Commentary
A Case For Bringing Marketing In-House
- by Gord Hotchkiss , Featured Contributor, March 22, 2016
When we talk about disruptions in marketing, one of the elephants in the room is the increasing demand to bring marketing in-house. Companies like Philips are bringing more and more marketing functions in-house.
As an ex-agency guy, this will sound either blasphemous or disingenuous -- but I suspect that it might be the right way to go. I’ll tell you why. It has a lot to do with the evolution of strategy.
In the past, we did two things when we planned strategy. We planned in relatively straight lines, and we planned over long time frames. A minimum of five years was not unusual.
Here’s how it would play out. Executives would go through their strategic planning exercise, which might -- or might not -- include getting input from the internal and external marketers. Strategic plans would be formed, which would then be broken down into departmental directives. Department heads -- including marketing -- would then execute against the plan, with periodic progress reviews scheduled. The entire loop, from input to executional plans, could easily span several months or even a year or more.
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The extended timeline is just one of the issues with this approach to strategy. The other problem is that it assumes strategic planning is only something executives can do. The strategic frame is only set at the highest levels of the organization. And it’s executives' prerogative to either consider or completely ignore any input from their direct reports. Even if they do consider it, this feedback is likely several steps removed from the source: the market.
I’ve written before about the concept of Bayesian Strategy. There are three basic foundations to this approach:
-- Strategic planning is a continuous and iterative process
-- Strategic plans are nothing more than hypotheses that are then subject to validation through empirical data
-- The span of the loop between the setting of the strategic frame and the data that validates it should be kept as short as possible.
With Bayesian strategy, the corporation needs to maintain a number of acutely aware “sensing” interfaces that provide constant data about the corporation’s current “reality”:
-- The internal “reality": especially in more qualitative areas that might fall outside typical KPIs, like morals, satisfaction, communication effectiveness, etc.
-- The external “reality”: What’s happening in the market? What are customer’s perceptions? What is the competition doing?
These “sensing” interfaces create the frame for the organization. As such, they’re integral to the setting and updating of strategy. Just as our brain depends on our senses to define our sense of what’s real, the organization depends on these interfaces. And when it comes to the “external” reality, no department is in a better position to make sense of the world than marketing. The span of distance between marketing and the management of the company should be as short as possible.
This is very difficult to achieve when you rely on external partners for that marketing.
When a company like Phillips brings marketing in-house, it’s more than just a cost-saving or consolidation effort. It’s bringing the function of marketing as close as possible to the core brand. It’s not only giving it a seat at the strategic table, but making it one of the key contributors to that strategy. As I said, it’s a move that makes a lot of sense.
But there is another side to this story, and that has to do with perspective. I’ll look at the flip side of this argument next Tuesday.
Having experience around ALL sides of the table, I tend to align with your thoughts here..except for one particular area and that is "external reality"..it's importance and how it is achieved. One can only speak from actual experience. Building in house full service 360 marketing efforts in house from the ground up, having an agency, going to the agency side, and then being a major client of a big agency.......I found in all cases, I very often was one of few who believed in the major value of this reality as you define it and also could deliver content for it...insatiable love for information, pop culture, and having roots as a true merchant (product creator) before marketer I think that has been key to my uncerstanding of this power. In an agency often "planners" could bring this into the fold....but in house ...hmmm....
Gord, in my rather extensive experience with branding advertisers, every one of them did their "marketing" in-house. They still do. By marketing, I refer to brand development and management, product distribution/sales and sales promotion. Only advertising was "farmed out", with an ad agency developing ideas for product and brand positionning---subject to client wishes and approval---and traditional media plans--again subject to client wishes and approval--- leading, finally to media buying and post buy servicing.
The advent of digital media has created the impression that here, the agencies are not all that capable when it comes to planning, defining ROI, executing buys, transparancy, etc, hence we read constantly that the 'agency model" is broken. While there is good reason to fault the agencies---with exceptions, of course---regarding their digital expertise and performance, we should remember that most of these buys are not for the marketers' branding campaigns but, rather, for promotional efforts which, in the past, were often handled in-house or via outside specialist, non-branding shops. In this context, it does make sense for many advertisers to consider continuing with an in-house approach for their digital promotional buys, as digital is merely a modern substitute for other media they once used for the same purposes---catalogs, direct mail, yellow pages, etc.
I know that I keep harping on the distinction between branding and promotional campaigns, here and elsewhere, but it is an important distinction. The two are not orchestrated in the same way, using identical metrics and definitions of ROI. Generally speaking, branding takes a long-term, "total campaign" approach while promotional activity is short-term in nature, primarily to stimulate or facilitate an immediate response or action, Many commentators seem to refer to "marketing", "advertising" or "media planning/buying" as if it doesn't matter what types of campaigns are involved. It does. In-house for promotional/sales service efforts why not? In-house for branding campaigns and media planning/buys----that's quite a different kettle of fish.
Gord, this was certainly a provocative piece. There is merit to all views presented. Would you agree that success in this marketing environment depends largely upon taking a true systems approach (as in systems theory)? If so, then you might also agree that exchanges between the internal corporate subsystems and the external environment are critical to success, particularly in a consumer versus product centric era. If it's all brought "in house," in my experience , the firm will migrate over time to a homeostatic state that inhibits full external information flow.
Certainly some functions can be brought in-house but I agree with Ed that other functions, like media planning and buying, might better reside outside with strong partnerships formed.
If Phillips is successful, great. Kudos will be offered, particularly to upper management. If not, the KPIs will show it.