Published: 30 June 2017
Analyst(s): Christopher Ross
Marketing leaders must take a methodical, comprehensive and sustainable approach to cost optimization, especially when making changes to ongoing operations. Use the seven questions in this research to identify how to drive marketing operations cost-efficiency.
Marketing leaders frequently overlook important areas for potential cost optimization, focusing only on eliminating costs or renegotiating current partner or technology relationships.
Cost optimization efforts are often reactive or erratic based on urgent, in-the-moment needs or other newly developing circumstances. This can lead to fragmented efforts that fail to deliver meaningful, long-term results and may impede marketing productivity and impact.
Operational costs can be difficult to spot behind more obvious trims to program, campaign or technology budgets. Yet, improved operations can have exponential impact on marketing results, as they touch the entirety of the business.
Even a comprehensive approach to cost optimization must recognize not all areas have the same potential for impact. Evaluating the potential near- and long-term impacts of optimization efforts is essential to prioritize efforts and focus on areas that can deliver maximum results.
To manage and optimize marketing costs:
Use seven cost optimization questions to assure your organization is considering savings opportunities across the entire continuum of opportunities. This requires considering people, partners, processes and technologies, and determining what can be eliminated, simplified, better-utilized, standardized, centralized, automated or renegotiated in each area.
Apply the seven questions to ad hoc budget exercises as well as informing ongoing, proactive cost optimization efforts. Marketing leaders must continue to calibrate priorities, and evaluate and fine-tune spending as part of continued marketing operations.
Prioritize for cost optimization success. The seven questions, when used in concert with the overall cost matrix, offer a methodology for evaluating potential business impact and subsequently addressing more tactical marketing spending decisions in each area.
While many marketing leaders continue to benefit from expanding budgets, they all face pressure to wring ever more out of every marketing investment (see ). Cost cutting initiatives can be planned or the result of an unanticipated business event or change in the marketplace. Regardless, they give savvy marketers an opportunity to shine by recognizing the need to apply a rigorous, ongoing approach to marketing operations cost optimization.
The Gartner cost optimization matrix provides a structure for evaluating the potential impact of various approaches to cost optimization, assessing short-term or long-term impact, and considering fixed and variable costs (see Figure 1 and ).
Smart marketers should ask themselves seven questions to identify cost optimization opportunities in marketing operations:
Not every question will provide equal yield. In some areas, there will be questions that offer greater opportunity for impact; in fact, some may not be relevant at all. Be thoughtful of short- and long-term implications, and focus on the primary questions as they relate to people, process, technology and partner relationships.
On average, 28% of marketing budgets are allocated to labor costs (see ), representing a sizable portion of marketing budgets. As such, marketing leaders must consider people in their drive to deliver marketing operational cost-efficiency. Care must be taken, given the sensitivity of managing human-resources-related costs. The seven-question framework can help identify optimization opportunities.
The seven-question framework, applied to people costs, can help you focus on better ways to leverage existing resources, or ways you can standardize certain tasks that can create capacity in your team's day (see Figure 2).
The seven-question framework can reveal opportunities to:
Eliminate overlapping roles and responsibilities. Duplication of skills can be useful in the right proportions. A multidimensional marketer offers greater flexibility and scale to your organization and can take on a wide variety of projects. Given that more marketers now fit this versatile profile, there is greater risk of excessive overlap and duplication. Evaluate the aggregate capabilities of your teams, and determine how much capacity is required to deliver the overall strategy and portfolio of projects (see ).
Standardize to reduce variability. Can you reduce the variability of the inputs and outputs of your people? Which elements of their roles can be standardized, and where does standardization stymie the flexibility and creativity of your marketing talent? For example, standardizing the way your people set objectives, measure their performance and deliver projects can drive greater efficiency and accountability. Also, standardizing skills across the team, for example, reducing the need for specialist roles for capabilities that are now standard, can reduce the reliance on specialist teams or support from agencies and third parties.
Centralize critical skills and capacities. Where can centralization deliver greater performance at lower costs? While some generalist skills should be dispersed across the organization, there are also scenarios where centralizing skills and capabilities can deliver better results. For example, marketing analytics are strategically important, but difficult to resource skills. Efficiencies can be gained by pooling analytics resources, building a unified approach across the business and reducing duplicate or excessive capabilities that could be better served by centralizing resources (see ). Marketers should aggressively pursue centralization where it makes sense and limit the use of distributed resources only to areas where they are required.
Automate manual or low-value work. Getting more from your people means applying their talents where they provide the most value to the business. Look for new opportunities to leverage technology to automate processes, freeing people to provide higher-value contributions. In fact, as more marketing is augmented with technologies like artificial intelligence with machines, through machines and to machines, people resources highest calling may be in bringing the humanity into data-driven marketing decisions.
Marketing agencies, consulting firms, talent marketplaces and other marketing service providers are critical partnerships for every marketing organization. Over 40% of marketers plan to increase the use of agencies, which are seen as providing superior performance, breadth and depth of skill. On average, , a large category to explore for cost optimization opportunities (see Figure 3).
Significant opportunities can be found to:
Eliminate unproductive partner relationships. At the top of the list of partner-related cost optimization opportunities is discontinuing the activity or function where a partner is not performing. It could be a natural end to a project or a decision to halt a project that is no longer driving value for the business. Be aggressive, but discerning, when considering complete agency or project elimination as a cost optimization method. Discontinuing a relationship with a partner can be disruptive to delivery, but maintaining an underperforming partner could be even more costly.
Simplify your partner portfolio. Traditional agency of record relationships are increasingly rare, as marketers manage a portfolio of agencies to access a variety of capabilities and regional coverage. The nature of marketing work, overlapping and specialized agency capabilities, and fluid lines of demarcation can quickly lead to significant cost inefficiencies. Managing a large number of partners is costly and time-consuming. Rationalize and reduce the number of agencies in your portfolio. Clarify lead roles for each, and align and consolidate work to those roles. Discontinue relationships with partners that are no longer required.
Standardize partner deliverables. It's critical to align work product, processes and approaches for continuity and consistency when working with a portfolio of partners. At the foundational level, this means ensuring compliance with basic brand attributes. To realize more meaningful cost savings, look at shared work management tools, project initiation processes, and activity and campaign reporting. When multiple partners are sharing work platforms and processes, the time and effort of client-side coordination can be radically reduced.
Centralize for scale across partners. Look for economies of scale and leverage across your partner portfolio. Scale is frequently realized in areas like media, where purchasing may be consolidated to a small group or even a single partner. Other functional areas may benefit from a similar style of consolidation. Evaluate the overall body of partner work, and determine where consolidation could retain or improve quality while also creating cost-efficiencies.
Renegotiate your partner relationships. Partner relationships are fluid. Changes in the business, project scope, timing and other priorities create an ever-changing set of requirements. Marketing leaders should be continuously evaluating current statements of work (SOWs) to validate that they reflect up-to-the-minute needs of the business and that the work itself is priced fairly relative to alternatives. Marketers are more aggressively pursuing fixed price, fixed scope engagements to create tighter cost controls and clarity on deliverables. In some cases, a renegotiation may be to completely discontinue the partner relationship.
Effective marketing is driven by effective processes. The work of marketing involves the coordination of multiple organizations, technologies and other resources. Failure to do this well can lead to an extreme waste of time and money. Improving marketing processes can deliver substantial cost optimization results (see Figure 4).
To improve marketing processes:
Eliminate inefficient manual processes. Current resources may be applied to processes that no longer make sense or are carry-overs from long-gone programs. Are you and your team generating and distributing reports nobody reads or continuing ongoing meetings with other internal groups that don't have a clear or significant purpose? Eliminating processes where appropriate can be a fast-track to freeing resources to be applied to other marketing activities.
Simplify processes to reduce complexity. Limiting the number of people involved, removing steps that may no longer be required and discontinuing any unnecessary portion of an existing process can reduce time and effort, providing a clear cost benefit. Marketing leaders should experiment with eliminating people or steps to simplify; in situations where cuts have been too aggressive, steps and staff can be added again as required.
Utilize processes consistently. Sporadic use of processes creates inefficiencies, whereas consistent use of processes provides a stable and predictable baseline that can be further optimized and improved. You must be clear on core processes and commit to using those processes to realize cost-efficiencies.
Centralize core work processes. The fragmentation of marketing process and management creates a lot of wasted time and effort. To maximize effectiveness, establish a unified, central view of marketing activities and processes. This provides visibility to improve project governance, resource alignment and overall coordination of efforts. Without this view, there is greater risk of work duplication and misuse of resources. Implementation of work and asset management solutions can be instrumental to centralizing management of activities.
Automate manual processes and leverage technology. Even after homing in on core processes, there are additional opportunities to realize cost savings by reducing manual work through automation. Simple automation such as notifications around review and approval of materials, prompts for project-related follow up, or other triggered actions can provide surprising value. Marketers should evaluate every manual activity and seek opportunities for automation.
Twenty-seven percent of marketing budgets are spent on technology, representing a sizable slice of the marketing budget. As such, it is a large target for cost optimization. Evaluate the actual usage of technologies, and eliminate tools that no longer are relevant or fit requirements (see Figure 5).
The seven-question framework may reveal additional opportunities to:
Eliminate unnecessary marketing technologies. The clear choices are tools or technologies that are not actively utilized. Many software-as-a-service solutions come with seat-based or usage-based metered billing that requires little upfront capital investment. Ultimately, they end up dormant, forgotten or passed over in favor of a new tool. Finding and discontinuing any unused solution will be a quick budget win.
Simplify your technology stack. Once the obvious eliminations are made, rationalize your portfolio of remaining technologies, working to consolidate and reduce the number of solutions while retaining support for marketing business requirements (see ). More complete usage of a smaller number of solutions drives more efficient use of marketing technology budgets.
Utilize the tools and technologies already available within the organization. In some categories, as many as 24% of marketing leaders describe their use of marketing technologies as "deployed but mostly abandoned" (see ). The issue with underutilization is typically tied to inadequate training, unclear ownership or staffing. Assess the utilization of current tools, and invest in the staffing and training to maximize the value of current technologies.
Standardize on platforms and tools. Standardizing in the context of technology includes two vectors: one is standardizing the technologies themselves, determining the common, dominant platforms to orient around and using the related standards to rationalize the marketing technology stack; and the other is leveraging technology to templatize projects, campaigns, reports and other aspects of marketing operations. Leveraging common technologies and features that support templatizing other aspects of marketing leads to cost savings.
Renegotiate technology licensing agreements. The marketing technology landscape is jammed with vendors competing for their piece of your marketing budget. At the same time, your technology requirements are evolving, and vendors are trying hard to influence when and how those technologies are deployed. Actively review your technology portfolio every year, and renegotiate licensing relationships to focus on alignment with core marketing goals.
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This research was developed based on client inquiries and field experience, and with the support of end-user examples as secondary sources.
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