Insourcing Versus Outsourcing: The Challenge of Today’s Multichannel Marketer

Many companies already outsource a portion of their marketing function, such as advertising. What about other core marketing activities such as direct-mail management and customer analytics? Increasingly, expertise in these and other marketing areas lies outside of your own four walls.

When to Outsource Marketing Support Functions

Firms are increasingly asking questions about which marketing functions to bring in house, versus outsource and moreover, under what conditions should they outsource. To many firms the answer lies in the corporate culture of the organization and the marketplace demands of their industry.

If a firm is in a market that is undergoing change or a significant increase in demand from customers, it seems prudent to outsource many of its marketing functions, including database hosting, campaign management, reporting and analytics. This supports the marketing organization during these changes and lets the CMO and his team has laser focus on the key external factors that are impacting the business, enable the firm to provide even great value to its customers and grow the business during this time of change.

Changes like the consolidation of wireless, landline, cable, and video industries, and the merging of the cell phone, PDA, computer, and paging industries are just two examples of areas where the CMO and the entire marketing team need to focus. In these and many other cases, the CMO and the entire marketing team need to determine how the firm’s products and services can be tailored to the unique market segments that will ultimately come out of these significant industry changes and moreover, how the firm will compete in a dynamic marketplace.

On the other hand, if a company’s market is fairly well established with little ongoing change, companies still need to consider how their corporate culture — specifically the relationship between business and IT — impacts the value of bringing marketing functions in house. As one CMO at a large service firm recently told an audience, "I could build my own trucks to deliver our products to customers, but I don’t do that. Why, then, would I say that we should be in the business of building marketing databases, decision engines and web sites when there are so many providers in the marketplace competing to be the best at these tasks". Oftentimes, marketing departments are not the top priority for information systems staff and are kept “in queue” behind more pressing IT initiatives like customer care, billing, operations, finance, ERP and other core functions. As one CMO of a large consumer packaged goods firm said recently at a conference, "Shipping and billing will always be the priority of our information technology staff, and as such, we just will never get the response and attention to make us comfortable". Clearly, if cultural aspects of a firm suggest the aforementioned conditions might exist, marketing should consider outsourcing.

What Marketing Functions Should be Outsourced

Many marketing and advertising functions can and have been outsourced with varying degrees of success. From the most strategic elements like marketing strategy and program planning to the more operational and tactical elements like customer database and customer analytics, all aspects can be outsourced.

Overall, however, while companies are comfortable getting help on the strategic elements, they are often not outsourced nearly as much as the tactical elements. CMOs and firms are comfortable getting strategic advice and even using strategy consultants on their teams when developing a marketing strategy, but in the end, the strategic elements are just too critical to the operation to outsource them. And a CMO’s best chance of leveraging outsourced resources is on the tactical side.

By far, one of the most outsourced functions is the creation and ongoing maintenance of analytical and marketing execution capabilities. It seems to follow that with the focus of IT staff on business operations versus marketing, CMOs would outsource their operational needs to a vendor. This has resulted in an increase in Software as a Service (SaaS) providers and lets the marketer focus on customer segmentation, customer management, and program/campaign execution and measurement, while the outsourcer takes care of all the technology and related support services necessary to compete in today’s demanding marketing environment. In these situations, companies have had success outsourcing customer database hosting/management, customer reporting, customer analytics including advance modeling and stastical services, and overall support for the marketing lifecycle.

The Pros and Cons of Outsourcing Marketing Support to a Third Party Provider

The biggest issue with CMOs outsourcing any part of their business is a perceived sense of lack of control. While at one time things like data security and other factors might have discouraged companies from outsourcing part of their marketing process, off-the-shelf, inexpensive technologies can not only solve the problem today, but for many companies, the security and checks and balances of SaaS and marketing service providers are often much better than company processes and policies.

Prevalent is the thinking that if a person in another office or firm is doing the work, they won’t be as responsive, or will attempt to point a finger at another firm for problems. The "comfort" of having a person in the some company, though, is most often over-rated. Several CMOs and marketing executives have been very public about their increased sense of control, saying things like "if I call our marketing partner even off hours, the CEO or account manager will get back to me within hours, something that would not be possible with a fully in-sourced solution".

Likely the biggest advantage of working with an outsourced provider, in addition to responsiveness, is the capabilities and sophistication that can be offered at good prices. Typically the best personnel for marketing technology or marketing services are going to find their way to a service provider, where they can work in different client environments and be at the center of the employer’s business. Not to suggest that the client side of the house is not exciting and fun, but for almost every industry except a small few, marketing is not the core business. And as such, marketing is treated as a support function. This makes it a challenge to hire and retain the best people.

Overall, if an outsourced provider is selected and managed carefully, and if the relationship is maintained at the proper levels, many of these issues can be avoided and moreover, a productive symbiotic relationship can exist between the outsourcer and client.