Agency brain & brawn: are brands drinking the in-housing Kool-Aid?

Agency brain & brawn; Are brands drinking the in-housing Kool-Aid?

The situation seems to be snowballing. Every week there are stories of brands retendering, with agencies enthusiastically falling over one another in a race to the bottom on margins. Among the most recent cases, Hilton has set about building its own internal “centers of excellence” dedicated to specific media and marketing areas, which will be reinforced by the right niche and independent agency.

One of the unintended consequences of the digital revolution has been to challenge the identity and purpose of the all-encompassing agency. While positioning to handle the execution of the campaigns themselves, brands are now looking for more courageous and expert creative from agency partners.

But this is a next to impossible task for whoever wins the brief. Rather than being symptomatic of agency capabilities, the barriers to agency success are systematic.

However courageous they might be, agencies will always struggle where the 'brain' behind campaigns has historically been the incumbent. The moment the contract expires and a new agency is appointed, knowledge and insights from successful and unsuccessful campaigns gone by are lost.

Rather than an existential threat, the momentum behind brands retendering and in-housing is an opportunity for agencies to reposition themselves and share more responsibility for campaign success with brands.

The age of ‘taking back control’

Whether you’re reading the national headlines or stuck in a business planning meeting, it seems everywhere we look the focus is on ‘taking back control’ in one form or another.

Just as social media platforms have come to flex their muscles as a result of the data and customer understanding and access they control, so brands are beginning to realize that to control their own destinies, they need to be masters of their customer relationships, data and marketing learnings.

The meteoric success of direct to consumer brands can be seen to have added fuel to this fire, with brands such as Glossier already valued at over one billion dollars. Here the retailer is cast under the light of an unnecessary middle-man, in much the same way as the in-housing trend has cast a shadow over agency partners.

Both trends owe much to the growing awareness that brands need to take on onus of privacy and security and be the ones to decide how their data are being used, who has access to it, and who is profiting from it.

In all of this, brands are essentially taking review of where the insight and experience from marketing campaigns – i.e. ‘the brain’ – sits. While the headlines have firmly positioned the brain as rightfully housed within the brand, the situation is a little greyer in reality.

The evolving agency role; brain & brawn

Delving into the grey matter, the truth is the brain can’t simply move from one side of the fence to the other. Different businesses have different needs, and even where the brain does exist on the brand side, agencies can still find purpose.

It’s cliché but, ‘one size won’t fit all’. Some, particularly larger clients such as Disney need high value, strategic support. As Disney’s former chief marketing officer, Anna Hill, surmises, “Media agencies are awesome at coming in and showing us the outside world, which we have to keep on top of.”

Bringing on agencies, even on a project basis, can offer far greater flexibility than setting up an agency in-house. Take Intel as an example. The technology manufacturer found itself having to pull back sharply from its in-house ad agency following a change of strategic direction to focus more on technological leadership and B2B audiences at the start of 2019.

In some of these cases, brands need lower margin “hands on keyboard” support – the brawn. Rich media content is one area where agencies will continue to excel; it is quite difficult and cost-prohibitive for brands to build full production studios. Brands such as TSB, Unilever and Barclaycard have all brought agency partners on-site for specific work, particularly around content.

Since when did ‘swap and replace’ work for anything?

Of course, there’s another ace up agencies’ sleeves. Technology now provides the ability to take one asset and convert it into hundreds of different versions for use in various formats and channels. But this is far from a simple process.

There is a risk of brands buying loads of technology, booting it up and assuming that it will perform. In-housing is a long and costly process during which consumers will still want to engage with your brand seamlessly across every channel. There is a place for agencies to coach brands to in-house media and thereby be well placed to pick up on more strategic or project work in time.

With this in mind, agencies need to be flexible and thoughtful about where they want to play and be less paranoid about brands asserting greater ownership of the insight from campaigns.

For brands, it’s important to take the in-housing trend with the same diligence and care as any other we’ve seen in recent years. Rest assured, where agencies fail to get the balance right, in-housing will cut margins further. But those that are able to adjust will form new muscle memory.

Oliver Hansard, Vice President of Sales at 4C Insights

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