The Danger of Relying on Vendors and Consultants

A few months ago at a professional meeting, I had a chance to speak with the VP of Marketing for one of the country’s largest for-profit online Universities.  The focus of our discussion was marketing strategy; or more specifically, how the company generates potential students (a.k.a. leads) to pass along to the Enrollment Counselors (a.k.a. sales team).  Using their Online MBA Program as an example, the process was explained to me as follows.

At this particular online University, the Marketing Director for the College of Business and Public Administration would first choose an audience she wanted to market the Online MBA Program to—mid-level IT managers, for example—and contact the University’s outside marketing agency for help in formulating strategy.  The outside agency would perform a full-scale analysis of the IT management marketplace, and prepare a detailed report for the Marketing Director which included the following:

  • A list of potential print advertising targets
  • A list of websites and e-newsletters for web-based advertising
  • Proposed market positioning and sample messaging
  • A 3-page report of competitive activity within the channel
  • A list of upcoming industry trade shows and speaking events, with suggested speaking topics for various University representatives
  • Sample ad designs

In addition to the above, the report typically included a comprehensive demographic profile of the mid-level IT manager, in which average income, roles and responsibilities, career paths, buying patterns and even personality traits were outlined in detail.  The Marketing Director would spend a few hours reviewing the report, select the pieces she liked (and which fit into the budget) and turn execution of the plan back over to the outside agency.  From there, the Marketing Director received regular updates on plan performance, as well as recommendations for changes and improvements.

With all of the above in mind, do you see any potential issues or long-term problems within the marketing department for this online University?  I sure hope you do.  In fact, I would guess those of you who have spent ANY time in a smaller company spotted the problem right away.  In a nutshell, the problem is that all of the specific knowledge related to the industry, the customer and the messaging resides with an external agency.  Or, to put it a bit less politically:

The Director-level marketing people at this company are nothing more than overpaid vendor managers, who have the company’s strategy fed to them by an ad agency.

In the early stages of running a small company, owners and managers often find it easier and less expensive to utilize outside help than to develop skills internally.  And when you consider the financial and administrative commitment involved with adding full-time employees, the leveraging of contractors, vendors and agencies is almost always the correct decision.  But at some point every growing business must face the reality that being self-sufficient enables companies to be more flexible, more innovative, and less exposed to risk than their contractor-dependent counterparts.

This is not to say that small companies should do absolutely everything for themselves.  Even when companies are pulling in tens of millions of dollars per year, there are still certain functions better left to outside parties.  But this was a company with thousands of employees, hundreds of millions of dollars in annual sales, and shareholders.  They should have known the following small company lesson:

You cannot grow a small company by leaving knowledge of your market, your processes and your strategy in the hands of contractors, vendors and consultants.

The point here is that all companies, even $100 million ones, can be too small to justify bringing certain functions in-house.  But functions directly relating to strategy—like messaging, lead generation and product development—must be brought in-house early in a  company’s growth, and retained under any circumstances.

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