Is in-housing the future of marketing?

As belts tighten and efficient budget spend moves even more front-of-mind, Meredith Tehan, SVP of Sales at Cognitiv, considers what the future might be for agencies 

Prior to the pandemic, many brands both big and small were focused on bringing some, if not all, of their marketing capabilities in-house. Agencies were losing clients each year, and it was not uncommon to see stories about big brands shopping around for new agency partners. What should agencies be doing to address – or reverse – this trend, and how can they continue to prove their value to brands in a highly competitive and uncertain atmosphere?

According to the Association of National Advertisers (ANA)’s group executive VP Bill Duggan, about 85 percent of its members currently “have some form of in-house team”, up 7 percent from 2018. The pandemic exacerbated this trend to a certain extent, as brands looked for ways to cut their costs in a difficult environment without any clear idea of when ‘business as usual’ could resume. Yet, even as life returns to normal, many of the changes wrought by the pandemic look as though they are here to stay. 

For one thing, marketing budgets are unlikely to increase anytime soon. A Gartner survey of CMOs reported that they “have fallen to their lowest recorded level”, going from 11 percent of company revenue in 2020 to a mere 6.4 percent in 2021. With marketers under more pressure to account for every dollar, agencies too are being pushed to prove their worth by providing demonstrable, consistent results despite shrinking resources. 

The problem for agencies

As brands move more operations in-house, the amount of revenue agencies are able to generate is decreasing. 67 percent of US agency executives report finding it harder to obtain new business. As a result, agencies have had to shed up to 15 percent of their workforce, thereby losing many skilled professionals with valuable marketing expertise. Where will these marketers go? Most likely to brands, where they can help build out in-house capabilities and further reduce those companies’ dependencies on agency partners.

Yet agencies still have a valuable role to play. While more corporations than ever are investing in building their own marketing teams, many still lack adequate funding and talent. The In-House Agency Forum (IHAF), a trade group, reports that in areas like digital marketing, social media, video and analytics, in-house teams require more support. Without the budget to bring on new staff, that leaves agencies with a vital opening to provide their expertise.  

Why agencies must recalibrate

Some brands are also discovering the limitations of in-housing, with companies like J.Crew, Prudential and Splenda opting to outsource more work to agencies. Turning to agencies makes life simpler for brands, putting the pressure back on agencies to deliver. Given the concerns around transparency and performance in the past, however – the very concerns that spurred so many brands to in-house in the first place – agencies must now recalibrate to ensure they are capable of addressing brands’ needs. This pressure has most likely contributed to the ‘great resignation’ we’ve seen among agency employees who have experienced burn-out due to the amount of work required to manually maintain multiple campaigns across a portfolio of clients. 

Agencies should take this opportunity to leverage tech partners that help them optimize their resources, both human and technological. This includes investing in tools like automation and deep learning to ensure they are able to deliver scalable, real-time results and optimise media dollars as effectively as possible. Applying solutions that help traders efficiently optimise their time could help to retain employee count by freeing up some of the more tedious tasks and allow them to focus on the bigger picture to deliver for their clients. 

A complex relationship

The relationship between brands and agencies is incredibly complex, and it continues to evolve. Some agencies that were once irreplaceable have been cut loose, while brands that were once confident in their abilities to handle all aspects of the marketing process have returned to seek agency expertise. Many more have embraced a hybrid model, where some aspects such as the production of creative assets are done in-house while more complex processes like media-buying are outsourced. 

At this point, it seems clear that brands will never be able to in-house the totality of their marketing operations. On the other hand, this does not mean that agencies will be able to operate as they did in the past. Instead, they need to find ways to optimise performance and provide value to brands – otherwise, their days in the industry will be numbered.