The Oval Office or the press office

In last month’s blog we met William for the first time. He is a category manager for a global organisation and is responsible for a wide range of spend including marketing. Over the years, the number of marketing agencies has proliferated as new people have joined the marketing team and used the agencies they have worked with before. Kate, a team leader who regularly creates purchase requisitions for marketing service, explains to William that there are too many preferred suppliers in the marketing category to make a choice. William realises that he has missed the opportunity to influence Kate’s behaviour and people like her.

To rectify the situation William plans to issue a request for a proposal (RFP) for marketing services. He attends the marketing team meeting and asks them to suggest the scope of an RFP which would deliver the largest saving. The marketing team suggest branding. William is aware of the danger of claimed data (note 1) and so analyses the spend data for the last 12 months. He sees that there is only one brand agency, there were 4 purchase orders and each one was high value. There are, however, 20 direct marketing agencies, 120 purchase orders, and although none of the purchase orders is high value, the total value is over half the total spend of marketing. William presents his data at the next team meeting and manages to convince the marketing team to support a RFP for direct marketing.

As part of the RFP, suppliers are asked to provide a price for a typical scope of work for each of the sub-categories of mail, telephone and internet. One agency, Balmoral, say they offer more than the scope of work. William is aware that Balmoral want to change the competitive set (note 2) so tells them that proposals will be disqualified if they do not comply with the scope.

After 2 days of back-to-back pitches from the suppliers, the marketing team are ready to make a decision. William knows that scores and prices are relative, that is, neither are high or low in absolute terms but is comparison, so puts them into a table and presents them to the marketing team. William summarises the prices and points out that Balmoral has the highest price. The marketing manager, Harry, who uses them the most reacts badly and starts to question the RFP process. William is aware of confirmation bias (note 3) and knows how difficult it is to overturn a negative opinion. He quickly asks the other marketing managers for their opinion of the process and the feedback is overwhelming positive. He then relays the conversation with Balmoral about the scope and jokes that not even the Queen could afford their prices. Harry says that Balmoral often provide more than requested and agrees to try the lower price suppliers.

People don’t have the time or energy to evaluate every decision logically. Instead, they rely on short-cuts to make decisions more quickly. These short-cuts are prone to biases. The rational mind “thinks of itself as the Oval Office when actually it’s the press office” (Jonathan Haidt). William recognises bias and adapts his approach. This results in him having better relationships with key stakeholders and enables him to deliver a better outcome for procurement.

Notes

(1) The National Survey of Sexual Attitudes and Lifestyle (NATSAL) surveyed 15,000 people in 2010 and found that British heterosexual women admit to a mean of 8 sexual partners compared to 12 for men. The difference is logically impossible and illustrates the danger of claimed data.

(2) A quote from Rory Sutherland, Vice Chairman of the Ogilvy & Mather Group gives an example of successful changing the competitive set: “How can Red Bull charge £1.50 a can when Coke only charge 50p? Weirdly you make the can smaller. Suddenly people think this is a different category of drink for which different price points apply.”

(3) Psychologist Albert Hastorf and Hadley Cantril ask 324 spectators to count the number of fouls committed in a game of America football between Princeton and Dartmouth. Spectators were twice as likely to see the opposition commit a foul as they were to spot a foul by their own side illustrating confirmation bias.

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