The pros and cons of outsourcing marketing and working with agencies

Michael Valos and Alvin Lee present comments from anonymous CMO focus groups to get their inner thoughts on outsourcing and working with agencies.

This article originally appeared in our August/September issue of Marketing mag. New issue out now!

 

Screen Shot 2016-10-13 at 8.59.54 AMOutsourcing marketing services offers companies many positives. Motives for outsourcing include accessing skills a company lacks, obtaining a broader perspective from a company with international and cross-industry experiences, technology transfer, access to a wider range of business networks or even cost reduction.

This article takes the client point of view and identifies the critical areas CMOs focus on when outsourcing to maximise the advantages and minimise the disadvantages of external marketing services.

The rapid evolution of digital marketing technology has increased marketers’ reliance on external suppliers. For clients, social media offers new ways to reach customers and the potential to leverage closer service, sales, branding and distribution channel integration. Customer analytics can now provide previously unavailable insight to help lower marketing costs and guide strategic decisions as well as resource allocation.

Marketers are struggling to keep up with the rapid changes and growing diversity in social media and customer analytic tools. This leads to more dependence on external suppliers. This outsourcing leads to a widening chasm between the abilities of the client-marketer and agency-specialist in these areas. The growing specialisation and diversity in media channels and big data tools also mean that clients have to hire and manage more agencies.

To hear the client voice on outsourcing, we draw on a series of focus groups held by Hardhat Digital with senior marketers from blue-chip firms, on the condition of anonymity.

Do you develop in-house digital skills or use external suppliers?

One participant commented, “The digital environment is a shifting sand and thus a risk to bring some aspects of it in-house. As it is rapidly changing, after bringing it in-house we may want to outsource it again. Easier to outsource it while it’s in flux.”

This exemplifies clients’ struggles with digital opportunities. Clients voice a fear of locking into a digital approach or strategic mindset that may quickly become outdated. Here clients use outsourcing to manage the risks of a rapidly changing technology.

According to one CMO, “When you bring some competencies in-house, it prevents you from having an expert in agency who can tap into an agency network to deal with the issue.”

Once you’ve decided to use external suppliers are there considerations at the selection stage?

“At the selection stage you need to ensure a collaborative mindset exists between suppliers, as it’s important they collaborate constructively with you as well as the other suppliers you engage who are doing related tasks,” said one respondent.

This illustrates the reliance on trust and goodwill between suppliers, even when some of these suppliers may be competitors.

 

How does the role of your internal procurement function affect your use of external marketing suppliers?

This question on procurement gave rise to three diverse opinions.

The first recognises marketing as leading the procurement process: “If the CEO and the board consider marketing to be important, procurement generally has to follow marketing’s guideline on external suppliers.”

A second view argued, “Procurement may not always know how the external supplier adds value that justifies the higher cost of their services.”

The third argument made in the focus groups stressed balance, arguing that a counterbalanced approach using a cost focus (by procurement) and a revenue- generation focus (by marketing) would give a healthy balance to the outsourcing process.

How do you coordinate your increasing number of external suppliers?

This question triggered discussions on how supplier briefings can be done to ensure consistency-of- message, and how to manage supplier conflict at briefings. Some marketers encouraged positive and constructive conflict between suppliers: “We think it is best to brief all external suppliers at the same time, as you are more likely to have a common understanding of your objectives.”

Other focus group participants preferred more individualised briefings, arguing that joint briefings often lead to jealousies and ego-tripping behaviours between suppliers. Problems also arise when some agencies try to get a bigger slice of the marketing budget and selfishly promote their solution at the briefing.

Focus group participants felt that managing relationships between the customer analytics and big data agencies, and between the sales/ service and market communication suppliers was becoming more important. Their ultimate goal is to foster a real-time relationship between the analytics and the marketing teams.

What approach do you take to monitor and reward external suppliers?

Focus group members preferred to use compound measures. For example, “We believe supplier evaluation should be weighted and include attitudinal, financial and process [relationship effectiveness] measures.”

This appears to be a way to manage agencies so that they deliver good work that addresses the critical dimensions of the consulting project.

Finally, Ben Robertson, senior strategist at Hardhat Digital (whom we would like to thank for access to the anonymous executive data), offers the agency perspective on outsourcing.

Australian marketers are increasingly moving away from the traditional ‘Agency of Record’ model, instead opting for a selection of specialists. This multi-agency model offers greater potential for best in class results, but does require a strong client lead at the helm. Usually in the form of a marketing GM or CMO, there needs to be a champion that sets the course and ensures there is clarity around roles and responsibilities, as well as a shared vision for the end goal.

This arrangement can garner exceptional results. However, it’s rarely by accident. Collaboration among suppliers is best achieved with a ‘smile together, cry together’ policy, also known as the 360 approach. Teams are briefed together, required to respond together, deliver projects together and report on activity performance together. The intended result is not only great work, but also an environment that fosters strong relationships between
the suppliers as well as with the client.

 

 

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LEARN MORE: Marketing‘s trend report ‘Managing Agencies: current issues in outsourcing for marketing managers’ offers an in-depth review of the current trends, questions and practices in managing marketing suppliers. More information »

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