As a senior marketer, at some point in your career I bet you have thought "this would be much quicker/easier/cheaper if we had this in-house” and then questioned the true value of your chosen agency. I know I have.
Many marketing organisations are doing just that and COVID has only accelerated the trend. In Gartner’s 2019 Marketing Operational Survey*, 63% of respondents shifted some work from external agencies to in-housed services in the last 12 months. In 2020, a Gartner conducted poll suggested over 65% of marketers reporting moderate to significant budget cuts as a result of the pandemic and over 35% reporting cancelled or altered commitments to agencies.
Key drivers of in-housing
At the height of their success, agencies were invaluable and hence could charge exorbitant fees and retainers. Now, with budgets pulled tighter than ever agency costs and more specifically their value is in dispute amongst marketing teams across the world. Cost is a huge driver in the trend toward in-housing, but it isn’t the only one.
Customer experience has become the new brand management and the increased focus on the customer is challenging the agency model as marketers shift their focus away from channels.
But it isn’t just customer experience driving the trend. Digital transformation and a new generation of digital marketers who have more technical skills than ever before are leading many organisations to question if they can do without an agency, particularly in areas like data analytics and MarTech.
This is occurring for a few reasons;
· Data and privacy regulation, personalization, data security are increasingly dominating internal discussion and marketers want greater control and access to their data assets
· To derive true value from MarTech – it needs to be an embedded discipline within the marketing team – it is very difficult to effectively leverage MarTech if it is managed at arm’s length by an agency – nor is it cost effective to do so.
To in-house or not to in-house?
With such a systemic shift occurring within the industry there is little wonder that marketing organisations are re-considering the role their agency needs to play. Too much of that decision at the moment seems to be driven by cost efficiencies rather than stepping back and giving consideration to which capabilities should exist internally and which ones are best outsourced.
When it comes to in-housing often the discussion can be a very binary one – that is in-house or outsource. However we have seen many companies such as Vodaphone, Nestle, Hertz and Mitsubishi operating with various iterations of an in-house model. This demonstrates the fact there are a whole lot of options in-between that should be given greater consideration.
So what are the options available for marketing teams?
A hybrid model
The most common model we are seeing marketing teams adopt is a ‘Hybrid model’– where some resources have been brought inhouse, and then augmented with external agency support. Areas like Creative, digital planning, social media management and media buying are some of the disciplines where we see a hybrid model adopted and in these instances agencies are used to challenge strategic thinking and bring an external perspective. But it isn’t just strategic support that may be provided. In these instances, a hybrid model can see the agency playing a role to support and embed the new in-house function and help them to evolve their approach inline with best practice.
The village model
The ‘Village Model’ has also proved popular as agencies have realised that clients are fed up of dealing with multiple disparate agencies. In market we see the village model being applied in two different ways and seeks to solve the challenges around planning and delivery from a customer perspective. The first way in which the model is being adopted where large agency holding groups, with multiple agency brands and specialisations, bring certain agencies and skill sets together align the agencies offering for the client.
The second is where a client requests agencies (from different groups) to co-locate and work in a village concept to better align planning around the needs of the customer and the client.
For clients who don’t want the headaches of in-housing or can’t garner support for headcount increases, a village models provide an alternative option to solve some of the modern day marketing challenges.
The resource model
Another model on the rise is a ‘Resource Model’ which sees organisations paying for skill rather than service. This model sees marketing teams augment their core team, with agency personnel.
This serves several purposes;
1. It enables marketing teams to gain access to specialist skills which may be difficult to recruit
2. It enables marketing teams to scale up and down based on need
3. It better embeds agency personnel within the business to better understand client needs and problems
The year 2020 and all of the unprecedented challenges it has brought has forced organisations to re-think their agency relationships and the value they provide. The decision to in-house should not be solely cost based with many other considerations needed. There is not a ‘one size fits all’ approach and each organisation will need to establish what model is the best fit for them.
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