It can be difficult to define a marketing budget, but it helps to look at how peers are allocating resources. We decided to start with ourselves.
Three options to fill your marketing function
We need marketing — now what?
One of the biggest challenges in a growing company is when it reaches the size when it becomes time to think of marketing as a function or department of the organization. Up to that point, the business owner has been responsible for marketing (or had another team member who did a little bit of it). In our last article, we discussed the difference between sales and marketing roles. In this article, we’ll dive more into helping business leaders make decisions about the best ways to expand their marketing as their company grows.
Your three options: Insourcing, outsourcing, and co-sourcing
In my 20+ years of marketing experience, I've helped in-house marketing teams with multi-million dollar marketing budgets, I've assisted small businesses with very few resources, and I'm now part of a company that provides outsourced marketing. Along the way, I've learned that there's no such thing as one size fits all. Here are a few of the options small businesses have, and some of my insights from those experiences.
Insourcing (or in-house marketing)
This is usually the first solution business owners consider when seeking marketing support. And it makes sense: When your phones start ringing off the hook, you hire a receptionist. When your books become complex enough to require more frequent oversight, you hire an accountant (or CFO). And so when an owner’s business reaches the size that necessitates a more intentional marketing program, their first thought is to fill the role with a person.
The number one advantage of this approach is that your Marketing Director is physically present in your organization every day. This means you have unlimited accessibility and can get real-time project updates by just tapping them on the shoulder. That person’s manager can closely supervise and collaborate with the in-house Marketing Director at every stage. Over time, the Marketing Director builds domain expertise and knows how your customers think.
Marketing today requires a broad range of skills, and one person cannot do all of them well. For example, a social media and digital expert is a very different skillset than an event promoter and organizer. Like we’ve mentioned before, marketing is hard – marketing in the B2B space doubly so. Trends shift, tactics evolve, as do your customer’s favorite platforms and communication preferences. Because the in-house marketer is often heads-down in the business, he or she rarely has the time to lead from a point of strategy or innovation. In instances where the hire works out, businesses face a new, dire threat: turnover. Most marketers thrive on change and new opportunities – the typical tenure is just 2–4 years; when they leave, so goes their institutional and industry expertise.
When hiring an in-house Marketing Director, it’s important to be incredibly clear about what you want this person to do. So, to set this person up for success, start by analyzing and prioritizing your marketing needs. From there, craft a job description so you can hire the right fit. Since this person is working solo, you’ll want to ensure they have someone who can invest their time to manage this role and understand whether or not they are performing as expected. Make sure the manager of the Marketing Director knows enough about marketing to determine whether this person is focused on productive, results-oriented work (vs. wasting time and effort).
You’ll also need to have a budget in place for your new marketing person. The average salary of a Marketing Director as of time of writing ranges from $110,830-$152,864 (plus benefits and overhead). Depending on what this role is doing in your organization, you will need additional budget for outside resources (designers, web developers, etc.). Last but not least, don’t forget to add in the nuts-and-bolts unique to this role: marketing software, professional association dues, conference fees, and so forth.
Where it works well:
In our experience, insourcing works well when your business is large enough to support the salary, benefits, and equipment for an entire in-house marketing team. This more effectively addresses the skills gap mentioned above, and allows your organization to benefit from the diverse expertise of several marketing roles: Marketing Director, Graphic Designer, PR Specialist, Copywriter, Social Media Manager, etc.
While it’s possible for small businesses to build their own marketing teams (provided the owner has a strong marketing background), we’ve found that companies well-suited for an in-house solution have gross annual sales of at least $30 million, and can allocate at least 7%–10% of their gross revenues to marketing.
Outsourcing your marketing department
If your business can’t afford the benefits offered by an in-house team, however, plenty of outsourced options exist. Outsourcing marketing has become a common practice that provides all the perks of a multi-million-dollar marketing staff, while leveraging a monthly budget that works for you.
Companies typically get a much higher value for their dollar from outsourcing marketing because it provides access to a range of experts who stay up to speed on the latest marketing channels, understand current best practices, and provide fresh ideas. You’ll have a team that can work with your leadership and sales to understand and support your goals (and even help you develop them).
Not all marketing companies are created equal. Many are focused on a singular area of tactical expertise – like SEO firms, website design companies, or branding agencies. For an uneducated buyer, it can be difficult to differentiate one firm from another. And, worse, tactics-based solutions often lack the broad strategy required by growth-centered businesses.
The biggest return on marketing dollars comes to those leaders willing to develop a strategic plan. This plan encompasses the big picture strategic objectives for the company, then dictates what marketing activities can support them. Leadership should be willing to discuss these specific objectives with your outsourced marketing team so that everyone is on the same page, and the marketing company can set up metrics to measure success.
Where it works well:
In our experience, the outsourced model is incredibly effective for businesses that:
- Are anywhere between $2–50 million in annual revenue
- Have long sales cycles requiring buyer-education
- Value innovation and evolving approaches
- Have started to think of marketing as a core business need, rather than an ad-hoc activity
Good examples of companies that use this approach include our clients Streimer, Solid Form, and Corios.
Co-sourcing your marketing department
But what if you want the benefit of an in-house marketer and the resources of a full outsourced marketing team? In that case, co-sourcing may be your best option. Co-sourcing is when a company hires an internal Marketing resource (most often a coordinator) and a Marketing Firm; these entities then work together collaboratively. This, in some cases, combines the best of both worlds and is a great middle-ground option for companies with diverse marketing needs.
Co-sourcing is a flexible arrangement that gives a company a lot of control over the work they have in-house and what they outsource. It provides some of the best of both worlds while minimizing the risks inherent with hiring an entire team. Co-sourcing also provides redundancy; if your staff turns over (or the marketing firm relationship fails) you still have resources with industry expertise who can train the replacements.
For the co-sourcing model to work well, you’ll still need to take all notes above into consideration. Make sure that both the person who you have in this position, as well as the firm that you hire, are good fits for your company and have clear role expectations. Leadership should be heavily involved in developing a focused marketing strategy. Finally, in our experience, the internal marketing resource should be early in their career, and eager to learn. You can rely on the marketing firm for the strategy and insights, and maximize the internal resource to do the high-frequency activities like social-media posting.
Where it works well:
Co-sourcing can work well for those companies that are growing fast and want to expand their marketing capabilities quickly, but see the downsides of building an entire team. This is a great option if your company employs someone who wants to learn more about marketing, but would benefit from outside perspective and senior-level planning experience.
We’ve found this model to be perfect for businesses that:
- Require high-touch strategies like event marketing
- Leverage multiple social media channels at once
- Want to invest in the skills and learning of their internal marketing talent
- Have complex service offerings, and can therefore benefit most from a sophisticated marketing strategy and mix of tactics
A good example of companies that use this approach are our clients, G4 Kegs and Loupe.
At Kinesis, we've helped many businesses get clarity on right-fit marketing solutions. Some have become Kinesis clients, but our #1 focus is helping to find the right fit – whether that’s us, another outsourced solution, or help in finding a great candidate to hire. To learn more about what option is right for you, drop us a line – we’re happy to point you in the right direction!