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Analytics agencies vs. in-house: Which is best?

Analytics agencies vs. in-house: Which is best? Morgan Vawter
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For any successful organization, the focus needs to be on winning -- winning revenue, winning profit margins, winning market share, and winning share of mind. To create a trajectory toward these objectives, executives should be asking themselves how to better focus their analysis and optimization efforts.


That's where analytics comes in. With the right talent and framework to interpret data, analytics efforts can transform sales and marketing operations. Data-driven companies can outperform their peers in top line growth as well as profitability. By aggressively capturing and integrating new data sources, companies are able to produce insights about consumer behavior and key trends. Superior analytics and predictive optimization is no longer a "nice to have" option -- it's essential for winning in a highly competitive marketplace.


Analytics agencies vs. in-house: Which is best?


The analytics opportunity is not without challenges -- namely costs, technology, staffing, education, and execution. The staffing challenge is perhaps the first and most critical step, and the optimal solution requires a wide range of advanced analytics skill sets not commonly found in a single individual.


While many enterprise companies can afford an in-house analytics team coupled with an external agency team, many small and medium-sized businesses are often forced to choose between an analytics agency resource or an in-house resource. That said, I have been on both sides of the fence; while I am currently leading the analytics and optimization team at Piston (a digital analytics-focused agency in San Diego), I can expound the pros and cons of both approaches. I know the decision is tricky, and there are a number of factors to consider. Let's take a closer look at the most important ones.

Agility


Generally, a client doesn't hire an analytics agency and expect results to be better in a couple of years. Most clients come to agencies because results haven't been progressing in the right direction and they need the agency to fix it immediately. Time is always of the essence, and we, as agencies, are inherently aware of this.


The analytics agency you hire should have handled your type of business challenge many times before, be it lack of data quality, insight, or predictive optimization. By hiring an agency, you're more likely to achieve success in a shorter time by leveraging its established processes and best practices. With experience handling multiple clients, agencies help to increase the odds that you won't make mistakes such as choosing the wrong platform, wrong metric, or wrong model.


On the other hand, in-house analysts, with proper management and incentives, will be motivated to quickly implement progressive data collection, integration, and optimization projects. Further, the in-house analyst is 100 percent devoted to your business and will not split time between your business and other businesses, as an agency would.


Analytics maturity of your organization


If your company is an inherently analytical organization, you will undoubtedly benefit from creating an in-house web analytics team. Even in this situation, though, your in-house analytics team might be overwhelmed and under-staffed. In this case, it might make sense to hire an agency to provide additional support or fill experience gaps. It is not uncommon for an analytically savvy organization to retain an outside agency to manage parts of its analytics program, in order to supplement the efforts of a skilled in-house team.


If your organization is not fully grounded in analytics principles, you'll be better off working with an analytics agency in the onset. As an example, let's say you want to ramp up your organization's use of available customer data. You set out to search for and hire a data scientist, with all the right intentions. The only problem is you lack analytically experienced leadership and a team of like-minded peers to support the new employee. A data scientist is trained to find patterns in complex data sets, with the goal of synthesizing data to make predictions about the future. In this case, the data scientist will be creating models to predict future customer behavior. However, without the right leadership or analytically structured environment, modeling projects will take much longer. Further, you risk losing money to faulty modeling if no one is able to properly review the work being done. So, what are you left with? Limited gains in insight and optimization -- and a frustrated statistician.


The benefit of an analytics agency partnership is the ability to receive services from a data scientist and a full supporting analytics team and leadership, whose efforts are guided by road-tested, multi-client, multi-person experience.


Reporting requirements


One of the other key issues to consider is how much reporting you need as a business. Consider the volume and depth of reporting that you need when deciding between an in-house analytics team, agency partner, or both.


Most in-house analytics specialists loathe recurring reporting responsibilities. Don't believe me? Go ask a few. Most would prefer to be optimizing experiences, performing ad-hoc analyses, implementing new technology, and improving existing technology. If you request a significant amount of regular reporting from your in-house analytics team, expect a significant amount of discontent.


Agency analysts, on the other hand, expect reporting to be a significant portion of their responsibilities. On the agency-side, reporting is how we remain accountable for our performance, and as such, agencies have turned reporting into an art form. Truly skilled analytics agencies are able to turn recurring reporting reviews into a marketing strategy and tactical optimization exercise.


If you desire frequent reporting, you should likely consider an agency partnership or a hybrid approach.


Cost


When comparing hourly rates, the cost for an in-house analyst is lower than that for an analytics agency. Additionally, when working together with an agency, there might be additional costs for account and project management. However, most analytics agency engagements do not require the hours of a full-time employee, and thus, most companies see savings in hiring an analytics agency versus building an in-house team.

Communication


At the enterprise level, the in-house expert is a master of leveraging resources. Internally, that means influencing marketing, gathering data from business intelligence teams, and working with web development to implement analytics code changes. Externally, that means working with best-of-breed analytics tools and firms that support his or her overall analytics strategy and direction.


A core task of an in-house analyst is to establish a certain level of awareness and appreciation for analytics within the company's collective body of thought. Someone who is permanently present is more likely to succeed in this task. With that said, there is an inherent burden on this person to spark interest in using the power of data to transform sales and marketing. An experienced and passionate in-house analyst is likely to improve the knowledge of the entire organization regarding analytics. If a business's marketing, IT, product management, and executive team develop an understanding and interest in analytics, the potential impact of that person on the business is limitless.


On the other side of the coin is the agency team. Although not as integrated as the in-house analyst, the agency team has some advantage in numbers. For analytics agency engagements, it's typical to have more than one person assigned to an account. Usually, there is an analytics specialist (or team of specialists) executing the strategy, plus an account manager handling day-to-day communications and administration and an executive point of contact overseeing activity to ensure objectives are met. There is power in having access to a team of specialists, who, through tactful communication, can drive innovation within the business.


Specialized business knowledge


The primary weakness of the agency analytics solution is that of shallowness. An agency simply cannot achieve the depth of knowledge about a particular industry or company that an in-house analyst can. An in-house expert will undoubtedly have a strong knowledge of your business processes and your market.


Often times, an analytics agency can't achieve this depth of knowledge because of the need to focus on several clients, rather than only one. Although there are some drawbacks to not being an in-house expert, analytics agencies make up for it by having exposure to multiple clients with different needs and expectations. Having this experience helps to obtain a broad skill set that can be used to problem-solve across multiple clients.

Bias


A potential weakness of the in-house analytics model is that of nearsightedness. The in-house analyst might become so deeply immersed in his industry, company, and sites that he can't see the forest for its trees.


Oftentimes, the best way to discover opportunities for growth and improvement is to consult an outside expert. Sometimes, an in-house analyst might be too consumed with other responsibilities to notice problems and opportunities. It can also be a challenge to set aside personal biases when strategizing ways to improve marketing or customer experience efforts.


Bringing in someone from the outside, with fresh eyes on the situation, helps to solve a number of problems, inside and outside of analytics. It's also easier for external agencies to identify data quality anomalies due to the volume and variety of data processed across clients. It's also perhaps easier for the external agency to uncover strong positive and negative trends affecting the business, as its team is regularly analyzing the performance of numerous other organizations.


Experience


Finally, one of the biggest pain points in analytics is finding, hiring, and training the right people. Building an in-house or agency analytics team starts with first finding and hiring a strong analytics generalist. Individuals well suited to this role have an optimal mix of mathematics, statistics, marketing, business sense, and strong communication skills. They are truly rare.


Outside of your analytics generalist, you'll likely also need specialists to evolve your organization along the crawl-walk-run spectrum of maturity. These specialized skills -- including customer and CRM analytics, research, data modeling, analytics programming, and business intelligence -- are equally hard to find and come with added expense and integration challenges.


If you're missing any of these skills or have segregated these people into separate departments, then your team structure might be limiting your organization's potential. Most analytics-focused companies will have an experienced bench of staff in each of these areas, so your best bet might be to work with an agency to fill the skills gaps and develop an integrated analytics roadmap.



An additional advantage of working with an agency is that of innovation. Since agencies work with numerous clients in diverse industries and categories, expect that they will have more experience implementing cutting-edge solutions to common analytics challenges.
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Building a winning analytics team


Excellence in analytics comes from continual work and integrating that work into the very fiber of a company. Analytics touches everything. It needs an evangelist within the company to align analytics strategy with business objectives, drive execution, educate internal stakeholders, and report to management.


At the enterprise level, the analytics manager cannot do this alone. He needs support. He needs an agency to do some of the heavy lifting, to help drive strategy, and, sometimes, even to be the contrarian voice in the room.


Agencies are great at being the "opposing view" or "the voice of reason" when it's needed. On the agency side, I have been brought into many clients' executive meetings to be the advocate for an analytics project or marketing strategy that my client-side partner believed in but knew was in opposition to myopic business processes.


If your company can afford to finance both, a combination of in-house analytics and an agency team will undoubtedly provide the best analytics results. This way, it is possible to enjoy the advantages offered by both sides and also to make use of synergistic effects.


Morgan Vawter is VP of analytics and optimization at Piston Agency.


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"Chess game single white piece in front of black pieces," image via Shutterstock.

Some say Morgan's first word was "Internet." Since then, she's demonstrated an uncanny knack for deciphering the complexities of the web. At age 15, she was accepted to enroll in college, at the Georgia Academy of Mathematics, Engineering &...

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