The same thinking applies to the debate over in-house agencies versus external agencies for marketers’ brands and their communication needs.
According to an Association of National Advertisers study released in October 2018, advertisers are using in-house agencies more, with 78% of ANA members reporting having some form of an in-house agency in 2018, compared to 58% in 2013 and 42% in 2008. In-house agencies are providing a larger range of services, including content marketing, creative strategy, analytics, media and more.
What’s driving this trend? Are there really greater benefits to managing everything in-house versus externally? (Disclosure: I work at an agency that matches marketers with ad agencies.)
This is a primary reason behind the shift. CMOs are still being forced to do more across a range of marketing channels with smaller budgets. The “new black” when it comes to client budgets is to expect double the work for half the fees. But is it really a cost saving to pull the account in-house?
Marketers need to calculate all the increased costs (people, equipment, programs, training, etc.) and compare it to the fact that most external agencies have an operating profit of less than 10%. Furthermore, if you're working in-house, there are multiple increasing layers needed to properly communicate across channels. And what happens if advertising goes dark for a short period of time? With an external agency, the fees halt. With an in-house agency, those costs continue.
Increased Internal Knowledge
Institutional knowledge is in abundance, and there is no learning curve that needs to take place for an in-house agency, right?
Well, not exactly. Unless the internal advertising team consists of people who’ve worked at the company for years, I beg to differ.
A hundred-percent focus on the brand may be beneficial -- but that goes back to my point about being too close to the brand. There is value in cross-referencing insights and experience from other brands, categories -- and especially consumer behaviors and purchase journeys.
Diverse teams with various skill sets produce more creative results. Personally, I have never seen creative talent run to the client side of the business. They simply don’t. They want to work at ad agencies with juicy brands, and they want to touch multiple accounts. Why? So they can exercise their creative muscle. They’re hungry to create “big” ideas that work.
This issue has caused marketers to pull accounts in-house, but every agency has an ethical responsibility for having an “open book” policy highlighting clear and transparent operations and finances.
From the onset, establish a simple financial relationship. Hire an independent auditing firm to review all finances on a sporadic basis. Then, establish a stated set of guidelines backed by third-party monitoring services to ensure transparency.
After managing agency reviews for 18 years, I find one thing certain about external agencies: their diverse teams, skills, depth of experience, cross-category insights, and perspective are real assets. An external agency is a natural habitat for a creatively charged environment -- not an in-house agency that’s concentrated on one brand.
This diverse creative environment, coupled with objectivity, sets up for some powerful client-agency relationships. Additionally, external agencies and clients push one another to drive the brand to the next level, which isn’t always the case with an internal agency.
There is truth in the adage “Two head are better than one.”
My two cents? Set up the right conditions and reap the benefits of external agencies' creative expertise. Having a team who doesn’t sit so close to your brand day in and day out far outweighs some minimal cost savings.