Irish Marketing Journal, September 2003
Outsourcing Marketing and Advertising
Outsourcing became a major business trend in the 1980s as all kinds of enterprises embraced the idea that they should concentrate on their core competencies and ancillary activities should be farmed out to specialists. Cian Molloy examines how the outsourcing trend has taken hold in marketing and advertising.
Most people trace the current vogue for outsourcing back to the publication in 1993 of the Empty Raincoat, where 'management guru' Charles Handy argued that businesses needed to concentrate on core activities to prosper and therefore should farm out non-essential tasks to those who specialised in those particular fields.
However, third-parties have been specialising in functions such as advertising and recruitment since the dawn of the Industrial Age in the mid-19th century. Indeed, some would say that outsourcing has been a feature of marketing since the serpent in the Garden of Eden persuaded Eve to act as chief promoter for a new range of apples!
Today, when it comes to recruiting senior marketing personnel most companies outsource to task to consultants says former Marketing Institute of Ireland chairman, Martin McEvoy, who is MD of recruitment and execuctive search consultants McEvoy Associates. He told IMJ: "At entry level Š assistant brand managers or marketing assistants Š about five to 10 per cent of recruitment is via consultancies; for brand managers and product managers the figure is about 60 to 65 per cent, above that level the vast majority is via recruitment consultancies and executive search. Saving time is only a small element in why this is the case, the main reason is that we have the recruitment expertise. We do original and real-time searches to find the best available person for a particular post and then we are in a better position to approach those people about vacancies. If you approach that person, as an employer, you are immediately on the back foot in terms of negotiating, you are cap in hand, whereas we can manage the process more successfully."
However, it is true that outsourcing in marketing and advertising is on the increase. One of the longest serving providers of outsourced marketing services in Ireland is Associated Marketing Ltd (AML), which was established in 1970 by Denis Kelly and which is now run by his son Hugh. Originally, AML provided a comprehensive sales, marketing and credit management service to eight established Irish furniture manufacturers, but now the company concentrates primarily on the carpet-manufacturing sector. "We are unlike most consultancies that just give advice and charge for it," he says. "We set up channels and distributors, organise the marketing and only get paid when an order is completed. In fact, we take on 100 per cent of the debt risk."
At present, AML represents 17 different companies in eight different sectors, though the companies biggest area of expertise is floor-coverings where it has eight clients. Kelly says: "Our only limitations is how fast we can grow."
Given AMLÕs 33 year history, the claim made by Alternatives to be "Ireland's only Outsource Marketing Company" is a bit bold, however the company set up by Sandra Lawler and Aldagh Mc Donogh in early 2000, does seem to be unique in that it provides interim marketers to work in-house with businesses with cover for maternity leave and sick leave, or following unexpected resignation, or when in-house resources are insufficient to move a project forward at the necessary pace.
The two friends founded the company when McDonagh, working as head of marketing at Coca-Cola found it nigh impossible to find cover for a brand manager on holiday and Lawler, woking at Irish Distillers, found that brain storming sessions were producing wonderful ideas that were rarely executed because of a lack of in-house resources.
Today, Alternatives has a panel of some 200 commercial managers and brand managers with sufficient skills and experience to handle most marketing jobs. While Alternatives has a strategic commercial marketing division, manned by the companyÕs senior permanent staff, the bulk of its revenue comes from its interim service.
"Business is growing all the time," says Lawler. "Outsourcing marketing is a model that is becoming more acceptable and which is developing internationally."
Another marketing outsourcing outfit is Freedom Marketing, established by Scott McInnes in 2002. While he too uses a panel of temporary marketing professionals, the bulk of their work is done off-site. "We would take on projects and run them for companies, particularly those coming into Ireland for the first time," he says. "Our daily rate would be higher than that paid to staff, but there is a saving to clients on PAYE and PRSI. Recently, DRM, the largest provider of off-site record storage asked us to launch their new corporate brand and to develop media awareness of the organisation. I was contracted to run the brand relaunch, I took it on, delivered it and handed it back to them.
McInnes says the cost of hiring Freedom Maketing varies immensely from project to project and that he himself outsources functions like PR and Web and graphics design. Although he works from project to project, he says demand for his services is continuing to increase.
"When a lot of technology companies cut back on their marketing departments in 2001 thatÕs when the opportunity for my company really took off. Suddenly these companies realised 'We need a campaign run, but Christ, we have no marketing staff'."
Another company benefiting from the current vogue for outsourcing is KnowHow Media, which was set up two and a half years ago and is now IrelandÕs biggest media representation agency, selling advertising for Independent Newspapers, their associated newspaper supplements and various magazines. Additionally, KnowHow Media represent the Belfast Telegraph in the Republic of Ireland. "Outsourcing sales to us is a way of getting ad revenue on a project without out overheads, we are the risk takers in it all," says Orla Howard, who founded the company with Gerry Knowles. "There are enormous opportunities for us and we get enquiries all the time, from people thinking of setting up new magazines to media organisations in the UK, Europe and the USA. For anyone setting up a new publication, itÕs a very big commitment to hire an ad manager for 50 grand Š instead they can contract out to us. WeÕve done some television and radio work and we are looking to develop that in the future, at present TG4 are represented by PostTV and Channel 4 are represented by Medialink, but these contracts will come up for tender again."
In addition to representation services, KnowHow also offer consultancy services and feasibility services to publishers. Lawler says: "Outsourcing sales isnÕt for everybody Š if you are the owner of a magazine, you often need on-going feedback, but you won't get the same level of feedback from outsourcing as you would from an in-house sales team."
The most profound change wrought by outsourcing in the advertising industry is that most of the full-service agencies no longer do their media-buying inhouse, with a plethora of media agencies now specialising purely in purchasing TV, radio, newspaper and outdoor slots. However, there does seem to be a reaction against outsourcing the creative function.
"Over the last couple of years, we have rarely outsourced to freelance creatives," says Orlaith Blaney, MD of McCann Erickson. "We were finding it hard to recruit good creative freelance talent and because it's been much quieter in the second half of this year a lot of freelance creatives are finding it quite tough at present."
"The problem with using freelance creatives is that it can take quite a bit of time to get them up to speed on a particular brand or client and they are just interested in getting the job done, getting paid and moving on to the next project. If you look at all the work that has won awards, how much of it has been done by freelancers - not a lot."
Chris Cawley at Cawley-Nea says his firm has greatly reduced the number of freelancers it uses, but this is partly because of the way his firm has involved. "Sometimes we have been a bit too profound for our own good and when we set up, I was greatly influenced by Handy and his book The Empty Raincoat. When we set up in 1992, we saw ourselves as a generalistic marketing services provider and weren't even members of IAPI. In that context, it made sense to outsource creative work because we didn't see it as core business. Since then we have evolved into an advertising agency and the strategic planning and creative functions are now core, core, core to what we do. While we still use some freelances, most of our creative work has to be, by definition, in house."
Nevertheless, there are several advertising agencies who have no creatives at all on their permanent staff, among them is the Larkin Partnership, where account director Nora Ahern says using freelance creatives has many advantages over using an in-house creative team. "Clients should not have to pay for a creative team that is not working on their business, with freelancers they only pay for the work done for them," she says. "The freelance sector is unbelievably hungry for business, they are more adaptable, they are more prone to listen to a brief properly and it's much easier to get them to come in at 9am on a Saturday. Where a team of staff creatives will sit on a job for weeks, freelance creatives want to get it done quickly and, because they work on different projects all the time, they donÕt suffer from burn out to the same extent."
Another firm that outsources its creative talent is Rothco, where MD Patrick Ronaldson says its away of having a larger pool of talent, allowing the company to offer a greater range of specialised services "from big budget television, to tactical radio to detailed press". He said: "We've just won contracts with Aer Lingus, Murphys and Citroen, partly because with outsourcing we use the services of some of the best people in the business."