In many large companies, the marketing function is decentralized and sprawling, leaving executives without a holistic view of their marketing activities and costs. And those costs can be enormous, not just in dollars but also in lost opportunities: Lack of consolidation and collaboration can frustrate attempts to develop critical new consumer-focused capabilities, such as social media marketing, and interfere with marketers’ ability to focus on high-value tasks, such as generating richer customer segmentations.
Some leading companies have developed a strategy to avoid these pitfalls, by reinventing a model that’s been in use for years — shared services. Marketers first adopted shared services more than two decades ago with a specific goal: to slash expenses by consolidating the work they had been giving to a number of advertising agencies for research, media buying, and creative development. They soon added direct marketing execution, performance measurement, customer data processing, and lead management to the mix. Today, marketers are taking this model a step further, to build and share more advanced capabilities — including Web 2.0 technologies — that can be leveraged across business units. By creating centers of expertise and scale and freeing up resources that had been dedicated to low-value and often overlapping tasks, companies can deepen their marketing excellence even as they reduce operating costs. This goal is a key imperative for chief marketing officers, who face growing pressure to respond to the digital revolution under increased budget scrutiny. Indeed, some early adopters of this model have achieved efficiency gains of 15 to 20 percent.
Marketing leaders may face resistance. The marketing function is traditionally owned by the business units, geographic divisions, and brands that it serves. Those who try to implement a shared-services marketing model may face concerns about losing “local” knowledge, as well as questions about what services should be shared and how they should be structured. To help executives overcome these obstacles, we have identified four key steps: Develop a baseline understanding of the company’s existing marketing services, define a menu of services, design the future model and make the economic case for its adoption, and devise a holistic but practical transition plan.
Step 1: Understand your current model. Marketing leaders need to know how much money they spend, and where they are spending it. But getting a consolidated view can be difficult, because marketing budgets are typically controlled by the business units. In addition, many marketing organizations lack a standard framework for defining all their activities, and, as a result, information on how the function’s people are deployed is often scattered and incomplete.
To get a clear picture, we recommend that companies establish an enterprise-wide marketing taxonomy that captures activities across the marketing value chain. The taxonomy should then be used to understand how the various groups are allocating their marketing budget against each of the elements. Clearly defined data collection templates can help in gathering this information consistently. The volume of work associated with various marketing activities should also be captured to help determine the optimal size of the future organization.
By then conducting staff surveys and selected interviews, marketing leaders can discern the more nuanced differences among business units and geographies. This is especially critical when companies are thinking of rechanneling their investments in a particular area while gaining efficiencies in more transactional and commoditized marketing activities.
Step 2: Determine a menu of scalable services. Companies need to consider what the marketing shared-services organization will provide to its internal customers — the business units, geographic divisions, and product lines. Two broad kinds of services should be considered: transactional services and expertise-driven services.
Transactional services are repetitive in nature, and can be consolidated into centers of scale and potentially outsourced or delivered internally from lower-cost locations to reduce labor expenses. Typical activities include media buying, creative development, performance management, customer data management and analytics, market insights and research, trade show management, direct marketing execution, and lead generation. The Oracle Corporation, for example, has centralized its most repetitive marketing tasks in India, and its local staff reports to a senior director in the United States. Oracle uses standardized systems and processes to make the Indian operation accessible to business units around the world.