Effect of Outsourcing on Brand Equity

What is a Brand Equity??

A brand is a name or symbol used to identify the source of a product. Branding is an important decision since it differentiates one's product, given there is almost no difference in the functional features of product. The brand can add significant value when it is well recognized and has positive associations in the mind of the consumer. This concept is referred to as brand equity.

Business process outsourcing (BPO) is now part of everyday life, from IT to HR to call centers within big companies. What has interested me is how outsourcing impacts a company's reputation and brand, both with customers and with employees!!

Few things need to be considered in respect of repercussions of Outsourcing on the Brand Equity of Company's name:

• There needs to be employee buy-in when essential functions are outsourced, especially those that touch customers:

Employee should be in sync with the company's decision of outsourcing. This is of utmost importance for those people who are in direct contact with customer. Employees need to take responsibility for the actions of the outsourcing agent, if some goof up happens. For e.g. an airline has outsourced their baggage facility. One customer experienced certain issues with the baggage handling. Person complains to the customer care executive. But customer care executive shows apathetic attitude towards the problem since company has outsourced the facility. He has not been educated about the repercussions of this kind of outsourcing issue on his Company's image.
Mother company has to take each & every responsibility associated with the outsourcing results - whether good or bad.

• Outsourced employees need to understand and live up to the values of the organization:

Outsource employees need to be act as a partner to maximize the benefit proposition for the mother organization. The service provided by the outsourcing agency should be a customized one & increase the value proposition for organization. Mother organization should form stringent systems & quality rules for achieving the optimum results. The parameter for testing outsourcing results should be communicated to the outsourcing agency beforehand, rather doing damage control later on.
This concept was pioneered by organizations like Nike, Reebok etc. They outsourced their manufacturing facility & utilized their expertise of branding to maximize the profits.

Other more evident example could be from HR. A company recruits a person who is in sync with the organization's value & culture. So, a outsourced recruiting agency first comprehend the values desired by organizations & then find suitable candidates accordingly.

• Precautions for misuse of IP (Intellectual Property) rights:

If a function involving intellectual property rights is outsourced then it may risk the copying by imitators. So, the most important thing in any outsourcing is establishment of a long-term relationship between both parties. One should not cut corners to get any undue advantage, at the expense of other party.


So, there is pros and cons associated with outsourcing. Positives could be -

1. Firm can concentrate on core competencies.
2. Low cost advantage.
3. Specialized service from an outsourcing agency.

But, negatives could outweigh the positives since outsourcing, at times, exposes the poverty of the brand & all the good associations of brand can go down the drain.

So, as far as outsourcing is concerned -"Handle With Care." :-)