I recently wrote about a new trend, the outsourcing of the CMO (see here), and received several follow-up emails regarding the general challenge of outsourcing—specifically, when does it make sense (and when it doesn’t). Few individuals have experience making outsourcing decisions by the time they hit the C-suite. And yet, the decision regarding whether and when to outsource can have a significant impact on cost and the quality of outcomes. This becomes more challenging when considering outsourcing specialized skills such as digital responsibility.
According to Gartner, up to 50% of digital marketing activities are now being outsourced, as both large and small companies seek support for their marketing functions. However, there are still marketing leaders who believe nothing should be outsourced to an agency. This likely occurs because of a lack of experience in knowing when and how to outsource.
To shed more light on this decision, I sought insight from David Rodnitzky, CEO of digital marketing agency 3Q Digital. What follows are Rodnitzky’s insights.
Kimberly Whitler: Can you explain what you mean by insourcing vs. outsourcing?
David Rodnitzky: Insourcing means hiring team members in-house and outsourcing means working with an agency.
Whitler: Why would companies want to outsource? What are the benefits and what are the risks?
Rodnitzky: There are several potential benefits. First, an agency may have deep expertise, especially in something as specialized as digital, that a firm can’t cheaply replicate internally. Second, agencies have more redundancy, so if someone quits at an agency, there are other experts who can quickly take over the work. This is often not the case if you have an in-house team. Third, agencies see hundreds of accounts every day, which means that they are less myopic and learn faster than in-house teams, helping develop deeper and current expertise in a specific area. Fourth, agencies can provide cost-savings on technology and other services by offering bulk-discounts to clients.
Having said that, there are always potential risks which include: 1) the agency will never care as much about your business as your in-house team; 2) you could get the "B" team at an agency, or get a bait and switch (agency brings out the stars during the pitch, and then gives you junior team members; and 3) working with an agency involves transactional costs - you have to keep the agency up-to-date on your strategies, share confidential data, etc.
The decision to use an in-house or outsourced team is not an easy one and is context and company dependent. But often, CMOs don’t spend enough time trying to decide which path is appropriate for a specific company at a point-in-time.
Whitler: What advice would you give a CMO – how can they know whether it is better to staff from inside or outsource?
Rodnitzky: I'd look at this from two angles. First, what do you consider a core competency for your business? If there are parts of marketing that you include in this list, you should probably keep this in-house. Areas that aren't core competencies are candidates for outsourcing to an agency. Second, if you are on the fence about whether to use an agency or keep management in-house, run a test! Give 50% of the project to the agency and keep the rest in-house. Set up clear metrics and KPIs to test the two competitors. Then see who performs the best.
Whitler: If a CMO decides to outsource, what tips do you have for them to maximize results, given the inherent risk?
1. The squeaky wheel gets the grease. So expect a lot out of your agencies and you'll get great results.
2. Treat the agency as a partner, not a vendor. The best client-agency relationships are based on trust and mutual respect.
3. Give the agency clear goals. Be very clear about what you want them to achieve and when.
4. Sign contracts that give you flexibility. For example, sign a 30 day contract instead of a one-year contract.
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