Creating a framework for advertising outsourcing decisions

Best Practices in Outsourcing the Advertising

Best Practices in Outsourcing Advertising:

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.

Table 1:

Best Practices in Advertising and Marketing Outsourcing Framework

Marketing and Advertising Activity

Advertising Management

Advertising Program Development

Analytics of Advertising Effectiveness

Customer Experience Integration

Commonly Outsourcing Functions

Defining Advertising Strategy

Advertising Campaign Schedule planning

Program design

Advertising theme design

Campaign Management

Lead Management

Advertising Effectiveness

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

Company Examples

Ericcson

(future technologies overview)

General Motors

(Volt Launch)

AllState

(lead mgmt.)

Sony

(Sony Styles' advertising, campaign management

Website)

American Express

(identification of high potential customers and those with high net worth)

BestBuy

(Magnolia Centers marketing, advertising and in-store integration program)

Sources: (McGovern, Quelch, 2005) (Morrall, 1995) (Patrick, 1994) (Russell, 1997)

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 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 and promotional strategies that rely on a series of techniques, programs and unique creative development processes that are not known in the majority of companies today (Bernoff, Li, 2008). Another significant advantage is the time and focus that outsourcing advertising provides companies, freeing them up to focus on their core marketing messages, platforms and strategies (McGovern, Quelch, 2005). Taken together these factors represent the majority of motivations for companies choosing to outsource advertising. The three levels shown in the framework are also used for prioritizing and defining the relative level of risk vs. reward from outsourcing decisions.

Using the framework to evaluate the failures of companies who have outsourced advertising projects across the three levels of the framework, the following key insights emerge. The greatest disadvantage of outsourcing advertising continues to be the fact that many companies are too thinly-staffed to manage the outsourced projects to begin with (Frederick, Selinger, Szombathy, Minoff, 2006).

Lack of internal resources including time from current marketing staff can cripple any efforts to create the time and quality advantages outsourcing advertising can potentially provide. There is also the challenge of making the outsourced advertising consistent with the overall direction of the company as well (Patrick, 1994). This disadvantage is what also leads to the marketing staff having progressively less control over their outsourced project, as they don't have the time to coach and guide the outsourcing partner to the correct messaging for the advertising work.

Second, the culture clash that often occurs between the marketing departments and outsourcing providers is often based on differences of creative opinion and direction, and often lead to more delays than the outsourcing decision was meant to save (Russell, 1997). In other words it can take longer to overcome the limitations of cultural differences than it would be to do the work internally. Cultural clash is a major factor in advertising outsourcing not working well or at its optimal level.

Third, when outsourcing advertising and marketing includes partnering with companies located in cultures significantly different than one's own, cultural gaps and conflicts emerge quickly and can derail a project. This is the case with American companies outsourcing advertising to Indian outsourcers for example. The differences in values, perceptions and priorities can be so significant as to completely derail even the simplest project. While outsourcing continues to flourish between Asian nations for advertising and marketing expertise, it still has yet to catch on at the strategic level with western companies (Businessline, 2005). One of the key factors behind this is the ethnocentrism on both sides of the relationship, with each thinking the other partner in the partnership is wrong. When this occurs, projects come to as grinding halt and often fail.

Conclusion

The intent of this analysis is to analyze the strengths and weaknesses of outsourcing advertising and marketing strategies on a global scale. The advantage of gaining needed expertise and time-to-market must be balanced against the unforeseen costs of cultural clash, ethnocentrism, and the lack of focus at the beginning of even the smallest project. What emerges from the analysis is a framework for evaluating which advertising project should be outsourced or not, as this will often dictate how effectively the strategic objectives are achieved.