“In-housing” – Are clients taking back control?
In-housing is when clients take some element of their marketing spend (ie planning & buying media, creative production and/or digital marketing activities) away from third parties, usually agencies, and build their own in-house capability. This year, Vodafone has taken 66% of its media investment (which includes search, social and programmatic) away from its incumbent agencies, saving millions of pounds. Lots of brands like P&G, Unilever and United Airlines are also doing the same in one shape or another. P&G’s marketing chief Marc Pritchard, who has one of the biggest marketing budgets in the world claimed “We are now seizing back control”. Now, where have we heard that phase before?
There are a number of reasons driving this, but undoubtedly cost is probably the biggest motivator. Global brands spend many millions each year usually with big, networked agencies. With CMO’s under more pressure than ever to deliver return on marketing investment, you can understand the temptation to see if you can create more value for the business by a DIY approach.
Cost is not the only driver here. The impact of technological innovations, like programmatic buying and automation software, are also having an effect. Pritchard says, "brands do not want to just have more control, of their marketing budgets but also creative control".
As we have seen with the way Brexit is playing out, “taking back control” sometimes is a metaphor for “making things a lot worse”. So, what are the rewards and risks for companies that want to go down the route of “in-housing”?
- Big, global networked agencies are very expensive and don’t always have the client’s best interests at heart. Many global networks, like WPP, have almost become too big for their good with many clients (and investors) questioning the value they bring to the table. So potentially companies can save serious amounts of money by moving elements of their marketing in-house.
- When a task becomes so important to a company, its vital that it develops its own in-house expertise. Digital innnovation is fundamentally changing marketing and particularly the relationship between consumers and brands. Therefore, companies want to develop their own in-house experts rather being reliant on third parties.
- Speed can be a competitive advantage We live in an increasingly fast-moving world, and its vital that companies have the ability to act and react at speed. Using multiple large third parties often reduces business nimbleness.
- With the right talent and expertise clients might also be able to do a much more effective job that their existing agencies. The ultimate aim is to make your budget go further by spending less money on middle men and more on spreading your message, so more of the right people see and interact with your marketing messages. Not easy, but definitely possible.
- Big companies that try things outside their expertise often find that there is a long learning curve. In other words, they will do a much worse job that their agencies, especially in the short term. So costs are reduced but so is Return On Investment.
- Another risk is the loss of flexibility and creativity. Clients can always sack their agency, then arrange a pitch to generate new strategic and creative approaches with highly motivated, excited new (fresh) people. This might prove difficult if you are hiring your own in-house talent. People lose their mojo if they work on the same thing for too long.
- Usually the sign of a good agency is a great agency culture. Is it possible to create a culture like this in a corporate structure? For many companies this could be a challenge. It might be difficult to keep abreast of new innovations and technologies if the culture is not right.
What’s clear is this trend is set to continue, so there is no point in agencies being in denial. Client’s needs are changing and agencies need to adjust and adapt so they can stay relevant. My view is many more clients will look to save money by bringing the areas they find pretty simple to do in house. The opportunity for many agencies moving forward is to focus on the highly specialist, complex areas. For the fast moving, nimble, forward looking, specialist agency “in-housing” could as big an opportunity as it could be for clients.