Understanding the pros/cons of both will help to maximize marketing efforts, allocate budget wisely, and get the best return.

  • Keeping marketing functions in-house might be ideal, but in reality, you will likely have to outsource at some point. Both options carry their fair share of pros and cons.
  • Each marketing team is unique, so begin by assessing yours. Consider organizational goals, team strengths and weaknesses, and budget to determine strategic priorities based on available headcount and specialized needs.
  • Evaluate external vendor relationships every six months to ensure the efforts aren’t more costly than an in-house team member would be.

One of the biggest decisions you will face as a Chief Marketing Officer is whether to outsource or build an in-house team to execute your strategy. There is no one-size-fits-all answer, and striking the right balance between the two is a unique challenge for each business.

In this GrowthBit, I will share the benefits and challenges of hiring in-house vs. outsourcing to an agency, and how I have thought about determining the best plan for my teams. Understanding the advantages and considerations for each option will help you to make informed decisions and maximize your marketing efforts, allocate budget wisely, and get the best result.

Work toward building up a trusted bank of specialized vendors to partner with over time – you never know when you may need them.

Aligning marketing resources to organizational goals

The choice of when to outsource marketing functions versus hire in-house will depend, first and foremost, on the priorities of your organization.

Start by reviewing organizational goals and considering which functions are most strategically important to meeting them. Demand gen? Content? Public relations? Operations and analytics?

Armed with clear priorities, evaluate your existing team. Leadership transitions are typically the right time to reassess and ask big-picture, strategic questions, but it can and should also be done in tandem with major milestones for your business, like a significant growth surge or capital infusion, the launch of a new product or division, an acquisition, or a meaningful shift in market conditions. When I joined Appspace, I asked myself three key questions:

  1. Where is my team today, and what are the known must-haves?
  2. What would it take to shore up our current weaknesses based on our goals?
  3. Would it be most effective to outsource or hire a team member to meet these goals?

The last piece to get clarity on up front is the budget, as your decisions will be subject to headcount plans from your finance and HR organizations. (For great advice on working with finance, read this from an LLR portfolio company CFO: How to Turn Your CFO into Sales & Marketing’s Greatest Ally.)

Once you’ve assessed team, needs, and budget, you can make a strategic choice to create a role in-house, upgrade your talent, or work with an external expert. For example, if outsourcing creative is costly and bringing those efforts in-house would save money without sacrificing quality, hire someone. If in-house digital marketing efforts aren’t reaching your goals, try working with an expert vendor who might bring in better results because of their industry or functional specialization.

Whatever you choose to outsource, work toward building up a trusted bank of specialized vendors to partner with over time — you never know when you may need to call on them.

Since our shift to in-house, digital marketing ROI improved 5-6x, so it was worth the thoughtful transition effort.

 

The benefits and challenges of in-house marketing versus agency

I believe it’s best to have marketing functions in-house whenever possible, but most marketing leaders will never find themselves in that ideal state considering budget and bandwidth.

One benefit of outsourcing is that, with the right cost structure, it can be more flexible and cost-effective than making a full-time hire. When you need specialty expertise for a particular marketing function, but don’t need a team member’s dedicated capacity, outsourcing lets you activate that function to help achieve those goals within budgetary constraints. And you can always expand, reduce or turn that marketing motion off depending on your needs and contracted terms.

How to vet a marketing agency

At the same time, when you work with an external vendor, you face challenges you wouldn’t find in-house. For instance, vendors or agencies have a whole roster of other clients. As a result, you’re subject to their priorities and timelines. To avoid this pitfall, ask questions during the vetting process like:

  • Does the vendor’s expertise align with my company’s goals and needs?
  • What is the vendor’s current workload, capacity and growth plans?
  • Given the amount of money I am willing to spend per month, will my company be considered a priority client with this vendor?
  • If I provide general timelines and establish a rate card for different types of work, will this vendor be able to hit my deadlines for most projects?

Educating and ramping up vendors on your product and brand voice can also be difficult and time-consuming. This extended educational period can serve as a benefit, though, if you view your outsourced partners as long-term investments.

When you view outsourcing as an extension of your internal team — and align vendor expertise with your goals — the time spent will pay off. Approach the relationship with the mindset of “I’m willing to invest my time in educating this vendor and see this as a long-term relationship that will make us both successful.”

When to hire marketing in-house instead

When outsourcing does not fit your circumstances, a full-time hire offers benefits for all obvious reasons – they are dedicated only to your organization, normally specialize in a specific function, and can change priorities on a dime. Plus, they understand the nuances of your product better than any external vendor could. Of course, the dedication and expertise come at a cost — and you might not have the headcount to fill an essential function in-house.

When hiring internally, consider going through a transitional period while restructuring your team. When Appspace recently brought digital marketing in-house, we had a two-month period between when we officially moved on from the agency and when our new hire was 100% on their own. Transition overlap from external to internal resources might seem tedious, but the process gave our hire the opportunity to ask the vendor questions about the existing work and understand why we made certain decisions. Since this shift to in-house, our digital marketing ROI has improved 5-6x, so it was worth the thoughtful transition efforts.

Remember: It’s a lot harder to try out an internal hire than it is to temporarily test an external function.

 

Evaluating agency ROI and the tipping point for bringing it back in-house

I recommend evaluating your ROI every six months while working with agency vendors. Compare the cost of the monthly retainer to the cost of an in-house hire. Look for whether outsourcing costs 1.5 times the salary of an in-house marketing team member. If that’s the case, you may want to consider hiring someone internally.

At the same time, you’ll want to weigh those costs against the value you’d gain from a full-time team member. Does the given role require specialization, or can it be covered by a generalist? Campaign management may suit a generalist, for example, but PR tends to be highly specialized. Do you have the right skill set on your team already or would you need to hire or outsource for it?

Keep in mind that you can always put in place a 90-day agreement to test if outsourcing works for a particular role. If it does, then you can more confidently commit to a year-long retainer or go project-by-project if the need isn’t ongoing. Remember: It’s a lot harder to try out an internal hire than it is to temporarily test an external function.

Some tips and questions to ask yourself to evaluate your external vendors include:

  • Are they generating the results you expect? If not, it’s a clear sign that the relationship may not be the best use of your budget. If they are generating positive results, it’s also worth consulting peers in your network to ensure you haven’t set your expectations too low.
  • Beyond the hard ROI metrics, what is the amount of time your team is spending managing the vendor? Some are very independent and do a great job at asking key questions so they can perform their work and require very little effort or time from your team. Other vendors require much more handholding so it’s important to weigh this factor in your evaluation decisions.
  • Is there other work this vendor could be doing for you? Oftentimes some economies can be gained by consolidating multiple vendors into one, provided the quality of the work and results won’t suffer.
  • Can this function be performed by a single freelance worker on retainer, or does it require the efforts of a multi-person agency? The cost difference between these two options will be dramatic and you may be over-serving or under-serving your needs based on your existing vendor.
  • How easy would it be to find this skill and hire it in-house?
  • And perhaps one of the simplest questions to ask yourself is, would you recommend this vendor? If the answer is no, then you don’t need to search much further to know if it’s the right vendor relationship for you and your business.

When it comes to qualifying leads and assessing readiness to hand them over to sales, an in-house team is the way to go.

 

Examples of when to outsource or hire by marketing function

Event Management

Filling an event management need depends on how frequently you host events. If you host just one annual conference, you might not need a full-time events manager, and outsourcing the project to an agency might be more cost-effective. This approach allows your internal resources to focus on other strategic efforts so that the team isn’t spread too thin.

Public Relations

PR is typically an ideal function for outsourcing — but it can also be expensive. On our marketing team at Appspace, we hired an in-house PR Director and augmented their efforts with an agency during their first few months in the role. Close to a year after hiring, we turned off the agency costs. This will limit the quantity of our PR efforts, but we’re confident that having someone in-house will mean that the coverage is of the highest quality. We also gain the benefit of our in-house PR leader being able to head up our Analyst Relations function as well, which is not something an external agency would be able to do.

Social Media

For industries like B2B SaaS, social media may not be a central marketing function or require specialized skill or significant time and resources for your team. If this is the case, you’re likely better off keeping the function in-house since you can handle those needs with minimal time and effort through a generalized role. On the other hand, consumer brands, for instance, likely need to dedicate far more attention to social, and hiring someone or outsourcing to a specialist may be the right fit.

Sales Development

I am a big fan of keeping business development in-house. You need insider expertise and oversight to ensure that lead follow-up is happening in the right way. You can outsource simple tasks, like sorting through big call lists to find targets, but when it comes to qualifying the leads and assessing readiness to hand them over to sales, an in-house team is the way to go in my opinion.

Operations and Analytics

Be extra cognizant of how you approach marketing operations and analytics, especially when it comes to reporting accuracy. Your best bet may be a combination of internal and external. If you have an in-house marketing and RevOps team, they’re in a good position to challenge reports from an outsourced digital marketing agency that don’t match up with what you’re seeing in-house. If an agency shows a converted lead but you’re not seeing it on your end, it’s important to have a two-way dialogue to troubleshoot.

Here’s the bottom line.

Budget and bandwidth constraints will require you to strike a strategic balance between your in-house marketing team and outsourced efforts. Start with your organizational goals and team needs in mind, then spend your marketing dollars as effectively as possible to meet those goals.

Hire in-house in line with key campaign execution priorities to help ensure you always have dedicated internal resources. Work with external partners for specialized and cost-effective efforts to extend the impact of your marketing budget.

This GrowthBit is featured in LLR’s 2024 Growth Guide, along with other exclusive insights from our portfolio company leaders and Value Creation Team. Download the eBook here.