The topic of insourcing has resurfaced as brand marketers have expressed frustrations with issues such as slow agency adaptation in fast-moving digital times, unclear pricing structures related to programmatic media buys, and the desire to have access to and control over audience data.
In the meantime, ad/marketing technology companies, unwilling to wait on the sidelines for agencies to express an interest in their offerings, have taken matters into their own hands, bringing their pitches directly to the brands. By building out in-house agencies, brands can be more empowered than ever, but to what extent are they diving in, why, and what limitations and challenges could they also face?
Sparked by the ongoing debate about the future of the traditional agency, these are questions I sought to answer in my research about insourcing. As I wrote last month in the first part of this two-part piece, I personally interviewed marketing leaders with substantial in-house departments to better understand the trend. As promised, here is more about what marketing executives told me regarding the challenges associated with insourcing, the changing relationships with agencies as a result of insourcing, and some predictions.
Change Is Hard
Brands creating or expanding in-house agencies do so for reasons including cost savings, agility, dedicated employees who can achieve an unparalleled depth of knowledge and immersion with the brand, brand protection, and ownership of customer and transactional data and analytics.
In today’s world of big and small data, no company can escape the demand for more and better analytics and reporting. Marketers feel this pressure and care more about real-time data and predictive modeling than ever before. “Insourcing is on fire because as data and technology become more relevant and increase efficiencies, brands are expected to be more accountable,” said Arthur Muldoon, CEO of Accordant Media, a company that works directly with brands as well as agencies.
Control over analytics also gives marketers a more objective way to measure and compare across all of their vendors. And though marketers would like to do more analytics in-house themselves, “it’s hard–culturally and economically–to ramp-up a program, so a lot of brands still need to outsource this,” explained Joseph Stanhope, SVP of marketing at Signal, a technology company. “Brands probably want to have the ability to do more measuring of branding campaigns, but it’s scary, especially if a company doesn’t have a culture of experimenting and failure.”
The collection of data poses another challenge: the inclination to silo data by channel. This challenge isn’t unique to insourcing companies, but to all. The greater the dependency on an in-house team, however, the even greater the need to integrate internal marketing channels to better analyze and apply the learnings from their data. To encourage this, “the reward system needs to shift,” explained one global CMO. “You need to value not the activities at the functional level, but the impact/results of cross-functional work. What should matter is what the team did and if that serviced a business objective.”
When it comes to building a successful in-house ad/marketing team, companies that insource need to know what to look for, and digital aptitude reigns supreme. “Insourcing makes you start thinking more about digital, period,” said one marketing leader.
More than once I was told of an increased demand for cross-trained marketing generalists. “We're noticing how much more our clients are looking for people with cross-digital, interdisciplinary skills and comprehension,” said Nelson Rodriguez, vice president, global marketing of digital talent placement firm Aquent.
These generalists can better handle a world with fragmented audiences and channels to reach them. Some companies go as far as developing their own nomenclature for fulfilling these talent needs. “We are nurturing ‘integrationalists’ internally because we need to have people who think beyond their function, mainly because the way customers receive information isn't as linear as it was before in the past,” said one global director of communications who oversees a 500-person insourced ad/marketing team.
Companies moving toward more in-housed digital marketing face a different kind of challenge: This kind of work may require changes to entire processes and workflow that may not be enabled by management, which can obstruct the very people hired to do new work. Or, worse still, it puts new marketing hires in the awkward position of being forced into the de facto role of organizational change leader, oftentimes a recipe for disaster.
The Future Role Of The Agency
My conversations revealed criss-crossing observations about the agency-client situation. Some see the issue as driven by the need to act swiftly. “Consumers are the real drivers of the move toward insourcing,” said Peyman Nilforoush, CEO of technology company inPowered. “These consumers are putting pressure on brands to act in real time, whereas the agency model is fundamentally based on ‘planning,’ and those two circumstances are at odds.”
Others said they see it as command over innovation. “There’s a bit of a role reversal," said Puneet Mehta, CEO of MobileROI. “It used to be that brands turned to the agency to innovate, but now brands see disruption caused by technology and are getting nervous. They view their survival hinging on innovative thinking coming from within the organization, and then they're taking these ideas to their agencies to build and execute upon them.”
And if forced to evolve toward more of an accountability model, brand marketers might find themselves capable of handling even more in-house than they ever thought possible. “We do 98 percent of our advertising and marketing in-house,” said David Garant, creative director of Quicken Loans, which boasts a 200-person internal marketing team. “As we notice more and more requests for talent we don’t have, we go out and hire or internally train for it. It’s in our DNA to ask ourselves how to stay on top of innovation.”
Most brand CMOs, on the other hand, do see a permanent role for solid, trustworthy partners. Agencies that deliver innovative, creative thinking, complex strategy, and the ability to scale quickly in order to deliver on execution will still find themselves in demand. But agencies may also find themselves being asked to decouple the services they provide to brands rather than be expected to control it all.
“What agencies need to be looking at is why and what brands are insourcing, and instead of trying to claim to be great at everything, to pick their lane and stick to it,” recommended a marketing leader hired to build out an in-house team.
A few companies with in-house agencies, such as Medifast, have even gone in the opposite direction, bringing on their first AOR after realizing they would benefit from continuity and to “not get stuck in our own internal paradigms,” as Brian Kagen, Medifast's EVP and CMO, put it.
Based on my research, while I think marketing and advertising work–particularly production and tactical work–will continue to come in-house and flourish there, agencies with strategic thinking, a partnership mentality and real proficiencies–particularly digital ones–will survive and flourish as well. Issues including trust, transparency, pricing structures, and innovation will still need to be worked out between agencies and their clients. Education and training must continue and be supported throughout the entire marketing organization, brand, and agency alike–and at all levels of the company–in order to meet the demands of innovation and changing times.
Skilled labor, too, will have the upper hand, and it will probably only get more difficult before it gets better. Brands, agencies, and Silicon Valley alike will have to continue to woo, acquire, merge, and scour in the battle for the best and the brightest.
The shakeout in advertising and marketing wrought by the digital age is far from over.