When Outsourcing Marketing Makes Sense
Outsourcing the marketing department could mean more than just cost savings
The late 1980s and early 1990s was the era of finding external providers to deliver what were traditionally seen as core in-house responsibilities. In a rush to take advantage of this phenomenon and reduce fixed costs the decade saw the outsourcing of cleaning security, reception and post room services, facilities management, and then the more complex area of Information Technology, fleet management, customer services, telemarketing, the accounting function and financial management, and, more recently, buying departments.
So why not outsource the marketing department? After all few organisations sponsor in-house creative teams, media buying, print and reprographics, or market research and many are happy to outsource ancillary services such as database management, or inbound sales enquiry management. Others nowadays are using interim managers in their marketing departments, and even more buy in the services of consultants for specific projects. In fact, more than one fifth of American companies now outsource part of their marketing or sales effort to a third party supplier.
The case for marketing outsourcing is quite a strong one. Marketing departments are a large fixed cost, and in the in this sector the size of the marketing resource has expanded and contracted alongside the economic cycle, and often as a lagging indicator. Yet the costs involved in recruitment and severance of marketing staff are considerable and have increased markedly over time (to say nothing of the learning curve implications for new staff during the periods of expansion) .
Even in the good times when these departments are fully staffed the overheads are considerable. Over recent years as the margin has come under consistent pressure as more suppliers compete ever harder for customers especially with the new regulations imposing far more transparency in terms of cost disclosure. This has led to the need for the industry as a whole to look to their cost base and make reductions wherever possible But few, if any, have looked to the whole marketing department overhead for such savings outside of the normal cyclical contractions and redundancies.
Another benefit of outsourcing is that the actual costs can not only be identified, but can also be contained. The contract is let for the amount specified and cannot just grow unplanned. Each time you require more resource your supplier has to identify a cost, and nothing clears the mind as rapidly as seeing the relationship between a new requirement and a cost.
It also means that you identify the marketing team as a cost which can be apportioned to specific departments and projects, encouraging all those carrying the overhead to think about the value they get for the money they pay. This reduces the number of 'nice to have' initiatives, with all of the marketing team's customers looking hard at ROI.
Then there is the flexibility you get. With the right kind of contract and supplier, you can increase and decrease resource as your needs dictate. You ensure your supplier only provides you with experienced people so you reduce the learning curve. And, with this flexible expansion and contraction, you carry only the costs you need, when you need them.
So far, then, the case seems to favour outsourcing may certainly seem convincing enough to merit further consideration. What, then, about the case against.
Well, one key issue is deciding whether it is right for your organisation. If you believe that they key source of differentiation is housed in your marketing department then you may want to think again about outsourcing. Likewise it would probably be counter productive to outsource your strategic marketing function as the value of your in house expertise and ability to set the overall direction would be challenging to replicate through an external organisation.
There may also be issues of control. With your own team you can not only set the direction, but keep tabs on how the project is structured, which external suppliers to use, what the priorities are, what direction things might go in, and when and where to change things. If you are merely outcome focussed, as you would be likely to be with an outsourced supplier, you have less chance to change your mind.
It is also important to keep in mind that the outsource option is not a source of unique advantage. Your competitors can and will do the same if they think there is an advantage to it. Your edge will reside only in finding a better and more effective supplier.
But by and large, the benefits of outsourcing some, if not all, of your marketing effort may well outweigh most of the concerns, many of which are driven by a sense of possessiveness and a nervous prejudice. Abandon these, and you may just find that marketing outsourcing is just the initiative you have been looking for.
