The creative side of marketing is tough. Many companies in multiple industries barely, or don't invest in marketing at all. Many firms see marketing as a cost-center, with minimal benefit to existing sales strategies. However, companies that do invest in marketing only succeed long-term if the marketing goal leads to increased revenue.
Companies that do invest in marketing are faced with an interesting decision, namely whether to build marketing mechanisms internally by building and growing a marketing team, or hiring a marketing agency to drive financial results.
Source: Harvard Business Review: A Refresher on Marketing ROI
The Harvard Business Review crystalizes the mathematics of this formula by stating that marketing ROI is the cost of marketing divided by the f investment cost subtracted from the financial gained realized by that specific marketing initiative.
If Marketing Return on Investment (MROI) is less than 1, marketing doesn't really make sense unless there is some perceived long-term value that cannot yet be quantified. However, if MROI>1, the act of marketing is actually beneficial to revenue and the firm's bottom line.
Choosing between a Creative Agency or Creative Team
Assuming that MROI is positive, the choice then becomes which method of marketing will be more beneficial. The same calculation can be made when hiring a creative agency, or developing marketing resources internally.
When hiring an agency, the days of Madison Avenue ad men coming up with a pitch and taking their 15% are long gone. Modern agencies are more and more required to demonstrate the ROI of their marketing services.
At the same time, building marketing infrastructure in-house can be painstakingly slow, as teams must be built from scratch. Modern marketing ranges from MarTech stacks to Lead Generation to SEO to Conversion Optimization to branding and design. Building a team with all of these functionalities can require significant resources, and investments in time and effort.
Cost Benefit of Internal vs. Agency Marketing
Agencies can often be either more expensive than building internal marketing functions, or have trouble capturing the brand voice of many companies. For example, lead generation and marketing creative design are often outsourced, as businesses can hire consultants immediately. However, defining what a "qualified lead" actually is, or capturing a "brand aesthetic" can prove incredibly challenging to communicate to an outsourced team.
Many firms choose to nurture these marketing capabilities internally, because it's cheaper long-term. Marketing performance can be tied to overall business goals. Outsourced marketing is a commodity, where KP's are typically limited to the performance of a single campaign or channel, which may or may not directly drive revenue. Internal teams, while they take longer to build, can be cultivated to align with cross-functional department success, and motivated by the value their work provides other teams, ultimately creating more agility and levers for revenue.
A more detailed version of this article can be found on the Marketing Automation Experts NYC Blog.
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