Companies generally know what marketing is, but don’t necessarily know what to do with it. Jokes abound: “I waste half of my marketing investment. I just don’t know which half” and “Marketing is where the rubber meets the sky,” to mention a few.
All companies have a unique marketing mix depending on their business model (B2B, B2C, or B2B2C), structure, industry, market position, product life cycle, degree of government regulation and other factors. One of the major variables in any marketing budget can be found in the allocation between internal spending and outsourcing.
Marketers are big outsourcers. Public relations, design, data management, analytics, direct marketing, advertising, event planning and many other activities are frequently sourced externally. Outsourcing budgets are often spread over a number of vendors, and it’s not uncommon for some companies to outsource marketing functions to more than 20 unique specialists.
In fact, many marketing organizations would like to outsource more functions. Currently, the most popular outsourcing areas are data hygiene, customer analytics, list brokerage, creative, and campaign management.
The decision to outsource a marketing function can be both strategic and tactical. Many companies have a philosophy of outsourcing any activity that is not core to their business. Developing a positioning and communications strategy may be central to the company; writing a press release or calling a journalist may not be. At the tactical level, companies often find themselves strapped for marketing resources to respond to a rapid or unexpected change in the business, an increased volume of marketing campaigns, or expanded telemarketing efforts.
Determining what to outsource and what to insource is not a simple financial exercise. It’s not uncommon for marketing organizations to face challenges when defining return on investment (ROI). Many state that it is difficult to change established strategies even if ROI metrics determine investments are ineffective. Perhaps more sobering is the fact that marketers cannot get information on their own results in a timely fashion.
Without adequate measurement and analysis, many marketing organizations find it difficult to determine what to outsource and what to staff internally. As a result, they have many specialized, often short-term and overlapping vendor relationships. This, of course, does not imply that marketers wish to outsource less; only that they want to have fewer vendors to manage.
There is a distinction between two kinds of outsourcing. In this context, the term managed services means the delivery and use of specific marketing applications that may be owned and hosted by the company. A vendor that either hosts or uses your Siebel marketing system to execute outbound campaigns provides a managed service. Business process outsourcing means the management of a specific marketing function such as database management, leads generation, or telemarketing using either internal or outsourced technology. A call center company that handles your telemarketing is a business process outsourcer. The distinction is useful, but obviously some vendors provide both services.
Amidst this backdrop of chaos, confusion and contradiction, there are still some general guidelines that determine when to outsource a complete marketing function or specific tactical project. These are typically made up of the following challenges:
- You lack a specific expertise or bandwidth
- You lack a specific technology
- You want to manage more costs as variable expenses
- You want to benchmark your operations to best practices
- You want to focus on insight not operations
- You need to grow more rapidly
- You are trapped in a boom/bust investment cycle
- You need to mitigate your legal risk
- You just acquired another company
- You just launched an additional geography or customer channel
Check back next week when we will discuss the top 10 marketing challenges that can be best overcome through outsourcing.
Michael Shanker is CEO and Director of Extraprise, a leader in right time revenue optimization for B2B and B2C enterprises, providing database marketing and demand generation services. For more information, contact the author at firstname.lastname@example.org, visit www.extraprise.com, or call +1(888)i2iMKTG.
By Mike Shanker, CEO, Extraprise