Ben Plomion Director, Marketing & Partnerships Chango

One of the CMO’s toughest roles is to constantly assess the effectiveness of the marketing mix. In a digital world, the initiatives that do not perform are being revamped, paused, or phased out. This agility requires digital marketing leaders to have access to a flexible and specialized pool of digital talent. More often than not, this translates into outsourcing digital assignments to agencies.

The New Realities Of Digital
Not such a long time ago, most digital marketing leaders would break down their marketing initiatives into owned, earned, and paid media. It was only natural to hire one or several agencies to carry a specific assignment. For example, when I ran a digital marketing for a leading global financial institution, I had a Web design agency, a second agency that developed content, a third to buy media, and a fourth to run SEM. But this approach has two fundamental flaws: First, there is a natural tendency for agencies to operate in silos. Second, the Web is moving to social, which has major implications on the way brands think about outsourcing their digital initiatives.

The silo effect that is created as a result of hiring multiple agencies has been well-documented in the industry. My experience as a brand manager is this problem can mostly be addressed through increased transparency and coordination between agencies. 

The second and toughest challenge is the fact that the Web is increasingly moving to social. Back in my digital marketing role at the financial institution, we came to realize social media was not something we could outsource. Most agencies have the digital acumen but not necessarily the domain expertise required to manage social media campaigns successfully. As an example, being able to answer questions from customers on Twitter has to be done by folks who have an intimate knowledge of the business.

The True Costs Of Managing Agencies
Agencies provide incredible value in the form of expertise, flexibility, and access to first-class tools. As a result, they routinely cost three to five times more than internal resources. Let’s add indirect cost to come up with true agency cost. One factor digital marketing leaders tend to overlook when they hire multiple agencies is coordination cost. A good relationship with a given agency requires more than a brief, weekly progress call. Back to my example above, my team and I spent the majority of our time briefing, selecting, informing, and working on a day-to-day basis with our agencies. This was fun, but also costly.

In addition, when digital leaders outsource initiatives to agencies, a transfer of intellectual capital occurs. For example, an SEM agency will inherit the history of campaign optimizations that were previously done in-house. After a while, it will become very difficult for the digital leaders to bring this knowledge back in-house. The problem is exacerbated when key agency folks move on from their roles. When managed internally, knowledge transitions typically happen smoother.

The Joys Of In-House Digital Marketing
After joining Chango, a midsize company, I discovered the benefits of running our digital marketing activities in-house:

• We can now spend our time running digital initiatives instead of running agencies.
• Speed to market has increased.
• The direct and coordination costs are no longer an issue.
• We gained an ability to put core initiatives, such as earned media, at the core of everything we do.
• We no longer have the risk of losing invaluable expertise and knowledge to agencies.

When It Truly Makes Senses To Use Agencies
Granted, we are not a large as the financial institution I used to work for, and we do know one or two things about digital. But there will come a time when our digital needs become more complex, and we will find some incredible benefits in using agencies. When this time comes, and when we are in a position to assess agencies versus in-house activities, we will ask ourselves the following questions:

• How will our organization benefit from agencies’ initiatives? There are areas where the power of specialization found at agencies will make it worthwhile for our organization to use them. In addition, agencies can bring fresh perspectives based on what they are experiencing with other clients. Finally, agencies provide some additional flexibility and might make economic sense when internal talent is rare.

• What is the total cost of using agencies? This includes all direct and indirect costs.

• Is there a cultural fit? More often than not, we think about the cultural fit between a client and an agency. It’s important, but attention should also be paid on whether a given client’s agencies can effectively work with one another. Needless to say, coordination costs and, more important, work quality is optimum when agencies can collaborate.

• What’s our long-term outsourcing plan? I will definitely spend more time thinking about building a sustainable network of agencies. In my humble opinion, a partnership with agencies is like wine--it gets better with time. 

In summary, there are times when hiring digital agencies makes great sense. Until we get to the point where our needs become more complex, I will continue to enjoy running digital initiatives instead of running agencies.

Also by Ben Plomion: "What Does It Take To Be A Great Digital Leader?"

About Ben Plomion

Ben heads up all marketing and communications at Chango, where he is also responsible for expanding the company's data partnerships program. Prior to Chango, Ben led digital initiatives at GE Capital. Ben has spoken at OMMA and IAB.