Marketing Outsourcing

Marketing outsourcing is one of the most sensitive topics for owners of small and medium-sized enterprises. When and why is it needed?

Outsourcing, as the transfer of the execution of certain production and management functions to an external organization or an off-staff worker, has long been firmly established in business reality.

Management textbooks and common sense suggest that only those functions that are not key from the point of view of forming the company's competitive advantages should be outsourced. And, at first glance, marketing is a very important area where outsiders should not be allowed. Nevertheless, the accounting function is no less sensitive for a business owner, but its outsourcing has already become common practice. If there is generally nothing to hide and the work process of an off-staff executor can be clearly controlled, then outsourcing accounting does not pose serious threats. The situation is similar with marketing.

When marketing can be outsourced

Marketing is a rather complex function in its composition. It includes a wide range of methods and tools for implementing set tasks, but that's not even the main point. Marketing can be understood as the implementation of the company's business model in terms of interaction with the external environment. Therefore, it cannot be fully outsourced to a single party – the risks for the owner are too high. There are two solutions – distribute individual marketing blocks to different executors or, which is more preferable, retaining the strategic level of marketing, choose an external contractor ("single window") who will implement the goals set by the owner, selecting the optimal system of tools for them. This leads to the first necessary condition – the ability of management to make strategic decisions in business management, proficiency in goal setting and methods of controlling marketing activities.

Condition number two – the scale of the business. It must be sufficient for the economic efficiency of hiring a specialist (in this case, it doesn't matter – in-house or remotely) or signing a contract with an external firm. Further complication of the marketing structure as the business grows can be implemented either within the company or by attracting external resources.

Finally, the third necessary condition – the specifics of the company's activities should be in areas not related to the formation of core value in marketing. It is clear that marketing is important for everyone and always (except for个别 cases, for example, monopolies), however, if the business is directly dependent on marketing tools or is actually in the field of marketing consulting, then outsourcing marketing in such a case would be inappropriate.

If the three necessary conditions are met, then in almost every specific case, marketing can be successfully outsourced and the set tasks achieved. Moreover, the outsourcing model is simpler and cheaper for the owner. Next, let's look at why this is the case.

Advantages of marketing outsourcing

1. The outsourcing model is more effective due to the use of external resources.

No matter how qualified the in-house marketing staff is, it can never be compared to the army of specialists in the marketing services market. Choosing a quality external service provider and replacing them if necessary is much easier than forming and retaining a staff of specialists within the company.

2. The outsourcing model simplifies the management of marketing by the owner / top manager of the company.

Contractual relations are always simpler and clearer than the labor format. Management is based on clearly set goals and objectives; failure to achieve them is grounds for demanding free revision / rework or termination of the contract. In the case of working with staff, all risks are borne by the employer.

3. The outsourcing model is cheaper relative to hiring marketers in-house.

Let's consider a simple situation as an example.

A company has reached a level of development and scale of activity where a full-time marketer is required. A single marketer is a qualified specialist who possesses many competencies from analytics to advertising. The cost of such a professional in the Samara market will start from 35,000 rubles net, meaning the costs for the enterprise (with taxes and social contributions) will be at least 50,000 rubles.

If outsourcing to a marketing agency, then due to the economies of scale, the monthly subscription fee will be no more than 40,000 rubles. Furthermore, if both parties work under the general taxation system, the customer receives about 7 thousand rubles of incoming VAT, which can be deducted.

The economics of the two models are simply incomparable in terms of efficiency. For hiring a team, the difference in expenses will be much more significant.

4. The outsourcing model is more flexible.

The market situation changes very quickly, so at different times, various marketing tasks come to the fore – analytics, pricing, work in sales channels, event preparation, online marketing, advertising in offline channels, etc. Due to access to resources, an external agency can quickly offer the customer the package of services that is in demand and quickly move from setting the owner's goals to their decomposition into tasks and directly executing the marketing plan. In the case of working with an employee, different timelines will be required, and in some cases – retraining or staff expansion.

5. The outsourcing model disciplines top management.

An external consultant, especially a team, is perceived completely differently. The conversation with them is practically on equal terms, and therefore more constructive and productive. Mutual demands within the contract encourage the parties to focus on key problems and their solutions. A staff employee is much more dependent and therefore operates with criteria of personal benefit within hierarchical relationships. Such a situation is convenient for managers who are not focused on quickly and effectively solving marketing tasks from the perspective of business goals.

6. The outsourcing model develops the company's resources.

External consultants and specialists often have a higher level of competencies. Communication with them is useful for the professional growth of company employees, not necessarily those related to marketing and sales. In this case, cooperation is accompanied by a process of mutual learning and acquiring additional skills.

7. The outsourcing model expands the company's market horizons.

Attracted specialists have experience in implementing marketing tools and solving tasks in various markets, in organizations with different corporate cultures, and have encountered diverse business models. As a result, such specialists are much more likely to find additional business growth points and successfully solve non-trivial marketing tasks.

All of the above does not mean that in-house specialists have no advantages. They, as a rule (but not always), know the industry and market better, and are also familiar with the specifics of the company's business operations. Furthermore, they can handle simple repetitive tasks more efficiently due to established communications. Nevertheless, their resource is limited in many parameters, and economic efficiency almost always lags behind attracted specialists.

For large businesses, a mixed model seems quite promising. The owner or top manager of such a company no longer has the ability to administer the marketing function, for which they hire a professional marketer in-house. This employee works at the strategic level, while the planning and implementation of marketing activities is carried out by an outsourced organization.

Which marketing functions are reasonable to outsource

As we noted above, with the exception of strategic goal setting, almost all marketing can be outsourced – to one full-cycle company or to an independent pool of executors. The following functional areas of marketing can be highlighted as the most suitable for implementing the outsourcing model:

1. Market research.

Reasons: requires special competencies, mastery of specific methods, resources (especially for quantitative research), often an independent view is needed, difficult to organize when the marketer is loaded with operational activities.

2. Preparation of individual events (exhibitions, etc.) or projects (new product launch, rebranding, etc.).

Reasons: projects are better organized by independent managers, special competencies in project marketing and solving specific tasks are needed, tight deadlines require the involvement of a wide range of professionals.

3. Advertising and PR in offline.

Reasons: often associated with advertising production, which requires access (i.e., direct contracts on favorable terms) to cheap capacities (for example, printing equipment), specific skills (design, engineering, etc.), contacts with a wide pool of final executors.

4. Online marketing.

Reasons: requires deep knowledge and skills in specific areas, paid licenses for special software, often large budgets require separation of management and execution to avoid conflicts of interest.

5. Description of marketing processes and marketing engineering.

Reasons: usually impossible to do from within the "system", requires an independent consultant with experience in solving similar tasks in different business models, including skills beyond the standard marketer's functionality.

In general, the set of functions for which it is more effective to attract outsourcing companies is unique for each individual case. In any scenario, it is necessary to approach the process of organizing marketing activities reasonably, considering all possible options. Choosing a marketing agency for outsourcing is an important issue that largely determines the business's prospects in the market.