Outsourcing is the most prevalent strategy companies are using today to control costs, increase their time-to-market, and gain access to expertise they may not be able to afford on their own. Outsourcing advertising and other areas of marketing reduced one large banks' budget by 40%, with smaller banks gaining a 30% cost improvement using outsourcing over hiring and retaining their own in-house staffs (Russell, 1997). Outsourcing advertising and creative production projects to India has increasingly become commonplace, with both Lifebuoy and Fair & Lovely brands outsourcing pan-Asian production and European production to Indian advertising firms (Businessline, 2005). IT outsourcing, the largest proportion fo total outsourcing completed globally has steadily increased from 19% of total IT budgets (AMR Research, 2003) to a projected level of at leas 30% by 2015 (Goodman, Ramer, 2007). Outsourcing will continue to flourish across all industries, as IT continues to lead its growth, advertising, marketing, public relations, lead generation and marketing program management will follow. The key factor for this transition is the fact that as company databases, systems, and IT architectures continually evolve to be more customer-centric, the continual outsourcing of every facet of marketing, including advertising will continue.
For the firm considering creating their own advertising department vs. outsourcing this function, there are several factors to keep in mind. It is the intent of this analysis to evaluate these factors, keeping them in the broader context of how the global economics of marketing are shifting more towards speed of response, accurate and clarity of marketing strategy execution (McGovern, Quelch, 2005).
Creating an Advertising Outsourcing Decision Framework
Instead of just chasing the lowest-cost provider of advertising and creative services or attempting to drop marketing costs significantly through aggressive bidding for outsourcing services, the better approach is to concentrate on first creating a framework for evaluating which aspects of advertising can be reliably outsourced. Obviously not every aspect of advertising can be outsourced; the results would lead to more lost time and profits than the effort would be worth, as studies have shown
(Patrick, 1994). What is needed then is a framework for evaluating which type of advertising projects can be outsourced successfully, for the lowest cost and the highest quality. This is the first and most significant best practice of outsourcing advertising and media strategy that has emerged from the analysis completed for this analysis. What the framework that prioritizes which advertising project to outsource and which to keep in-house must also do is keep marketing focused on its core strategies first (Morrall, 1995). While outsourcing gets much attention as a cost reduction strategy, it is actually more effective for stripping away extraneous tasks and projects that detract from the core focus of a business, including making its marketing more focused and effective (McGovern, Quelch, 2005). What emerges from the analysis done on this first best practice is the fact that advertising outsourcing done for cost reduction alone is in fact a worst practice that leads to inferior, often unusable results. The focus needs to be on offloading advertising that can be reliably and effectively done outside the company, so that the core focus on marketing execution can be attained with a minimum of distraction. Examples of companies who have used this strategy successfully are shown in the following table, Best Practices In Advertising and Marketing Outsourcing Framework, based on several of the sources used for this analysis.
Best Practices in Advertising and Marketing Outsourcing Framework
Marketing and Advertising Activity
Advertising Program Development
Analytics of Advertising Effectiveness
Customer Experience Integration
Commonly Outsourcing Functions
Defining Advertising Strategy
Advertising Campaign Schedule planning
Advertising theme design
Analysis of Brand Health
Buyer and Prospect Behavior Analysis
Program Performance Analysis
Design and implementation of a uniform customer experience and integration of advertising specials to in-store displays and selling programs
(future technologies overview)
(Sony Styles' advertising, campaign management
(identification of high potential customers and those with high net worth)
(Magnolia Centers marketing, advertising and in-store integration program)
The framework shown in Table 1 illustrates how eclectic and varied the strategies are for outsourcing advertising and related marketing programs and strategies. The table provides a solid foundation for determining just which advertising functional areas can be outsourced effectively and which can't. What emerges from the analysis are three levels of best practice that any company can use in prioritizing their advertising, media outsourcing and marketing strategies at a strategic level:
Level 1 Advertising Outsourcing
The most common advertising tasks that are essential for a company to retain and grow its identity, yet are not strategically important enough that without them a company would fail. This includes website content development, blogging and continual text content, and the development of Web-based banner advertising. These areas are critical for any business to continually keep and grow its Search Engine Optimization (SEO) rankings yet are not as strategically critical enough as launching a new product for example. These tasks don't provide immediate or strong competitive differentiation; they do however provide the necessary continual support online and off to ensure a business keeps its identity and sustains it over time. In service industries including baking, these are the areas where the majority of outsourcing is accomplished (Russell, 1997). The continual growth of Google AdWords, Facebook advertising and the exponential increase in social media channels as a basis for advertising are predicated on advertising outsourcing at this level. These are the tasks that can be easily managed within an external agency as they are also often short in production duration, have inherently less risk than larger more complex projects, and have a relatively short lifecycle of use.
Level 2 Project-Based Advertising Outsourcing
The second level of commitment companies make to outsourcing heir advertising is that the project level. As is shown in Table 1, this would include the Magnolia Centers in BestBuy stores that promote and sell higher-end electronics and home entertainment systems. This approach to outsourcing advertising has much higher levels of risks than Level 1, and also has a series of incrementally greater rewards as well. The risks are of having a major new product introduction such as the Magnolia Stores advertising veer off-course, making the entire process difficult to control. The advantage is that it frees a company us to concentrate on its core marketing strategies without having to dissipate its efforts on a new product or services launch (McGovern, Quelch, 2005). This level of advertising outsourcing often includes the partial or complete outsourcing of public relations as well (Patrick, 1994). In total, this phase or level fo advertising outsourcing focuses on milestone and goal accomplishment over just the task of creating a new advertisement that is presented through a variety of channels.
Level 3 -- Strategy-based Advertising Outsourcing
This is the highest level of advertising outsourcing, where the entire strategic framework and direction of a company is outsourced. In the case of Sony and their SonyStyle launch and continual online presence, this was the strategy they chose to pursue due to time and cost considerations. Sony is one of the most diverse consumer manufacturers of electronics, and the company deliberately was looking to unify their many product and services with a common advertising theme. The decision to outsource the entire advertising strategy for SonyStyle was made in an effort to unify these diverse product groups. Based on these three levels emerging from the analysis completed, the following advantages and disadvantages of outsourcing have been defined.
Advantages and Disadvantages of Outsourcing Advertising
Using the Advertising and Marketing Outsourcing Framework as a foundation for defining strengths and weaknesses of the decision of outsourcing advertising, the following key findings have been defined.
The advantages of outsourcing advertising include lower costs from a process and creative standpoint and for projects in Level 1, the ability to more rapidly turn them around relative to having them done internally. Outsourcing Level 1 programs, which are short-term in duration, are often the best possible strategy for companies who have a very broad, eclectic product portfolio. Outsourcing advertising also has been shown to give companies the ability to gain access to greater expertise than they would have been able to afford on their own. This aspect of outsourcing advertising relates to levels 2 and 3 of the model defined earlier in this analysis.
The more complex and coordinated an advertising strategy is, the greater the need for experienced, reliable talent to complete the many tasks associated with the project on or before schedule. Many times companies will outsource advertising on project-level bases to ensure the work can get done without impeding current projects. A third advantage is the potential to improve existing advertising management processes and increase advertising effectiveness by partnering with an outsourcing expert. This often is the case with social media-based advertising…