Deciding whether or not to hire an agency for your marketing needs can be perplexing. There are many things to consider, but one of the primary questions that smart organizations ask is: what will be my return on investment if I choose to handle marketing in-house versus partner with an agency? In other words, which option is going to give me more bang for the buck?
We’ll start with the concept of opportunity cost.
Opportunity Cost: What You Sacrifice
You may remember learning about opportunity cost in a college economics course, but it comes into play in a major way when determining whether or not to hire or agency, hire someone in-house, or just do the work yourself.
So what is opportunity cost? According to Investopedia: “opportunity cost is what a person sacrifices when they choose one option over another.”
We make trade-offs and sacrifices (that is, incur opportunity costs) all of the time without realizing it. However, in order to find out your best solution, you not only have to consider opportunity cost, but you also have to consider both short-term and long-term opportunity costs.
Opportunity Cost in Real Life
For example, I am in the middle of re-finishing my deck and have opted to use a power sander. Unfortunately, I started off with the wrong kind of sandpaper. It wasn’t abrasive enough to go down deep into the surface. It didn’t take me long to figure out that using the wrong tool was going to make this a much bigger job. So I determined that the opportunity cost of going to the hardware store and picking up a more effective grain was lower than just plugging away with the wrong kind of sandpaper. Yes, I incurred the short-term opportunity cost of stopping my work, getting in my truck, and going to the store, but it would have taken me longer to get the job done (if at all).
Is the Cost Worth the Payoff?
The main takeaway is that it’s worth it to incur short-term opportunity costs because of a substantial long-term payoff. And there may be long-term opportunity costs when taking short cuts.
That’s why it’s important to prioritize comparing short-term and long-term opportunity costs when addressing your marketing needs.
Time & Experience: The Trade-Off
The reality is that it’s difficult to find a single person (or even two people) with the baseline level of experience and skill you’d need to be competitive in the areas of content marketing, SEO, social, marketing automation, analytics, and so forth. There are jack-of-all-trade types, but they’re rare (plus, there’s some truth to the old saying “jack of all trades, master of none”).
The Price You Pay When You Hire In-House
If you are lucky enough to find a single person with decent level of competence in a broad range of areas, he or she usually comes with a price tag. And I don’t just mean salary. The price that you pay is also the opportunity costs associated with the fact a single person only has so many hours in the day, can focus on only so many things, and can accomplish only so much.
Businesses often look at the short-term and hire someone who’s willing to accept a lower salary. But there will always be a trade-off between experience, expertise, time and money. At lower salaries, you may find applicants who are competent in a small range of skills, but don’t have the requisite breadth of knowledge that you get from working with an agency team. You get what you pay for.
With an agency, however, you can harness the power of an entire group of expert marketers and developers. Essentially, it’s like renting a ready-to-go, professional marketing department. Good agencies hire domain-experts who contribute to a collective level of experience and who pool skill sets in a way that isn’t possible with an in-house marketing/sales staff of a couple of people.
Going back to my story about finishing my deck, the best option for getting the job done quickly and effectively may have actually been to rent a power washer, rather than buy a random orbital sander (which doesn’t get between the cracks).
Breadth of Perspective: More Possibilities
When I worked as a full-time AdWords strategist, I was exposed to literally hundreds of business scenarios across numerous industries. In that intense environment, I was able to develop a keen sense of what to do (and what not to do) in order to get an AdWords account to perform according to a client’s goals. I have a repertoire of strategies that have been proven to work for other businesses. In short, I gained a perspective and expertise that wouldn’t have been possible if I worked as the AdWords guru for a single business, like Bob’s Superstore.
An agency that works with numerous types of clients provides an outside perspective that is powerful. Why? Because the vantage point is not limited to one account or (usually) industry. An agency brings a diversity of backgrounds and experiences to the table, and can provide far richer insights, creative solutions, and fresh tactics, while still retaining a depth of focus that comes with having several specialists on board.
Also, having an outside voice provides checks and balances that can help to ensure that a marketing strategy is realistic. Unlike an employee, for example, an agency has numerous clients. This provides a level of security that puts us in the position to be brutally honest and apply some tough love. It’s not uncommon for this to be difficult for an employee with his or her job on the line.
Lower Your Risk: Safety in Numbers
Having an agency is also safer in the sense that your marketing efforts aren’t reliant on one or two in-house people who may leave you holding the bag after a year or two. People either “climb the ladder” (if they’re good), flake out (if they’re not good), or burn out (if they’re not judicious). In-house employee turnover is very expensive. You will need to leverage substantial resources for recruitment, training, and management. And if they’re the wrong hire, it could spell disaster for your business.
Can You Handle Opportunity & Growth?
If you go the in-house route, relying on a less-experienced marketer (or a good marketer who’s overloaded) may create a situation in which it takes longer to accomplish goals. It would probably be much more expensive long-term due to mistakes and lack of efficiency. This doesn’t even include the costs of missed business opportunities. There’s also a risk associate with success: if your demand exceeds your capacity, it may be difficult to keep up with marketing talent.
Artonic, however, has a healthy-sized, full-time staff supplemented by a network of vendors, contacts, and contractors – relationships that have taken years to develop. Our individual team members also have personal networks. With an agency, you can increase capacity quickly without hurting your business. There’s safety in numbers.
Higher Rate of Return: Get More for Less
Working with an agency often gets you a better value for what you spend.
Here are some of the resources that you have access to when working with Artonic: SEO expertise, Google-certified PPC professionals, e-commerce pros, project strategists, web developers, social media gurus, award-winning graphic design talent, professional photography, and more.
To hire the equivalent of what you get with an agency, you’d need a bare minimum of hundreds of thousands of dollars per year, not including benefits, paid-time off, on-boarding and training, etc.
Competitive Advantages of Being Efficient
Our staff does many of the same things day in and day out. We’ve developed efficient processes and high degree of specialization. This not only allows us to make solid choices, but also execute with skill and effectiveness.
There’s also something to be said about economies of scale: as an agency, we can invest in professional tools, memberships, and so forth because we use these resources “in bulk” to support our clientele. We’re able to keep up with trends and thought leaders in the marketing industry, participate in conferences, commit to ongoing education, and invest in the right marketing tools.
The bottom line is that it may not be feasible for you to supply the right tools or efficient processes to in-house employees. However, with an agency, you have vicarious access to all of these things. This can give you a tremendous advantage over your competitors.
Conclusion: Agency or In-House?
It’s no small decision to entrust an agency with tens or even hundreds of thousands of dollars per year. However, allocating the same funds to an in-house team has certain risks and limitations. The short-term opportunity cost of hiring an agency are many times smaller than the long-term costs of maintaining (or fixing) an in-house team.
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