Lately, much ado has been made about the “death of the AOR.” Some companies have let their agency-of-record relationships lapse in favor of as-needed niche specialists; others claim agency bloat and excessive expense as the rationale; still others have retained their agencies but seek greater transparency into campaign activities and cost structures.
And then we have marketers who have elected to take this work in-house and to build-out internal agencies. No wonder today’s agencies feel under fire.
As a principal analyst at Digital Clarity Group, I have been conducting research to better understand the “insourcing” trend among marketers. My research has entailed personally interviewing marketing leaders with substantial in-house departments. Questions have been asked about the company’s history of insourcing, a description of what work is being performed in-house, and how it has changed in recent times--why and to what extent, how to determine what to take in-house versus keep outsourced (and why), and managing in-house teams and best practices. I also interviewed ad/marketing technology solutions providers for their unique perspectives since many of these companies now sell directly to the brands.
This two-part piece will highlight some of my key findings.
Why Insourcing Is Happening
Today’s CMO has a tough job: high accountability in a fast-changing environment that requires equal parts marketing, technologist, and data analytic skills. Layering on the management of an in-house agency team could seem like utter lunacy to some, and, yet, by all accounts it’s a growing trend. As of 2013, 58 percent of Association of National Advertisers members who responded to a survey now have in-house agencies, a 16 percent increase in the past five years. Those that do have also grown their in-house agencies, increasing personnel since 2008. Half of these in-house agencies handle some level of media planning and/or buying.
According to ANA president Bob Liodice, more brands than ever before are having direct-to-publisher conversations with the likes of Facebook, Google, and Apple about how to leverage their platforms, how to buy media, and how to develop full-blown campaigns. Liodice told me he knows of many CMOs “taking the Silicon Valley tour” in order to become more personally knowledgeable the new dynamic being thrust upon them: that of the two-way dialogue between brands and customers.
The bulk of the work migrating in-house falls into the production and execution areas. To varying degrees, in-house agencies now perform creative production and tactical duties, such as marketing/email automation, direct mail, copywriting, content marketing, social media, and paid media planning/buying, including digital display, search, and offline. Project planning and management are also handled internally.
Many marketers reiterated the same key reasons for taking work in-house: cost savings, speed, brand intimacy, and control.
• Cost savings: Though a driver for insourcing, cost savings gets treated more like an added benefit than a sole rationale. Insourcing does provide better a company with better accountability, as measured through cost savings, and with more CMOs being held so accountable, it helps them justify insourcing. Fidelity Investments, for example, estimates it saves over $20 million annually through insourcing.
• Speed: This refers to a company’s ability to turn around iterative work much more quickly than if it has to go out-of-house. Everyone lives in real time these days, including management, which demands responsiveness from its marketing team. Plus, work performed in-house can be fast-tracked through approval authorities. “It’s a lot easier to walk down the hall for an approval than to wait for an agency to get it done,” one marketing director told me.
• Brand intimacy: Brand intimacy refers to the unparalleled depth of knowledge, context, focus, and hopefully instilled passion brought by employees who live and breathe the brand every day. For instance, Carol Kruse, former vice president of Coca-Cola’s global digital marketing and SVP/CMO of ESPN, asserts that brands should insource social media management because, “Your internal marketing team should know the brand voice better than anyone else and consequently be most authentic. Plus, they are also better-positioned to integrate social throughout your marketing mix and bring social listening insights into the brand planning process.” In a well-run in-house agency, brands also benefit from the longevity and continuity of their teams. “No one will care about the company more than your own employees--if they don't, you need new employees,” said one global director of communications who oversees a 500-person insourced ad/marketing team.
• Control: The desire for control emerges in several ways, including brand safety (many brands cited social media control as an example), and protection and leveraging of marketing technology investments. By insourcing and controlling marketing, brands can glean insights they may never have been able to get when they outsourced; these insights not only fuel such factors as messaging and audience segmentation, but thanks to also controlling speed, they can be used faster.
Data control probably represents the fastest growing reason for insourcing right now. Access to and ownership of data is hugely important to brands in terms of protecting it, making use of it, syncing and slicing it, and gleaning its secrets to better marketing and more loyal consumers. Brand marketers want this data to help them justify their ideas and efforts in ways previously never available.
Data also represents one of insourcing’s biggest challenges.
“Increasingly, the role of the CMO is that of the orchestra leader, as there are so many functions that affect the customer experience that must be coordinated across the enterprise,” Jim Speros, EVP and chief brand acceleration officer of Fidelity, told me. “While efficiencies are clearly important, we’ve got to collaborate and coordinate with our partners, both internal and external, to create compelling experiences that set us apart from our competitors and drive a compelling value proposition across the marketing ecosystem.”
Today’s insourcing CMO has to confront challenges in talent, data, and analytics, managing new sets of expectation, and weightier business transformation issues, such as organizational change, departmental integration, and driving innovation. Some people talk about the convergence of the CMO and CTO, but based on insourcing challenges, the position sounds more like a marketing-minded COO to me.
Talent-wise, brands struggle with capacity and scale; prioritization and allocation of resources; unequal regard for the internal resource-- perceived as free and unrestricted compared to outsourced work, leading to unfettered scope creep and the fragility brought about by positions that lack redundancy if and when an employee leaves. Education and training, especially needed during today’s fast-changing times, not only challenges brands within their marketing departments, but also their entire business. The majority of brand marketers I interviewed want to hire data specialists, but scarce talent exists in the open marketplace.
Intrigued to learn more? In part 2 of this piece, I’ll cover additional challenges associated with insourcing, the changing relationships with agencies as a result of insourcing, and some predictions.