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The Pros and Cons of In-House Marketing Mix Analysis

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In this article, you'll learn...

  • Four reasons in-house marketing mix analysis is beneficial
  • Five drawbacks to bringing marketing mix analysis in-house
  • Whether or not in-house marketing mix analysis is right for your organization

The question isn't should you be doing marketing mix analysis, but rather, how you can best do it. Marketers across multiple industries are learning what consumer packaged goods manufacturers have known for years: Marketing mix analysis provides insights from market dynamics and past performance that improve return on investment (ROI) and optimize spend.

So what is the debate? It's whether organizations get the best results from outsourcing marketing mix analytics or building in-house capabilities.

Here are some relevant factors:

  • Business scope (breadth of products/geographies and current and future levels of marketing spend)
  • Data availability
  • Current state of marketing mix in your organization
  • Complexity of your specific business market

Though many organizations initially outsource marketing mix analysis to get moving quickly, most will eventually consider bringing the process in-house. Cost is often the preeminent consideration, but it's not the only one.

Let's consider the pros and cons of in-house implementations.


Pros

1. Consistency and Transparency

Vendor models—those used in hosted services—are often closed and proprietary. Your organization has limited to no visibility into weaknesses, failures, and potentially hazardous "workarounds." If you engage multiple suppliers, they'll almost certainly provide inconsistent information for identical marketing decisions across different brands or products. An in-house process, on the other hand, allows you to produce, validate, and manage the predictive marketing response models at the heart of marketing mix analytics.

2. Timeliness

Do you want more-frequent model updates from your supplier? Be prepared to open your pocketbook. A solid in-house analytics team, complemented by robust modeling software, can provide model refreshes quarterly—and even monthly. New business knowledge from your company's brand teams and its broader organization can be incorporated quickly into models.

3. Enterprise Knowledge

Invaluable insight gained from the modeling process should accrue to your organization, not your suppliers'. Supplier staff turnover equals knowledge lost between projects. In-house systems allow your organization to increase and maintain long-term brand and product knowledge. Plus, if you're not locked into your suppliers' approach, you'll have more freedom to experiment and to explore emerging analytic techniques, such as agent-based models.

4. Data Assets

A centralized, in-house marketing data mart can evolve over time to incorporate new, valuable data sources, and it can readily serve mix-modeling needs as well as ad-hoc analytics and business intelligence reporting. Can your vendor do that?

Cons

1. Upfront Costs

An upfront investment in technology and data infrastructure will be required if resources are not already available. You'll also have to pay for the time your staff spends planning and building the in-house capability.

2. Hiring

Finding team members with the right skills can be challenging and expensive as the demand for top-notch analytic talent increases. And with such a hot analytic marketplace, you'll need to invest in long-term incentive structures to retain your best talent.

3. Time

Let's face it. Establishing the teams, processes, and technologies to drive marketing mix analysis can take years. To reap those long-term benefits, multiple internal groups will need to invest time. Success requires a senior-level executive sponsor who can bridge groups and hold participants accountable for meeting project objectives. Furthermore, key representatives from stakeholder organizations must have the success of the project worked into their personal management objectives.

4. Nimbleness

I've seen organizations favor outsourcing simply because doing so allows them to procrastinate. Unfortunately, that forces the supplier to work its team overtime to meet deadlines. If your organization can't master good planning, an outsourced solution may be your best option.

5. A Culture of Analytics

If you're not already using marketing mix analytics to inform marketing mix decisions, analytically derived recommendations may not be warmly embraced at your organization. If your organization can't master good analytics, an outsourced solution may be your best option.

After the Pros and Cons

If you've weighed the pros and cons and you're leaning toward in-house operations, you may still be overwhelmed by the scope of the task. A phased approach will help move your organization toward its goal.

Remember, you are probably not starting from scratch. Use the work you're already doing— delivering data feeds to a marketing mix vendor—to kick-start your own marketing data mart build.

In general, high degrees of automation and efficiencies in today's modeling and reporting software don't require squadrons of analytical consultants to support your business units. Create a technology-based model that supports a large number of information consumers without comparably large numbers of information producers.

Best advice? Keep your eye on the goal. It takes time to achieve, but if you've determined that in-house is the way to go, marketing mix capabilities will provide the high-level benefits that'll make your decision worthwhile.


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Noah Powers is customer intelligence specialist at SAS, which provides analytic solutions to help solve complex marketing issues, including marketing mix optimization and marketing optimization.

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Comments

  • by Theresa Kushner Wed Apr 25, 2012 via web

    Agree with everything Noah said. Except it does seem fairly self-serving since he is a SAS analyst. If you've already invested in analytical capabilities, marketing optimization is the task most analysts want to get the chance to do. Aggressive organizations will build their internal resources toward being able to deliver just this kind of project.

  • by John Dawson Wed Apr 25, 2012 via web

    I'm not sure I do agree that nimbleness is a benefit of using an external consultant. From my time as a Consultant, we'd need to go through RFP's, Procurement and a whole host of things in order to execute a very simple project. Internal teams have permission to just get on with what's important.

    I'd also add that I think context is so important when running analysis that you can't underestimate the value of having someone internal who understands their subject.

    Another point I'd add is this - it's often not possible to specify exactly what the question is that you need someone to answer for you. On many occasions, I started a project thinking the objective was to analyse one metric only for five other questions to come up which we needed to look at as a higher priority.

    For me, quick accurate answers are the key - if you can't get these then that's your issue.

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