When to Outsource Marketing

This is an incredibly loaded question and the answer is different for each organization. Good rule of thumb is that if your organization is large enough to start considering bringing on a marketing agency, then chances are that you should.

Generally speaking, most organizations have one or two core competencies. A car company might be incredible at managing supply chains, which is why you get boring cheap cars like a Camry. The best car companies are amazing at managing the supply chain as well as incredibly skilled at engineering. A good example of this would be a company like Tesla. Neither Toyota nor Tesla manage marketing in house.

An executive coach might be incredible at organizing and delivering information. This would translate into a strong value offer to their customers, but also strong skill set rooted in sales. A secondary competency would be skill in branding. It’s highly likely that same coach is not going to be purchasing, managing or split testing Facebook campaigns to drive web traffic.

When making the decision on whether to bring on an outside marketing agency, it’s important to take stock of the skill set of your executive management and decide what your company’s core area of expertise is going to be.

Generally speaking, I almost always suggest that organizations outsource their marketing.

That’s not because I’m the guy selling marketing services, it’s actually because most companies are genuinely not equipped to handle corporate communications to the level needed in order to grow their business. Ultra large companies are the exception, but those organizations operate with a certain level of inefficiency that leads to wasted money and wasted opportunity. I should know, I work with several of them.

I’m going to break this down into three distinct categories: small business, medium business, and large business.

Small Business:
Usually an owner/operator with a few employees. Typically, a small business is under $5m per year in revenue. Because there isn’t a significant amount of excess capital to spend on high skill labor or expensive marketing trials, many small businesses tend to operate on ‘word of mouth’ referrals.

Ignoring that this is a flawed premise, any marketing that is done by an organization of this size is usually managed by one of the founders or the owner. This group of entrepreneurs benefits by outsourcing their marketing most because it frees up time for the founders to focus on growing the business in a meaningful way. Outsourcing marketing is also much more likely to be an efficient use of marketing dollars.

Medium Business:
This is a really interesting group because it varies in dynamic by a huge amount. The definition is also not consistent across the internet for me to reference. For our purposes we’ll say any company that does between $5m and $50m per year in revenue is considered a medium business.

Companies of this size start to have more money to play with and are able to throw more dollars towards problems to make them go away. At these levels you start to see executive management make quick hiring decisions of marketing managers, hoping that someone can come in through the front door and solve their problems. I work with several companies that operate this way and it’s always amazing how fast they go through marketing managers.

The lucky organizations win the lottery with one of their hires that sticks around long enough to build a marketing department but this is an incredibly expensive game to play. Companies like this benefit strongly from outsourcing their marketing because it saves them boat loads of money in trial and error when it comes to staffing marketing managers.

Large Business:
Any company over $50m per year in revenue. The marketing departments in these organizations are usually led by a CMO, filled with middle management, and have many bottom level marketing managers that build media plans and reports all day. They probably spend 3-5 hours per week in meetings with sales or the rest of the marketing team, reviewing the progress they’ve made in their campaigns or suggesting new ones.

These are the most mismanaged tier in this article because the executive management hands a budget down to the marketing department as their operating capital for the year. The marketing department then divides those dollars into the initiatives for the year and creates annual campaigns based on those initiatives. At the end of the year they review the progress and decide which media buys to adjust.

Large businesses have the most room to play with creative media, split testing, branding and content creation but most of the time the good ideas never make it through middle management. Marketing is trained to never come in under budget as well, creating bloat an inefficiencies.

I’ve personally worked with organizations in the past that have approached me at the end of their fiscal year and asked me to take their money for any old campaign because they needed it spent. This is wildly inefficient and a horrible way for an organization to operate.

Outsourced marketing solves all of these problems.

So when should you keep it in house?

Short answer: When one of your founders is a marketer and your business is design with marketing in mind.

Long answer: When smart companies that are designed to grow are founded, they’re created with a talent pool that complements the projected strengths of that business. In most new software companies, marketing is a core competency because the primary focus of the business is not to make money, it’s to acquire new users to drive the next round of venture capital.

If you were to imagine starting your company today, what skills would you make sure that your founding team had? Engineering? Product design? Supply chain management? If marketing isn’t the first or second thing on your list then chances are working with an outside agency is a good idea.

What do you think? Let me know in the comments below!