We are all advocates and customers of outsourcing in our daily lives. When did many of us last repair and service our own cars? And even if we don’t drive, we’d be outsourcing our transport needs to public transport or the gigging economy! Going out for a meal with family and friends is us outsourcing a sociable experience and sourcing food via a third party. Even stepping foot in the supermarket, we are about to outsource the procurement and production of our household purchases to third parties.
Yet despite this level of commonplace, everyday outsourcing, some would argue it still has stigma and/or is a “dirty” word when it comes to outsourcing key business functions in the commercial context. Sometimes, it is seen as a byword for ‘cost cutting’, ‘selling out’, or conceding a lack of capability. But as most would attest, outsourcing business functions that are not core to the enterprise, to expert providers who do have that function as their core competence, supports the old adage somewhat of “sticking to the knitting.”
Similar stigma and reticence is still often experienced in the area of field sales and in-store brand activation tasks; “How could we possibly remove the crown jewels of our sales force, or our brand ambassadors, those whose passion for our brands couldn’t possibly be surpassed by a third party?” This is the reticent cry often heard, albeit lesser now, in the Sales Directors’ leadership meeting.
Passionate experts with scale
Outsourced field sales, contract sales, merchandising and retail marketing services providers exist because they usually, for want of a better plagiarized ad slogan, “reach the parts that others don’t.”
The scale and geographic reach that can be achieved with fieldwork being the core of the business, enabled by the breadth of suppliers/tasks supported, makes for unprecedented reach. And as anyone who knows the challenges of running field teams; the more work there is to execute in territories, the smaller those territories are likely to be, and the less inefficient travel time and unrecovered costs. Given their core business, outsourced field sales providers, have the systems and expertise to optimize their scheduling, routing the team in the most efficient but coverage-enhancing manner. Furthermore, the breadth and depth of coverage of all retail channels makes for great intellectual property and best practice sharing.
The typical third party merchandiser owns their territory for sometimes several brands, and sees them and the retailers they visit as their ultimate customer. The agency brand is almost covert. What matters to these experts is servicing their retailers with whom they have great regular relationships with, and brands for which they have tremendous loyalty, as without them, they would not get their working store hours.
The sheer scale, breadth and depth of coverage, married to the passion and accountability of local outsourced brand activators/merchandisers equates to improved agility, a maximized speed to market for the brand owner, and a flexibility in coverage model which could consist of dedicated calls only for solus brands or shared store calls across a range of brand owners.
Commercial benefits
Often cost/efficiency drivers are the catalysts for outsourcing for the first time from an insourced team. And sometimes, the soft landing for an initial move from in to out is to retain dedicated solus brand calls versus going into a shared (sometimes known as syndicated) call type. Indeed, it is reasonable to assert that usually investment is reduced as overheads are spread across multiple clients and the scale produces economies. Furthermore, the cost base knock-on effect of outsourcing is a corresponding reduction in the investment needed for Human Resources (HR), payroll, systems and management.
Often overlooked are the additional and incremental balance sheet benefits of outsourcing given the removal of leave balances, entitlement accruals such as the very real challenge manifested from COVID when staff were less willing to take leave during lockdowns and still presents a legacy effect now. Similarly, even if the supplier does not want to fully outsource, the labor market gaps and challenges in this post COVID low employment period are better tackled with the support of a third-party partner who can help fill those gaps.
Commercial benefits in outsourcing also include agency fees inextricably related to performance. Unlike insourced teams where the overhead costs are regardless of performance, the rigor of KPI management in an outsourced team versus in-house (ie agency contracts “stand and fall by results”) makes for an increase in the ROI of in-store activation.
Finally, contractual governance is widespread versus just managing as an in-house department. Notwithstanding the clear and positive relationship between result and fee for the budget holders of merchandising services in retailers and brand owners alike (usually either sales or marketing leads), procurement managers can take comfort in the knowledge that in the initial contract set up and negotiation, they have helped their businesses with strong governance of the agency contract.
Intangible benefits
Whilst efficiency, effectiveness and return on investment is the ultimate arbiter of outsourced versus insourced teams, there are many inadvertent and, for some, pleasantly surprising consequences.
Sophisticated agencies will support their client partners in providing their staff as a talent pipeline to management roles within the client. Competencies and succession plans can be aligned in order that clients benefit from the talent in the agency over the short and longer term. In addition, smart agencies will use their understanding of multiple categories, retailers and trading channels to share what works and doesn’t work in order to maximise returns for their clients.
Furthermore, where there is breadth to the value proposition of the agency, i.e. additional services such as space planning, vendor replenishment and sampling which are adjacent and complimentary to the core of field sales, the ensuing connectivity of these services results in increased sales and return on investment.
Removing the hassle factor and the organizational stress from running large scale teams is often underestimated when moving to an outsourced model with an expert agency in the field. With increasing OH&S and workplace legislation requirements, moving the accountability to a third-party expert can offer peace of mind.
Finally, unlike in the insourced model, in the rare event that brand owners or retailers outsource and it doesn’t work, decision makers can choose to pitch out their work to alternative agencies, to create competitive tension to ensure ultimately, you get more than you paid for and have your expectations exceeded.
Summary
So, whilst the reticence to outsourcing field sales/retail marketing services, has subsided somewhat, driven in part by the necessities of cost pressures, stigma has also been removed by the increasing expertise, commercial and intangible benefits. Outsourced agencies are increasingly seen as integral and business critical experts in the value chain of retailers and brand owners alike.