recommended that 70% be spent on proven strategies, with the remaining marketing budget to be used for experimental campaigns and growth strategies.
Researching vendors or suppliers
During this phase, you need to try to gain a good understanding of what work vendors have done in the past, the kinds of businesses they've worked with, and how successful they've been.
Good marketing agencies, content creators, advertising agencies and other similar vendors will have case studies of previous work and examples of their successes. In most cases, you'll find this information on the company's website.
It could be a red flag if you're struggling to find information on work previously carried out by a vendor you're examining. Even if you find information, it's worth looking for vendor reviews on third-party platforms or asking them directly for additional information.
Alternatively, you could create a request for proposal (RFP) document, which can then be sent to potential suppliers. Doing this encourages suppliers to table a bid for the contract, outlining their proposals.
Hiring your chosen marketing suppliers
After you've narrowed down your options or received proposals from interested marketing service suppliers, you need to go through the process of selecting the best candidate. Work through your shortlist, comparing the different proposals or services on offer. Consider how much the services will cost you, how much experience the vendor has, the specific skills they can offer or their proposed plan of action.
Ultimately, you need to narrow your shortlist down to your preferred choice. From this point, you'll need to work with the vendor to draft an agreement on how they’ll work with you.
This one is the most legally sensitive of all the vendor management best practices outlined in this article. It involves drawing up contracts, agreeing on payment amounts and establishing what happens if either party fails to live up to their end of the bargain. The full scope of the services the vendor is to provide should also be in writing.
Onboarding suppliers and setting expectations
Once you've hired your preferred marketing supplier, you should begin the onboarding process.
Take the time to explain the various aspects of your business and ensure the supplier fully understands your needs. You may need to take them through your current marketing strategy and help them fully understand the current situation.
During this stage, it’s important to be clear what you want them to do. Ask questions like: How much work are you expecting them to do? What is the timescale for the project? How will they report progress to you?
Part of the expectation-setting phase of vendor management is also related to payment schedules. The vendor will want to know when they'll get paid and on what basis that payment will be calculated.
Collaborating and managing your relationships
With expectations set and your chosen marketing supplier on board, you'll need to work together to ensure that the right work gets carried out. You'll also need to take steps to ensure you build relationships based on trust.
Don’t be afraid to give feedback on any of the services you’re receiving and be comfortable collaborating so the work is optimized to suit both parties. As your relationship with your supplier develops, take time to make your expectations clear.
Also, pay attention to communication from the vendor and respond to their needs appropriately.
Throughout your working relationship, it is essential to have a system in place to make sure your vendor gets paid on time. Be sure to flag and resolve issues early - it’ll save time in the long run.
Tracking vendor performance over time
As your working arrangement progresses, tracking KPIs should allow you to develop a clear picture of how well the vendor is meeting your needs. Ask things like: Have you seen improvement in the areas you identified? Is progress toward your goals occurring at a sufficient speed? Is the vendor keeping to deadlines or meeting the terms of their contract?
Besides KPIs, you should also explore issues related to costs.
Are you receiving value for money? Are there any points of friction causing increased costs or missed deadlines? Have you identified any areas of risk, and do you have contingency plans in place if risks develop into serious issues?
If performance isn’t good enough, you need to consider the relationship carefully.
Is this a temporary blip? Have they built up enough goodwill and proven to be a reliable supplier? If this isn’t the case, consider whether they should be replaced with a different vendor.
Evaluating the state of your relationship
When performance indicators start to decline, or if you experience friction in other areas, you may need to think about whether to continue with the arrangement or start looking elsewhere.
Research by Indeed.com explains that one of the best ways to manage vendors is to have regular meetings with them. Meetings allow both parties to align, provide updates, explain their current circumstances, share ideas, address any concerns, and generally stay focused on the tasks at hand.
You can also check to ensure your marketing objectives still align with what the marketing supplier or vendor can offer.
Meetings can be arranged in person or using video call technology. The best option depends on your physical proximity to the vendor and the nature of your working relationship.
If vendor performance doesn’t meet your standards, you may have to terminate the working arrangement. Similarly, there may be instances where working relationships were only intended to be short-term, and you'll need to formally end the agreement when it no longer serves your company's interests. On the other hand, if they're performing exceptionally well, consider extending your supplier agreement.
Perfecting the art of vendor management
High-quality vendor management can be the difference between establishing positive, mutually beneficial working relationships and entering into risky partnerships that fail to meet your expectations. The art of vendor management involves taking the time to work through different stages and collaborating with your chosen supplier so that terms and expectations are clear and understood by all parties.
Many vendor management best practices are based on the simple premise of good communication. This can be aided through CRM software so that all communication can be tracked and referenced. Such tracking is especially important when dealing with multiple marketing suppliers simultaneously.
Click here to learn how Capsule CRM can benefit you and access a 14-day free trial.
