Nestle, Betway and Pepsico on navigating agency tension as they move to in-house
Nestle, Betway and Pepsico are all trying to build programmatic knowledge, expertise and technology internally and simultaneously assure supply chain partners their margins are safe. But agencies are showing signs of resistance.
Nestle’s efforts to take control of its programmatic ad buying began in earnest three years ago after deciding that its data was a “company asset” that should be under its control.
The food and drink giant set up a hub in Barcelona where it has built its own global data management platform (DMP) – one step on the journey to owning the entire programmatic tech stack – to give it a view of customers across all of its brands, not just a single product. As an FMCG-company with limited first-party data access, Nestle has faced a long road of cleansing and pooling global CRM data and working with Salesforce to fill in the gaps.
The immediate priority is to ensure that every local market is using this global DMP. Each region has one “DMP super user” who is responsible for coordinating and “connecting the dots” with the media agency.
“It’s complex, it's a challenge every day,” said Teresa Fusaro, Nestle's product manager for programmatic media, at the Programmatic Pioneers event in London.
One hurdle has been acceptance from some of the local markets that have been asked to adopt it, with Fusaro saying a handful wanted to retain the relationship with the local solution. More challenging have been certain, unnamed, agencies on the roster, reticent to commit their resource to a client’s unique tech stack without an incentive.
“In some cases they'll say it's not in the scope with the contract they have with us so they want to charge additional costs to us,” Fusaro later told The Drum.
“[Agencies] used to build audiences on the DSP directly and now they have to build them on another platform, our DMP. So, they say they need to put more resource and additional people for instance, or they have to dedicate more time to it.”
Nestle is now trying to rework those contracts to ensure its agencies are using its own programmatic tech at no additional cost.
Despite the friction, Fusaro stressed that there is a place for agencies in its media mix. It doesn’t want to handle the programmatic operations (“yet,” she hinted) but it does need agencies to embrace the shift to its in-house technology so it has “full control and visibility of data and media spend”.
In hindsight, Fusaro admitted that these are kinks that could have been resolved much earlier on its path to establishing the operating model. But she’s not alone. Betway has also established its own programmatic tech in-house and, like Nestle, use of the DMP it has invested heavily in setting up is “non-negotiationable” with agencies. For those unwilling to adapt, they'll be cut from plans.
It's only three-months into this journey – previously it was using the Tradedesk DMP to build audiences – but Thanos Patsis, global head of online media and mobile at Betway Group, is "very clear on what we want to achieve".
"I'm sure Tradedesk or Mediamath, which are our DSP suppliers, have their own DMPs that they want to use to get 3% or 5% or whatever they charge. But when we own the data it should be used as we like; we're giving them access and including them in our plans for the DMP," he said.
"We offered them a lot more useful data, much better quality, and everyone is much happier."
For now, Patsis would argue there's an equilibrium between its agency partners and in-house function but it's not afraid to act alone should it be required to.
"We have built a team that is capable of [buying digital media in-house]. We are always ready; if we work with an agency and they don't deliver as we would want we can then take it in-house. Maybe [doing it in-house] is the long-term vision but at the moment we are happy with agencies we work with. There's still a lot of value for agencies and having an in-house team and an agency is the most effective way to go."
For the likes of Pepsico, the potential move to in-house digital media has also meant frank discussions on what brands now need from their agency partners.
It's early days. As The Drum revealed earlier this month, the soft drinks giant is only just in the process of building out the team in North America that will be dedicated to bridging data with media planning. So far it's been recruiting CRM, digital, data management, shopper marketing and adtech roles.
Execs within this function will be expected to launch internal marketing initiatives to “build awareness and adoption of the adtech” within the company.
However, Josep Hernandez, Pepsi’s senior director for media and connections was at pains to stress that this doesn’t mean agencies will be culled. It’s simply trying to “upskill” in a department that commands the biggest spend.
“Why [a brand is in-housing] is more important than the 'what'. If what springs in-housing is the lack of trust or hiding behind low numbers and blaming the industry then that’s not the right approach,” he said.
Separating the wheat from the chaff and having the knowledge to ask the right questions with the Mediacom buyers at the table is the plan of action for Pepsi. What it needs in return is agencies being receptive to having its own people sit in their offices for days at a time to be educated, something he says they have been open to.
“What is the job of an agency when we’re squeezing fees?” he asked. “We need marketing organisations that are futureproof. We’re not in the business of doing advertising but our teams are marketers and when you’re in a world of revolving salesmen you need to have better knowledge internally.”
It was a sentiment echoed by Fusaro's colleague Steve Pollak, who heads up Nestle's UK marcomms.
“When I was in an agency, we saw the client twice a year and it’s completely changed. We’re going through another period of change. One of the positive aspects is that it’s opened doors to clients that were previously closed," he said at the same event.
"There are some things we can do ourselves... but advertising is not our business. But we are far more involved and have access to data and logins and a really collaborative relationship with Zenith."