Why are marketers talking about taking agency services in-house?

Late last year, the Association of National Advertisers reported that some 35 percent of marketers have already brought programmatic in-house, a dramatic increase from the 14 percent reported in 2016. And that’s just a start. Marketers have their eyes on a host of services once outsourced to their agencies: social media marketing, data management, strategic planning, message development, media buying and planning.

Right under our noses, it seems, the brand/agency relationship has undergone a complete transformation. What’s going on? And is this a good development?

What’s driving the interest?

To find out, I spent the past few months speaking with numerous brands and agencies, and it’s safe to say we’re living through a seismic shift in the marketing ecosystem. As a result of those changes, brands and agencies are on two different trajectories.

Marketers once fully trusted their agencies and looked upon them as vital partners in their success. Today they’re more apt to question the value they get from an agency. However, many have no strategy for assessing the actual value they receive — because they have so many other critical things on their plate that they choose to leave the relationship alone, mainly because they don’t see the value of fixing it, either. There are exceptions, of course.

[pullquote]The big agencies are currently doing their part by making necessary … transformations to their operational structures … However, brands must also shift the way they engage us in order to take full advantage of these shifts.[/pullquote]

The agencies, for their part, eager to maintain a hold on their businesses, overpromise brands by positioning themselves as a one-stop solution for their entire operations. This leaves marketers scratching their heads. Marketing, advertising, ecommerce and customer care are now in the marketer’s bailiwick, and as a result, they have become far more complicated than they once were.

This complexity further impedes the brands’ ability to manage the relationship. This vicious cycle has no end. No wonder marketers are skeptical of the one-stop claim. And that, in turn, leads them to ask: What exactly is my agency good at? Without a clear vision of a given partner’s strengths, marketers simply don’t know how to insert their agencies into their inner workings.

Besides, the messages they get from the industry at large are pretty clear: do more yourself. Technology is making it possible to bring everything in-house and give brands greater control over their operations and data. It’s a powerfully alluring message that is hard to refute.

I’ve also spoken with many marketers who feel as though their agencies are too far ahead of them, proposing newfangled things like people-based marketing, customer-centric advertising and other next-generation ideas that feel a bit out of reach for their organizations.

This is a tricky issue because you’re not going to find a marketer who doesn’t want to put their customers first and build their operations around providing one-to-one engagements. But those strategies require a fundamental shift in the way their organizations operate, to say nothing of the tech investment, all of which comes with great risks. Marketers feel like their agencies don’t quite appreciate those risks.

Are agencies still delivering value?

All of these issues have led the marketer to believe that agencies are no longer useful or valuable. To my mind, this is completely wrong; marketers need agencies as much as they ever did — even more so, in fact. But we need to recognize that technology has profoundly altered the world, and that has changed the relationship between marketers and agencies. This means the relationship needs to evolve to make it more aligned with today’s complex marketing ecosystem.”

Warren Zenna, EVP and managing director, NA at Mobext (Havas) told me, “The big agencies are currently doing their part by making necessary — and in some cases overdue — transformations to their operational structures to accommodate the modern marketing ecosystem. However, brands must also shift the way they engage us in order to take full advantage of these shifts. It’s not enough that we make adjustments.”

Many brands have hired agencies in the hope that they will fix this misalignment, only to be frustrated when they realize they’re ill-equipped to take full advantage of what agencies have to offer. This is the dilemma I heard over and over again: I’m spending a lot of money for agency services but I’m not sure I’m getting value. But I haven’t taken the time to think through how best to use an agency, mostly because I don’t know where to start.

Marketers believe the proper response to this misalignment is to take more and more of the marketing funnel in-house rather than evolve the relationship. But I propose that the best outcome is for the relationship between brands and their agencies is to evolve.

How to evolve the brand/agency relationship

Here are three ways I believe the relationship must change:

1. Marketers must (and do) accept that they can’t do it all themselves, and they must figure out a division of labor they’re comfortable with. But accepting an agency’s role as part and parcel of their marketing and advertising operations means that marketers must once again trust their partners. Key here is for each brand to determine what to keep and what to give away. This is a very bespoke process, as each brand has its own vertical and horizontal characteristics.
2. To make this happen, agencies need to evolve from the one-stop claim and be honest with marketers about what they’re good at and where they can add real value and differentiate. Fear of mission creep is real, and oftentimes outside counsel is sought when there is a demand for specialized skills versus an all-encompassing skill set.
3. Brands need to better understand the new landscape so they can extract the right type and amount of value from their agency relationships. There has been a lot of consolidation among agencies, and many have emerged as leaders in specific disciplines. It behooves marketers to find out which ones offer the expertise they need.

The reality is that agencies aren’t going away, and brands will always need to work with them. It doesn’t make sense to bring the entire advertising and marketing lifecycle under their roofs, and, even if it did, where would they find all that staff to run the operations? Rather than undertake costly initiatives, marketers should schedule frank discussions with their agencies and figure out how they can work better together.

The future state of the brand/agency relationship

So, what does internal brand transformation look like? As agencies continue to consolidate and become more transparent about their strengths, marketers can make better decisions about which tactics to keep in-house and which to outsource. Understanding this division of labor will enable senior brand leaders to hire and retain top talent that clearly aligns with the needs of their internal team.

And most importantly, I predict that as the relationship evolves, advertisers will have a more holistic view of what is going on in their departments and will be better equipped to demonstrate the value that they bring to superiors. The agencies that come out on top will be those with a clear value proposition.

The evolution of the brand/agency relationship may require mediation, but I believe, based on my experience and the conversations I’ve had, that it’s well within reach.