The Hidden Costs of In-House Marketing Measurement

04/27/2023

Times are uncertain, and the finance team is pushing for cost savings. The pressure is on to find ways to save money and do more with less. Someone on the marketing team has a bright idea: let’s bring marketing measurement in-house to save the money that is paid to the outside vendor. The cost savings appear obvious: the team can immediately put those vendor expenses in the bank and claim victory with the finance team. But in the rush to find hard dollar cost savings, most teams don’t evaluate the hidden costs of this decision nor the damage to their brands that will occur as a result. These costs may be hidden, but they’re very real, and they pose real risks that will be felt in the short term and for months and years after the decision has been made.

 

When a decision is made to bring marketing measurement in-house, the risks and ripple effects will be felt across a very predictable panoply of problems:

1. False confidence masking poor decisioning
2. Lost precision, agility, speed and responsiveness
3. Lack of innovation
4. Missing benchmarks and comparisons
5. Which leads to negative business effects (lost revenue, weaker marketing efficiency, lower acquisitions, etc.)
6. Which in turn, leads to lost competitiveness
7. Internal prioritization yields trade-off costs
8. Which can lead to higher people costs
9. Which all add up to higher-than-anticipated in-house costs and complexities

 

 

 

 

The Disadvantages of Taking Marketing Measurement In-House

 

 

The False Confidence Problem

 

Once a marketing team brings measurement in-house, it is at risk of a major false confidence issue. This is not to say that it is impossible for a brand to run its own measurement analytics. Talented, experienced analytics team members, while very difficult to recruit and retain, can do great work. The false confidence issue is related to the fact that the relative level of proof required for a very specialized marketing measurement vendor is much, much higher than for an internal analytics resource. The bar is higher, and it should be.

 

Consider a few facts:

1. A measurement vendor typically serves many brands, all of whom train a constant, critical eye towards the measurement outputs they receive from the vendor solution. This large and diverse client set continually challenges the vendor across a wide set of outcomes, industries and data sources and ensures consistent, high-quality measurements.
2. The measurement vendor must build and assess quality assurance processes, procedures and outputs on a continual basis, and ensure that these cover every model, measure and brand-specific use case.
3. The best marketing measurement vendors have entire data science, QA and data operations teams all singularly focused on delivering the best possible measurement with the highest quality and reliability. 

 

Let’s contrast this with an in-house measurement effort:

1. The in-house “team” is likely to be a single person, and marketing measurement is probably not the entirety of that person’s time or focus.
2. This in-house analytics person probably isn’t well versed on the development of automated QA screens, the creation of highly reliable, consistent code routines or data governance, which is equal to or even more important than model development. Garbage in, garbage out. 
3. When new priorities come along that require a drop-everything effort to react to a leadership team request, the in-house analytics person is forced to turn away from marketing measurement (and the efforts to build quality and reliability infrastructure) to a must-have-it-now reporting request that has nothing to do with marketing measurement.

 

These conditions are just a simple reality for the vast majority of in-house analytics efforts. These realities aren’t a criticism of any analytics person, their talent or their capabilities. These realities are simply the common conditions most analytics professionals face on a day-to-day basis.

 

But the problems is that these conditions create silent quality problems, errors, and risks that are masked by false confidence. These risks, while still faced by measurement vendors, should be significantly lower compared to in-house efforts. This not-knowing-there-is-a-problem with the marketing measurement leads to overconfident decisioning that is based on problematic models, data, assumptions or even outright inaccuracies. 

 

And when marketing decisions are made with false confidence when underlying measurement problems exist, the damage is done. Sometimes these silent issues persist for months or years, and the damage to the business is substantial. By the time it is discovered, if the issues become known at all, it is too late.

 

 

Lost Precision, Agility, Speed and Responsiveness

 

Once a brand has pulled marketing measurement in-house, it faces a new risk in terms of reaction speed and agility. Some may argue that an in-house team will move faster because they are dedicated to the brand, but the fact is that most analytic teams have a very large backlog of projects, business requests, and competing priorities. And this all adds up to delays and slower response times resulting from constant priority shifts.

 

A solution vendor must be accountable and responsive to their client– a happy client is a client that continues with the relationship. Given this, an outsourced solution provider cannot afford to move slowly to customer requests.

 

While it is difficult to quantify the hard dollar impacts of lost agility, the impacts are real nonetheless. In markets that are being disrupted by newer, faster competitors, a loss in speed and responsiveness can be deadly to the brand. Consider the massive changes that occurred in the market in the last 12-24 months across consumer behaviors, media consumption patterns and buying modes. Delays in measurement updates were costly and brands suffered by being too late to capture these trends and adjust marketing strategies accordingly. 

 

 

Slower Pace of Innovation

 

Measurement solution providers work in a highly competitive market where players are continually investing in, and evolving their solutions. The continuous improvements and enhancements allow leading providers to compete and win new business by differentiating their capabilities.

 

Likewise, brands that play in markets that are being reshaped by newer market entrants must keep pace with the level of innovation being driven by smaller, faster and more innovative players. Not doing so puts an entire existing customer base at risk as consumers find it easier to switch to more compelling offerings. A brand is a lot less likely to try to innovate on the basis of analytics and is more likely to invest in product and service innovation, new customer experiences and service levels. This is not to say that analytics teams do not innovate– they can and they do. The point is that unless the enterprise has made decision to do so, it is very difficult to invest in the levels and pace of analytic innovation when compared to a vendor whose sole existence relies on the ability to out-innovate its competitors.

 

Again, it is difficult to quantify the dollar impacts of lost innovation. But the easiest way to think about this tradeoff is to compare brands who utilize innovative analytics vendors with brands that don’t. This highlights the risks of this innovation imbalance.

 

 

 

Missing Benchmarks and Comparisons

 

Wonder how your brand’s marketing mix or performance compares to your competitive peer set? Or, do you have a nagging feeling that you are missing opportunities in the market due to a lack of visibility? When taking marketing measurement in-house, these external perspectives are extremely difficult to obtain. When using a leading measurement solution, benchmarking and peer-group comparisons should be a standard capability. And when leveraging these unique benchmarks, a brand can improve performance by continually testing new opportunities, moving from a laggard to a leader.

 

 

Quantifying Hard Dollar Costs of In-House Marketing Measurement

 

 

While some of the risks and costs outlined above are a little more difficult to quantify, there are several hard-dollar cost impacts that can be identified when a brand chooses to operate its own marketing measurement in-house. The chart below compares relative hard-dollar cost differences across the wide set of areas that all come into play when building, operating and maintaining an in-house measurement solution.

 

A few elements need some additional context and explanation:

• People Costs: many of the people-related costs are lower for external solution vendors because skill sets can be leveraged and fully utilized and focused on measurement, and nothing else.  
• Solution Operation Costs: similarly, an external solution vendor will also achieve much more efficient economies of scale for hardware, software and related operational costs because they build or purchase these elements in higher quantities at lower unit costs, and because these operational efficiencies are passed on to customers. 

 

As a result of these scale-based efficiencies, measurement solution vendors can achieve cost savings advantages of 30-90%+ when compared with brands that build and operate their solutions in-house.

 

 

Adding it Up—Comparing the Costs of In-House Marketing Measurement vs. Outsourcing:

 

 

Cost Element	In-House	Outsource
Staffing- Experienced Modelers: comparison assumes one dedicated modeler (with 10-20 years’ experience)	Fully loaded cost (salary + benefits)	Access world-class analytic expertise and data science resources for a fraction of the cost of dedicated in-house staff ✅
Staffing – Analysts: comparison assumes one dedicated analyst, but the brand may require hiring 2-3 to support full measurement in-house	Fully loaded cost (salary + benefits)	More efficient use of resources, significant savings ✅
Staffing – Data, ETL, Database Administration, Data Governance: comparison assumes use of shared resources with internal IT teams	Internal support costs billed from using internal IT resources (and lost time from waiting on IT priority queues)	More efficient use of resources, significant savings ✅
Staffing – BI: development of dashboards, reports, BI licensing costs	Internal support costs billed from using internal IT resources (and lost time from waiting on IT priority queues)	More efficient use of resources, significant savings ✅
Staffing – Engineering: building optimization tools, scalability tuning, interfaces. Assumes used of shared resources with internal engineering teams	Internal support costs billed from using internal IT resources (and lost time from waiting on IT priority queues)	More efficient use of resources, significant savings ✅
Compute – Hardware, Software: dedicated servers or rental of cloud compute	Dedicated capital investments plus setup and maintenance costs, and lost time waiting for IT priority queue	More efficient use of resources, significant savings ✅
Compute – Storage: dedicated storage or rental of cloud storage	Dedicated capital investments plus setup and maintenance costs, and lost time waiting for IT priority queue	More efficient use of resources, significant savings ✅
Compute & Staffing – Dev Ops: Dev Ops costs have grown as companies use more cloud services, tools and technology. These costs include both people and technology (licenses)	Dedicated capital investments plus setup and maintenance costs, and lost time waiting for IT priority queue	More efficient use of resources, significant savings ✅
Business Impacts – Marketing Efficiency: with a vendor with dozens or hundreds of employees solely focused on the best possible measurement and business outcomes, it isn’t unreasonable to expect higher performance. This analysis uses a conservative assumption that a specialized measurement vendor will deliver a minimum gain of marketing efficiency.	Lost performance	Gained performance (10-30%) ✅
Business Impacts – Revenue: with a vendor with dozens or hundreds of employees solely focused on the best possible measurement and business outcomes, it isn’t unreasonable to expect higher performance. This analysis uses a conservative assumption that a specialized measurement vendor will deliver a minimum gain in annual revenue.	Lost performance	Gained performance (10-30%) ✅
Cost Comparison Total =	Substantial hidden costs	Significant cost savings, performance improvements and competitive agility ✅ ✅ ✅ ✅ ✅

 

 

The enticing savings opportunity of removing a vendor’s fee from the budget requires a much deeper analysis of the true cost impacts of a decision to bring measurement in-house. Brands need to carefully consider each of these costs and risks alongside their need to compete in their markets, and do so with the agility required to compete successfully. Generally speaking, using a specialized marketing measurement vendor will be significantly lower cost when fully accounting for all of the direct and indirect cost areas and business implications.

 

 

 

Cost Considerations When Choosing a Marketing Measurement Vendor

 

When your brand decides to look for a marketing measurement and optimization vendor and solution, there are many factors to keep in mind when evaluating different options in the market. We’ve outlined some important criteria below to keep in mind when making this important decision.

 

 

Consulting vs. Software

 

Most of the solutions in the market are consultancies that will custom-build solutions for your brand. While this may appear attractive, a consultancy approach has some very significant drawbacks when compared to more modern technology companies that offer measurement and optimization solutions via software-as-a-service “SaaS”. The issues with consultant-delivered solutions are many:

 

• High-Cost: consultancies require hourly billing to support their business model, and usually lack scalable self-service technology. The result: the brand is stuck in a high-fee relationship regardless of their service and support needs.
• Slow Speed: any analytics requiring manual efforts will be extremely slow. Why select a vendor that lacks scalable technology and forces the use of slow, manual services? This is not how to compete in the modern economy. 
• Inflexible Support Levels: consultancies that rely on high hourly billings are not built to give you solutions based on self-service options. This business model conflict will cost your brand over the long term. Some vendors offer a combination of high-scale, modern technology and flexible consulting service models that offer the best of both elements, and allowing the brand to flex as its own needs and support levels change and evolve over time. 
• Lack of Solution Scale & Measurement Detail: many brands cannot scale their measurement solution across multiple product lines, geographies or lines of business because consultant costs are much too high. Also, manual measurement solutions lack detail and depth in measurement reads that miss hidden ROI and performance lift deeper within marketing channels. As a result, costs are too high to serve the entire business and performance opportunities are missed.

 

 

Support Model Flexibility

 

With the right resources, skills and team, many brands can use an outsourced measurement solution without requiring heavy levels of consulting support from the vendor. But, if the vendor is a consultancy, this kind of self-service approach may not be possible because the vendor’s own business model cannot support self-service technology. So, an important decision criteria for brands is to understand whether self-service is possible and that the vendor’s tools can actually be used without consultants’ assistance.

 

Many brands chose a vendor that provides strategy consulting only to realize that they are now stuck with a solution that has no ability to be operated directly by the brand. This increases costs long-term, and slows down the speed of insights for the brand as they are forced to rely on consultants to deliver guidance via presentation materials.

 

It is critical to choose a vendor solution that offers flexible consulting support models that do not rely nor require the use of expensive professional services billings if they aren’t required. Insist on a solution that offers self-service options, even if your brand may not require those currently. These support needs evolve over time and your vendor must be able to flex to meet these changing needs.

 

 

Modern Technology and Right-Sized Service & Support

 

Fortunately, brands don’t need to sacrifice service and support in their search for speed and agility from their measurement solution. Modern solutions that are built with advanced AI and high-scale computing provide major advantages in speed, business scale, measurement detail and flexibility. And the right vendors can combine this advanced technology with the right levels of consulting service and support to meet the needs of the brand today, and the evolving needs of tomorrow.

 

Contact us today to learn why OptiMine’s modern marketing measurement solution is the right fit for you and your brand!