Sunday, February 27, 2011

Should You Outsource Your Marketing?

Outsourcing, for the small and mid-sized company, can be a very effective strategy to gain access to skills, and services at a fraction of the cost of hiring employees.  There is an adage that a company should outsource everything that is not a core competency.  For years, firms have taken this on in the areas of payroll, IT, distribution, and logistics.  Certain functions, such as sales, marketing, R&D, etc. have been held close within the organization as core competencies due their strategic ability to grow the firm and their intimate knowledge of the growth levers of the business. 

The time to reassess this practice may be here.  One of the largest components of any firm’s costs are in the compensation of its staff.  Even a small department of 2 – 4 people can cost the company hundreds of thousands of dollars in compensation alone, not to mention computers, phone and rented space.  This expense is also not flexible when topline sales may be temporarily weaker than normal.  What does outsourcing deliver?

  1. Access to top talent
  2. Latest thinking in the field
  3. Methods and processes built and tested over time in other organizations
  4. Ability to contract and pay only for services needed, rendered 

What About Marketing?

Marketing’s role in the organization is to first set the correct marketing strategy for growth.  Marketing will then take on any of a number of functions in the marketing mix (see insert) depending on the needs of the organization.  Marketers should understand and build the consumer insights that feed communication, and product development.  Marketing’ will also develop and execute the outbound functions of the communication with the customer.  This includes public relations, advertising, social media, market research, promotions, and provide customer and consumer direction for the company’s innovation pipeline.  Marketing staff typically handles even the tactical customer Marekting focus 1presentations, logos and letterhead, trade shows etc. Smaller organizations do not need all of these areas covered at any one time.

There is a small, but growing, field of contractors that specialize in the area of marketing and can assist management in setting strategy and developing programs typically handled by an internal marketing department.  They will develop these programs or work with outside agencies ensuring that each resource is delivering against the plan.  

Many small firms go directly to a PR, ad, or web design agency to fill the role of a marketing department.  There are drawbacks to this approach.  First, agencies tend to specialize in an area of execution.  This area may or may not align with the strategic needs of the company.  PR agencies will offer great PR programs, advertising agencies will look to advertise, web and social media will provide social media solutions.  Second, agencies still have a vested interest in you spending as much as your budget allows, where a marketer should only be interested in effective spend, flexibility and growing the bottom line of the company.

Many smaller- to medium-sized businesses must keep a keen eye on the day-to-day managing of their business.  Marketing can become a distraction taking up valuable time and energy away from the operational side of the business.  For many firms, outsourcing can be a very cost effective way to gain access to top notch skills to get the results needed.  

2 comments:

Jim said...

Bob:

A subject close to my heart. It was the topic of my first post back in 2008. I really think you make a great point as it relates to agencies, especially now with the advent of social media. They will run off and execute without really understanding the strategic implications to your company like resources, governance, etc.

My apologies, I could not resist but share my 2008 post: http://bit.ly/7175ZR

Jimmy

Bob Clark said...

Jim: thanks for comment. It is even in the interest of a strong agency relationship to have to have a contracted marketer to ensure the right strategy gets executed. Thanks for sharing your post also.