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In-housing is accelerating: here’s how agencies can hold on

As in-housing gains momentum, challenges and opportunities are emerging for external agencies. Here’s a look at the expectations and realities for marketers, and their unwavering desire for the big idea.

As in-housing gains momentum, challenges and opportunities are emerging for external agencies. Here’s a look at the expectations and realities for marketers, and their unwavering desire for the big idea.

It’s pitch time for Sheetz. The popular Midwest convenience store chain is in the final stages of selecting a lead creative agency. The catch: its external agency partner has to be ready, willing and excited to work with its in-house agency.

Sheetz is looking “for really deep collaboration. We want an agency that challenges our assumptions, our points of view and comes to us with big strategy,” says Zachary Sheffield, Sheetz creative manager, who runs its in-house agency. At the same time, he wants to avoid “the arrogance and the condescension that can come from creatives and an agency.”

Sheetz has been ahead of the curve when it comes to in-housing. Its internal studio is 20 years old. Now it is expanding as it adds internal talent, in addition to its new agency partner.

They aren’t alone. A who’s who of top brands continue to bolster in-house teams, including Procter & Gamble, Walmart, PepsiCo, Verizon and Anheuser-Busch. The benefits of an in-house team? An intimate knowledge of the brand, faster output, more control and less cost—especially when it comes to production.

Still, smart brands know that going it alone is limiting and even risky — look no further than the Kendall Jenner Pepsi ad as the ultimate cautionary tale. Its tone deaf-ness screamed for checks and balances that appear not to have existed. External agencies bring an outsider perspective rooted in culture as well as skillsets that are often too expensive for a brand to build from scratch. And then, there’s the holy grail: ’the big idea’ that external agencies are meant to deliver.

The other knocks against internal agencies as a solo act: lack of economies of scale as brands are not set up to handle agency specialisms, a lack of shared learning and insulated thinking.

Lisa Colantuono, president of consultancy AAR Partners, says: “The two problematic areas that I have seen bubble to the top more recently with in-house agencies are brands struggling with cohesive and insightful strategies anchored into innovative and salient creative ideation. This highlights the specific challenge of ‘insulated thinking.’”

That’s why, even though “there’s a continued penetration of in-house agencies. It’s usually not an ‘or’ conversation. It’s an ‘and’ conversation. Ninety percent of marketers who have in-house also use external,” says Bill Duggan, group executive vice-president at the Association of National Advertisers.

Michael Kassan, chairman and chief exec of MediaLink agrees. “There is an acceleration, but it's a hybrid. We're finding in-housing where agencies are still putting their proverbial fingers on the keyboard of the client. That's what we're going to see more and more of.”

For example, in-housing a programmatic media buying sounds good on paper “but you still needed that agency expertise,” he says.

But what about the money? One of the biggest gripes is that when an external agency actually lands the glorious big idea, a brand will then take it and produce it in-house more cheaply. “I recall having a discussion with a national and networked full-service ad agency who eventually resigned a client since the marketer only wanted to nominally pay the agency for their ideas and then take the idea and produce it in–house,” says Colantuono. “Why? They got the best from the agency for a cheap fee and saved on the production.”

Given these realities and increased focus on cost savings in the era of the lockdown, how can everyone win? Especially since the bedrock of adland is built on the spark of fierce competition. Where is the balance when the entire world is off kilter? Here’s some key advice from those who have found success.

Swim lanes be damned

‘Stay in your swim lane’ is a common cliché for how to partner with in-house agencies. However, Budweiser is actively in encouraging all of its agencies, including its in-house agency Draftline, to bust through the lane dividers.

“We're so obsessed with great ideas that we know if we only allow agencies to stay in their swim lane, we’re already putting limitations on the opportunities,” says Budweiser, vice-president marketing Monica Rustgi. “Our big rule of thumb is, as long as you ensure deliver on your sweet spot then you are more than welcome to be disruptive and think outside of the box.”

This means everyone gets a shot at creating a Super Bowl spot — including its internal shop. In fact, it was Draftline that produced one of its most significant and recent films entitled ’Brewing change’ (image above). The spot addresses inequality in the brewing industry and stars NBA legend Dwayne Wade.

“There is such an emotional tug on the heartstrings, one might say, ‘oh, there’s probable one agency that does all of those. Well, no, that’s not the case,” says Rustgi.

The iconic brand has a clear delineation of responsibility among its four agencies Vayner, David, FCB and its internal agency Draftline. Draftline was officially announced last year after being launched in 2018.

In-housing’s on the up

  • 74% of in-house agencies were founded in the last five years, according to the World Federation of Advertisers (WFA) and The Observatory International.

  • Creative in-housing is at 57% among multinational companies.

  • 17% are considering founding one.

  • Cost efficiencies (30%), better integration and better brand knowledge (59%) are the key drivers towards in-housing.

  • 37% of creative output among multinationals now comes from in-house teams.

  • 40% of brands allow in-house teams to pitch against external agencies.

The Budweiser brand team serves as orchestral conductors for all four agencies, says Rustgi. “We’re all for the consumer first and the best ideas should always see the light of day. Whether or not we have the resources or not — we’ll figure it out. We make sure that our partners have that same mentality so that there isn't this unhealthy sense of competition. We reward collaboration.”

Given Draftline’s proximity to internal staff, do they have the inside lane? “They probably understand the company culture more than anyone else could ever — no matter how strong the relationship is with an agency,” says Rustgi. “But, one of the things that we pride ourselves on with Budweiser is we do have really, really good relationships with Vayner, David and FCB to the point where sometimes we forget they are external.”

Still, there is a chance that such a head-to-head arrangement can fall apart if it’s not handled correctly. The VIA agency chief exec Leann Leahy says: “If a client calls a creative shootout with an in-house agency, it is not the right thing to do. That’s not the way to foster a relationship and a partnership based on mutual trust. Pitting us against each other, we wouldn’t do that again.”

In-house resources are the ‘extension of ideas,’ not the enemy

Lowe’s, LL Bean, Arm and Hammer and goPuff are all clients of The VIA agency. Another common denominator: they all have internal agency resources. What is the secret to winning and retaining their business? Leahy says: “First of all, we don’t fight it. The in-house staff can do things that we can’t because they understand the nuances of the business and there are pieces they can adapt and turnaround quickly. They are our partners. They are an extension of the idea we put forth, an extension of our resources. Run toward them, not away.”

ll bean campaign

LL Bean’s recent ’Be An Outsider’ campaign created by The VIA Agency.

This isn’t always easy, says the ANA’s Duggan. “Resistance and fighting are natural. Competition will always exist to some extent, but it has to be minimized so the two can work together. Too much friction and competition are the wrong way of doing it.”

This was the exact sentiment from the team at Sheetz. Senior brand design manager Tamara Dunkley stresses: “synergy”, “the importance of being on one team” and “the fun that comes with doing the work together. Agencies have a broader view of the world that can help inspire what we are doing. We don’t want an agency that’s going to keep us where we are. We want an agency that’s going to continue to keep our brand relevant with our customers. We are all in this together.”

Given the varying needs of the client, where and how an agency gets involved is unique to each relationship, says 4A’s president and chief executive Marla Kaplowitz: “There is no ‘ideal’ model to deliver that balance; it depends on the needs of the brand and how they want to partner with agencies on broader marketing and enterprise needs. These needs often shift over time, with a number of in-house teams moving back to agencies as just one example. While increased complexity leads to a desire for greater control, agencies will continue to add value to businesses and ensure positive customer experiences with an external perspective, and a deep breadth of understanding of the complexity of the ever-changing technology.“

Small teams offer less big politics

Collaborate early and often is one of the common refrains among successful partners. The trick is making certain that this can happen seamlessly. Stripping away the politics is key, says Colantuono who is leading the Sheetz pitch. “It takes two to tango and when those two are committed to the same brief, goals and desires then they become true collaborators. By creating tight teams and losing layers and internal politics, it allows for the speed, nimbleness and control that marketers need and want.”

Whether it’s working with Lowe’s or LL Bean, Leahy agrees that it is about creating “small, teams. We create pods. We think together early on so there is a sense of co-ownership as soon as we have an idea. It’s important to set ground rules around an idea so it can grow in different directions so we can execute against it and make it stronger.”

At the core of a successful partnership is a shared purpose – a fact which has been emphasized during lockdown, says Dun & Bradstreet CMO Stacy Greiner. Dun & Bradstreet has been actively in-housing its content marketing practice because it wants a “team that is living and breathing” the brand. Still, it relies on external agencies for other aspects of its business.

Greiner says the pandemic has helped strengthen its relationships with external partners because “it got us back to the basics of relationship building. Being on a call together, you’re seeing people differently. Their kids are doing their homework and the dog is barking in the background.

“Honestly, people are craving human interaction. We are all just people wanting to come together for a shared purpose and interest. We want to unleash that passion together.”

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