The ANA released a report this week on “in-housing” agency functions. The report is based on feedback from 412 marketers who all work client-side. It sheds some important light on a trend unlikely to end any time soon.
Let’s first align on what functions the in-house agency performs. It generally delivers a combination of content marketing, creative strategy, data/marketing analytics, media strategy, programmatic media, and social media (both creative and media).
“Wait a minute,” I hear you say. “Marketers have always been at the helm of those functions, right?”
This is true. But what has changed is that the marketing department used to be the department of briefings and plan approvals on these topics, while they now execute on these plans in-house -- or at least to a large degree. We also know how much this approach has grown, because similar research was carried out in 2008 and 2013. Today, the practice of in-housing has grown a whopping 70%!
The singular reason marketers are making this move is to deliver cost efficiencies. Other reasons include: Better knowledge of brands; institutional knowledge; dedicated staff and speed, nimbleness but all these are less than half as important as the cost-saving argument.
I have written before about the challenges of moving agency functions in-house. The challenges are real, but, at least for now, it seems the trend is not slowing down. But if one of the most important drivers to move agency functions in-house is to save costs, the danger is that the success of the endeavor is also only measured in cost (savings).
Per the ANA study, 79% of respondents are very satisfied with their in-house agency’s performance. Sadly, the study does not reveal what “satisfied” means. Is it the delivery of knock-it-out-of-the-park creative? Is it innovative and business-results-delivering strategies? Is it better-than-market-performing digital media plans? Or is it cheaper than what was paid to the agencies?
This is where the ANA could and should do more work— and where marketers owe it to themselves to be realistic.
In order to measure the true value and ROI of an in-house agency, a number of benchmarks and trend data points would need to be measured. I would like to know if the performance of the in-house agency is competitive (and preferably winning) on aspects like strategy delivery, plan development and implementation, cost effectiveness AND efficiencies of the media and/or creative production operation, etc.
I would also like to know the total cost before and after in-housing was set up. That cost should cover the totality of the operation, including personnel, overheads, tech investments, etc.
How much did the marketer used to spend on outsourced resources, compared to now-in-housed services? And what were the marketing, creative and business indicators showing in terms of performance during that time? And what does that picture look like today, with a combination of outsourced and in-housed resources at work?
If you have those two relatively complete pictures of delivery and cost you can calculate an ROI for the before and after state. I truly wonder if, with those numbers in hand, 79% of all marketers would still give their in-house operation a thumbs-up.