Should You Be Outsourcing Your Digital Marketing? A 5-Minute Quiz
September 28, 2020
- Marketing •
Aden Andrus• September 28, 2020
At Disruptive Advertising, we’re big believers in the power of outsourcing your digital marketing. I mean, we’re a digital marketing agency, so it kind of goes with the territory.
That being said, we also know firsthand that marketing agencies aren’t right for every business.
But which category does your business fall into? Should you outsource your digital marketing? Or keep things in-house? It can be hard question to answer.
Normally, to answer that question, we like to sit down with prospective clients and talk through the ins and outs of their business. If outsourcing their digital marketing makes sense, we’ll let them know. If it doesn’t, we’ll explain why and try to get them pointed in a more effective direction.
After all, it doesn’t do anyone any good to hire an agency when that’s not the right fit for your business.
Now, that kind of in-depth assessment is a little hard to pull off in a blog post, so we’ve put together the next best thing: a quick quiz you can use to determine whether or not you should be outsourcing your digital marketing. This quiz isn’t a perfect predictor, but it’s a good, easy place to get a feel for what your business really needs.
A Quick Self-Assessment
If you’re reading this article, odds are that you’re either currently outsourcing your digital marketing and unhappy with your results or you’re doing things in-house and wondering if outsourcing would be a better solution.
Either way, this quiz should help get you pointed in the right direction. We’ll go over the answers and scoring in a bit, but first, go through the following questions and record your answers:
Before we jump into scoring your results, let’s talk about each of these questions and why they matter. After all, getting a score won’t mean much if you don’t understand what your score really means.
1. How much are you willing to spend to improve your online marketing?
Whether you outsource your digital marketing or manage it in-house, marketing is an investment—and not just in terms of ad spend.
If you aren’t willing to invest time and money into finding the best ways to market your business, your marketing will never really reach its full potential. You can make that investment in-house or by hiring an agency, but it’s an investment you have to make if you want to achieve long-term success.
The question is, how much are you willing to (or able to) invest?
If you can only afford to spend a few hundred dollars a month on testing and refining your marketing, outsourcing probably isn’t the right move. At that price point, any agency you hire either won’t put much effort into your account or won’t have much expertise to bring to the table.
Now, there’s nothing wrong with recognizing that you’re not in a good position to make a major investment in improving your marketing right now. But, if that’s the case, your budget is better spent directly on testing new ideas than hiring an agency that doesn’t have the time or expertise to really help you.
If you’re prepared to invest $500-1,500/month into management fees, you’ll get more from an agency, but the value you get for your money will really depend on who you hire. If you can find a decent agency that seems like a good fit at this price point, it may be worth a shot, but if you aren’t seeing much of a difference after a few months…you might want to reconsider your choice.
Once you can afford to spend $1,500+ a month to improve your marketing, though, outsourcing your marketing can be a really compelling option to consider.
For a $1,500+ a month management fee, a good agency will commit serious resources to helping you make the most of your account. You’ll get the time and expertise your business needs to get great results and scale, which can lead to some pretty exciting growth.
Of course, if you can afford to spend even more on improving your marketing, you’ll get even more time and attention from a good agency. That can result in huge improvements in performance, and your agency partner will be excited to scale their efforts right along with your business’s growth.
2. What is your average gross profit per new customer?
Even if you’re willing to invest a lot into improving your online marketing, you may not have as much wiggle room as you think. That’s why it’s important to take a look at your average gross profit per new customer.
Improving your marketing—whether that’s by investing directly into testing new campaigns or paying for outside expertise—takes money. That money often doesn’t immediately translate into sales. If you aren’t making enough profit to handle the added cost of outsourcing your marketing, hiring an agency may not be the right decision.
Low Profit Per Customer
To show you how this works, let’s imagine that you sell cell phone accessories. Your average order value is $28 and it costs $10 to fulfill an order, which leaves you with around $18 of net profit per sale. Given your current cost-per-sale of $12, you net $8 for every sale you make.
You want to take things to the next level, so you’re considering hiring a marketing agency. Is that the right move?
To answer that, let’s take a closer look at the numbers. If you’re making $28,000 in sales a month, you’re spending $12,000 a month on advertising. On average, most agencies will charge around 20% of ad spend to manage this sort of marketing budget, which works out to a management fee of $2,400.
If you’re willing to make that kind of investment, a good agency can do a lot for you, but it will take time to get results. The problem is, you’re only making $6,000 of profit a month, so outsourcing your marketing will eat up 40% of your current profits.
Is that an investment you’re willing to make for several months before things really start to take off? Maybe, maybe not. It all depends on your goals and what sacrifices you can reasonably make to achieve them.
High Profit Per Customer
In contrast, let’s say your business does commercial HVAC installs instead. You charge an average of $2,800 per job and you have a gross profit margin of $1,250. Your cost per sale is about $750, which leaves you with $600 of net profit per install.
At 10 sales a month, you’re making the same $28,000 a month of sales as the cell phone business, but you’re only spending $7,500 on advertising to make $6,000 in profit.
A 20% management fee for $7,500 of ad spend works out to $1,500 a month, which puts you in the sweet spot for hiring an agency. This time, however, outsourcing your digital marketing so you can scale will only eat up 25% of your monthly profit (vs 40% for the phone accessories business).
Odds are, that’s a much easier investment to make.
Obviously, these are grossly oversimplified scenarios, but they highlight how profit per customer can influence your decision to outsource or manage things in house. Total sales and net monthly profit were identical for both of these business, but because the gross profit per customer was so much higher for the HVAC business, hiring an agency was a much more affordable option.
The higher the lifetime value of your sales, the more marketing spend you can justify to get them, and the more good an online marketing agency can do you. A good agency can leverage the expected value of your sales to improve marketing and generate more customers in the future.
3. How much of your business is from new customers vs. existing customers?
The higher your turnover rate is, the better your marketing needs to be.
For example, if you make industrial grade diamonds, odds are that there are only a few companies looking to buy what you’re selling (and you probably already have relationships established with all of them). Additional marketing won’t do you much good at this point, so you may not have much to gain from hiring an agency.
On the other hand, if you make diamond engagement rings, then your customers (hopefully!) only need to buy one in their lifetime. You need to be constantly attracting new bachelors in order to keep your company from going under. In this case, the expertise of a marketing agency may be absolutely critical to the success of your business.
4. How well do you understand the nuances of the online advertising platform(s) you use?
I just mentioned that if marketing is important to your business then the expertise of an agency may be helpful. That is…unless you already have that expertise.
If you’re already running case-study worthy campaigns, you may not get a ton of added value from outsourcing your digital marketing. There may be other reasons to outsource—like freeing up your time to focus on other, more important tasks—but if you’re already an expert with your marketing platform(s), you may not get a ton of additional insight from an agency.
On the other hand, if you’re not particularly great with or knowledgeable about a particular platform, a good agency can make a world of difference. To make things even better, outsourcing your digital marketing can actually be a great way to learn more about different platforms.
An agency that is good at communicating can help you understand why they’re doing what they’re doing. Your agency can teach you how to manage your site and your accounts successfully, should you want to do so in the future.
5. How many online advertising experts do you currently employ?
A big part of developing expertise is assembling a team of experts. Online marketing is a big enough area that it’s extremely difficult for one person to be a master of every aspect of digital advertising.
That means to succeed in today’s competitive online marketing environment, you probably need a team of online marketers.
Now, there are two ways to go about acquiring this team: hire them in-house or hire an agency.
There are distinct advantages to having in-house specialists. A good agency will do their best to get acquainted with your industry, your vision and your priorities, but it can be hard to beat the knowledge that comes from the inside.
That being said, there are disadvantages to hiring your own marketing experts as well.
First of all, most small-to-medium-sized businesses don’t need a full-time designer, a full-time paid search expert, a dedicated social media manager, a paid social media marketer, a web developer, a copywriter and email automation specialist. They need all of those things, but they can’t afford to hire someone for each of those roles.
Unfortunately, it’s not easy to find true experts who only want to work a few hours a week.
Agencies, however, are able to give a team of experts in a variety of fields full-time employment because each marketing expert works on multiple accounts. There also tends to be less turnover with established marketers in agencies and even when one member of a team leaves, the others are around to bring his or her replacement up to speed.
Very large companies will find these problems less troubling, however. So, if you have enough need and the resources to hire your own team of senior marketers full-time, switching to an agency would be unlikely to add a great deal to your online efforts.
6. What is the current conversion rate on your website?
What percentage of the people who visit your site end up “converting” in some way (purchasing, calling, opening a chat, giving contact info, filling out a form, etc.)—1%? 5%? 10%?
If you feel like you’re in the very high category (8% or more), you may want to check your math…
…Checked it? Well, then congratulations! You may be in the top 10% of businesses in your industry!
With a conversion rate this high, you may have already cracked the marketing code for your business. It’s possible that working with an agency could increase your success even more, but you have things pretty well managed already and you should be proud of yourself.
If your conversion rate falls somewhere between 1 and 8%, working with an agency will probably be helpful (and maybe even essential).
If you’re converting at less than 1%, you may be lucky to still be in business. Whatever you’re trying isn’t working and you need some outside help if you want your online marketing to start delivering real value.
Well, that’s the end of the quiz! How do you feel about your answers? Chances are that some of the questions indicated you’d do well on your own and others indicated an agency would be helpful.
Like I said at the beginning, this can be a complicated choice to make. No single factor captures the needs of your company, so let’s total your score to get the big picture:
You should probably outsource your digital marketing right away. Your business probably has a lot of untapped potential and you’re well situated to benefit from hiring an agency.
Outsourcing your digital marketing will almost certainly be helpful to you. Previous marketing efforts probably haven’t worked out the way you hoped and outside assistance may help you to increase your visibility and your profitability.
An agency could be helpful to you. You may have limited marketing resources, but you’ve got some things figured out. A long-term relationship with an agency will probably be beneficial, but you also might consider a shorter “mentorship” arrangement to help you get ready to handle things on your own.
You may not need an online marketing agency right now. Either there are aspects of your business which make online marketing impractical or already you have the resources to handle it on your own. That being said, if you’re curious for another perspective, you may want to have a sit-down with an agency representative if you feel there are areas of your marketing you’re still unsure about.
To Outsource…or Not to Outsource
Obviously, every company’s situation is different and this quiz isn’t a perfect indicator of whether or not your business needs an agency. However, it should give you a good feel for whether or not outsourcing your digital marketing is right for your business.
At a minimum, hopefully going through this exercise has given you a lot to chew on. Deciding whether or not to outsource your digital marketing is a big decision and it’s important to choose the right route at the right time.
Of course, if you’d like a more in-depth, personalized analysis, we’d be more than happy to take a look at your business and give you our recommendations. Just let us know here or in the comments!
How did your business score? What do you think of this quiz? Do you agree with our approach to determining whether or not to outsource your digital marketing? Leave your thoughts in the comments below.