The Hidden Costs of In-House Marketing & The Outsourcing Advantage

Can your business afford to ignore outsourcing’s benefits? Traditional in-house marketing is challenged with meeting evolving demands. As macro trends and CMO turnovers disrupt strategies, the costs of hiring, retention, and the pandemic-induced shifts push companies towards outsourcing. Explore the evolving dynamics and cost considerations, emphasising why outsourcing is not just a strategic move but a competitive imperative in the ever-shifting marketing landscape.

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In today’s evolving business landscape, companies are under constant pressure to adapt and stay ahead of the competition. Nowhere is this more evident than within the marketing department or function of a business. With the digital age, consumer behaviour changes, and the growing complexity of the marketing environment, the traditional in-house marketing model is facing challenges that are becoming increasingly difficult to overcome.

In-housing is often seen as a way to save and have greater control of costs, paradoxically however, the true costs of in-housing can be much greater than first thought. It’s crucial to understand how the marketing landscape has evolved to consider the true costs of in-housing.

The Widening Skills Gap

The days of a marketing department primarily focused on advertising and promotions are long gone. Modern marketing encompasses a broad array of responsibilities, from sales enablement to customer experience (CX) and e-commerce. These expanded roles demand specialised skills and expertise that can be challenging to find and retain in a traditional in-house team.­

According to E-consultancy, not only are macro trends decreasing the shelf life of specialist skills within organisations and forcing them to play catch up, 92% of executives say that their strategic plans require skills that are new to the organisation. Adequate training and development of staff requires learning and development professionals to align training to business goals, build relevant and fast-evolving curriculum, and assessment models. No small feat for most organisations.

CMO Turnover: Declining Leadership Stability

One of the critical issues contributing to the in-housing challenge is the rapidly decreasing average tenure of Chief Marketing Officers (CMOs). In 2022, the average tenure for Fortune 500 CMOs was just 4.2 years, down from 4.5 years the previous year. When looking at the top 100 advertisers, it was even shorter at 3.3 years.  The decline in CMO tenure reflects the potent combination of instability in the marketing industry, driven by the need to adapt to post-pandemic market dynamics, shifting consumer behaviours and rapidly advancing technologies.

This revolving door of CMOs poses significant challenges, and of course cost, for organisations. While hiring and talent acquisition costs are the first to come to mind, the lesser understood cost is the potential to stall growth. Among several potential contributing factors, examples include: a different vision and approach by a new CMO that causes disruption or a lack of continuity in marketing strategies that impact long-term effectiveness; or, inconsistencies in messaging, tone, and visual identity, that confuses consumers and dilutes the brand’s overall impact.

The Higher Cost of Hiring and Retention

Hiring and retaining skilled marketing professionals is a costly endeavour. The cost of hiring an employee in Australia more than doubled in 2021, soaring from $10,500 in 2020 to a staggering $23,860 per worker. These costs include recruitment, onboarding, training, and overhead expenses – with the more frequent churn of marketing personnel, these expenses can quickly add up.

But the expenses don’t stop at hiring. Retention costs are another significant factor; businesses invest in their marketing staff through ongoing training, professional development, and attractive compensation packages.

In addition, Michael Page reports that 56% of talent at any one time is looking for a new job, and when employees leave or are terminated, these investments can go to waste. If your CMO leaves after three to four years, the resources invested in their training and development often leaves with them, and the process starts over again.

The Impact of COVID-19: A Push Towards Outsourcing

While some form of outsourced marketing exists for most organisations, the pandemic has played a significant role in an increased move toward outsourcing.

In a survey of 100 Australian SME business founders, owners, and leaders, 47 percent were looking to remove current in-house marketing roles and opt for outsourced alternatives as a cost-effective strategy.

The Broader Trends Driving Outsourced Marketing

The resurgence of outsourced marketing isn’t just a result of shifting business priorities but also a response to broader trends in the industry. The marked increase in available outsourced marketing resources, including a growing number of marketers on freelance platforms like Fiverr and Upwork, has played a pivotal role.

While the number of advertising and related services agencies in Australia has shown small but steady growth in the period 2018–2023 (1% annual growth, IBISWorld Advertising Agencies in Australia), the demand for outsourced marketing services has grown. HubSpot reports that nearly two-thirds of B2B companies outsource a portion of their marketing.

The Future of Marketing: A Hybrid Approach

In response to these changing dynamics, businesses are exploring new models that combine the advantages of in-house and outsourced marketing. Eighty-five percent of respondents to one survey believed their businesses could benefit from a hybrid approach combining a lower-level in-house marketing resource with more strategic expertise from an external agency.

Top Factors Contributing to an Increase in Outsourced Marketing

Specialisation Supports Marketing Success

Business leaders are realising the importance of having specialised skills and expertise to tackle the diverse and evolving marketing landscape – they understand the value of hiring or outsourcing to true specialists. The demand for niche skills in areas like marketing technology, paid media, SEO, and email is on the rise. Specialised experts can find and leverage new channels, models, and technologies to remain competitive.

CMOs’ Changing Budgets

CMOs are shifting their budgets to focus on digital marketing and technology, creating a higher demand for specialists in these fields. The need for strategy and expertise in narrow areas is growing, and these specialists often come at a higher price than generalists. Outsourcing for senior-level expertise can make sense on a project-by-project basis, providing greater effectiveness and cost savings compared to full-time employees.

Marketing Spend is Changing

The focus on digital marketing and technology increases the need for experts in specific areas. For example, the advancing need for left-brain thinking to bring insights from data and analytics is a growing area of need. Outsourcing provides flexibility and cost savings, making it an attractive option for companies looking to remain agile in a post-pandemic business landscape.

The Expanded Responsibility of Marketing

Marketing has expanded its responsibilities to encompass roles and functions that different departments once managed. Sales enablement, sales operations, inside sales, and marketing technology are now part of the marketing department’s domain. The outsourcing solution to this increased need for new roles and skills allows businesses to tap into the expertise of skilled specialists without the lag of a steep learning curve.

In-House vs. Outsourcing: A Cost Comparison

To illustrate the cost difference between maintaining an in-house marketing team and outsourcing, let’s consider a side-by-side comparison. Below are all the costs of maintaining an in-house marketing team, which include:

  • Recruitment Costs: The expenses involved in hiring, including job postings, interview processes, and onboarding.
  • Salary and Benefits: The ongoing costs of employing marketing staff, including salaries, benefits, and overhead expenses.
  • Training and Development: Investments in professional development, workshops, and courses.
  • Retention Costs: Costs associated with retaining staff, such as bonuses and other incentives.
  • Limited Expertise: In-house teams might lack specialised skills and knowledge in certain areas, necessitating further hiring or training.
 ROLE IN HOUSE COST- average wages according to Talent.Com ROLE OUTSOURCE INVESTMENT – average fees as calculated by Pure Bold
CMO $215,000 CMO / Senior Marketing Executive Strategist $100,000
Marketing Strategist $90,000 Senior Marketing Executive & Strategist $60,000
Marketing Coordinator $77,500 Senior Marketer $40,000

How to Build the Most Effective Marketing Team – A Framework

Once a business has made the (sensible) decision to outsource, a framework should be developed to ensure it is effectively implemented. Some core areas to consider are:

Identifying Core Competencies

To identify core competencies, businesses should carefully evaluate their capabilities compared to suppliers and competitors. The goal is to determine whether the organisation can outperform internally in critical activities. If the organisation excels in certain activities, it should continue to perform them in-house. However, decisions should be based on objective analysis, as past practices may not align with current capabilities, potentially revealing crucial differences between internal strengths and those of suppliers or competitors.

The rate of change and deprecation of current skills should also be considered.

Assessing Service Activities

In this step, assess the various service functions to understand their relevance and costs. Identify the activities essential for meeting customer needs. By breaking down the organisation into distinct activities, you can pinpoint those that contribute to competitive advantages and those where the organisation falls behind competitors.

Cost Analysis

A cost analysis is essential to determine whether outsourcing offers cost efficiency. Activities that can be produced more cost-effectively externally should be considered for outsourcing. However, costs should not be considered in isolation. Value should be attributed to savings in the speed of introducing expertise, and the degree of impact on long-term success that can be achieved by introducing higher levels of specific expertise and outside perspective.

General Analysis of Suppliers and Market

Conduct an analysis of potential suppliers in the market, considering factors like availability, stability, reliability, conflicts of interest, and the ability to monitor service providers.

Unique Characteristics of Outsourcing Services

Outsourcing services offer organisations a range of benefits driven by their unique characteristics. This includes cost efficiency through accessing skilled labour at lower costs and avoiding significant investments in infrastructure. Organisations can tap into specialised skills, allowing them to focus on core competencies and strategic goals. Flexibility and scalability enable quick adjustments to operational scale, fostering adaptability to market changes. Outsourcing facilitates global market reach and risk distribution, while collaboration with external partners accelerates project timelines and encourages innovation. Time savings, improved customer satisfaction, cost predictability, a scalable talent pool, and compliance support further contribute to the advantages of outsourcing. Overall, understanding and leveraging these characteristics empower organisations to enhance operational efficiency and achieve superior performance.

Outsourcing decisions should be driven by strategic considerations, focusing on cost efficiency, sustainability of performance, and the depth of impact from the unique characteristics of the service being outsourced. Careful evaluation and alignment with the overall organisational strategy are crucial in making this successful.

The Competitive Advantage of Outsourcing

Outsourcing has evolved from handling peripheral business activities to encompassing critical functions contributing to a company’s competitive advantage. By partnering with specialised agencies, businesses can access top-notch talent and knowledge without the burden of maintaining a full-time team. This flexibility allows companies to adapt to market changes more rapidly and efficiently.

In addition to cost savings, outsourcing provides a competitive edge by tapping into a diverse talent pool. This can lead to innovative ideas, creative solutions, and a broader perspective on market dynamics. It’s a strategic move that allows businesses to stay ahead of the curve.

We have examined the general benefits of outsourcing previously, but as a recap, they include:

  • Cost-Effective Expertise: Access to specialised skills and expertise without the ongoing expense of hiring full-time staff.
  • Flexible Resources: The ability to scale up or down based on project requirements, reducing overhead.
  • Efficiency: Faster project turnaround times, as specialized agencies are focused on their core competencies.
  • Proven Results: Outsourcing agencies often have a track record of success in their respective fields.
  • Reduced Risk: Shared responsibility with the outsourcing partner for project success and outcomes.

More importantly, specific benefits often seen as the rationale for in-housing are now competently being handled in the outsourced model. These include:

Cost Control – fees and spends remain flexible and designed to meet the needs of the organisation. Costs and continuity are predictable.

Strategic Alignment – Organisations maintain direct control over the execution of their strategies as the agency guides the formulation of strategy and manages execution aligned to organisational goals.

Increased Control and Oversight & Integration with Core Operations – Sophisticated and shared analytics, business units or key personnel working together with agencies as a single project team, and shared project management systems provide companies with direct control and oversight of processes.

Faster Decision-Making – Quicker decision-making is possible with an expanded team providing expertise and full execution capability. This is significant when agility and rapid responses to market changes are critical.

Customisation and Flexibility – Agency teams are more ready to adapt to the changing needs of the company providing rapid customisation and flexibility when needed.

Brand Control and Consistency – For functions related to branding, marketing, and customer experience, agencies often lead control over brand consistency and messaging and robust approval processes are already embedded in the agency’s processes.

In Summary

It is evident the cost of not outsourcing your marketing efforts can be substantial. The shifting marketing landscape, the increasing cost of hiring and retention, and the ever-shortening tenure of CMOs present notable challenges for in-housing and the potential for unseen costs. Conversely, outsourcing saves costs, and provide a source of competitive advantage by accessing specialised expertise and a flexible, scalable, and skilled workforce.

Businesses today must adapt to these significant changing market dynamics and consider outsourcing as a strategic move. Can you afford not to outsource? The answer, in many cases, is a resounding “no.”

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About the Author

Tina Robertson

Tina Robertson’s entrepreneurial career spanning 28 years is marked by the establishment of successful ventures in internet technologies, digital marketing, and marketing strategy. Her expertise encompasses all facets of marketing, brand and digital strategy, performance marketing, digital execution, and effective marketing management. With a deep commitment to best practices and a scientific approach to business and brand growth, Tina's proven 'right approach' to marketing has played a pivotal role in driving tangible growth for numerous businesses across diverse industries.