The ad world has been abuzz of late with talk of the Association of National Advertisers’ recent report, “The
The report defined in-house agency as a department, group or person that has responsibilities typically performed by an external advertising or other marcomm agency, not including an internal PR function. While some have embraced the report as representative of the dramatic shifts taking place in the fundamental agency-client relationship, others have argued it is simply reaffirming what has always been the case: that some marketers, primarily financial-services firms, tend to keep mainly collateral-creating capabilities in-house.
So what is the report really revealing? I reached out to several chief marketers, as well as ANA Group Executive VP Bill Duggan and 4A’s President Nancy Hill, for their perspectives.
“It’s no longer just about ‘cheap’ and ‘fast,’” Duggan said, explaining the fundamental takeaway of the report, in an email. “In-house agencies are playing more important, more strategic roles.”
And, he added, the report indicates a legitimate rise—not just a consequence of procurement pressures. “Procurement’s impact has been somewhat minimal to date,” he said. “Our research indicates that, among those companies that have a marketing procurement department, 45% say procurement is somewhat or more influential in deciding to move business in-house. But only 5% “extremely” influential and 10% “very” influential,” Duggan said. “This influence is likely to grow.”
Certainly, the need for speed is core to the strategic role in-house agencies are playing. “The pace at which advertising and marketing needs to happen has accelerated dramatically,” said Ann Lewnes, senior VP and CMO of Adobe, who explains that her company has not an in-house agency, but rather “insourced key capabilities.” “The need to iterate and respond—when you find out what’s working and not working in your campaign, you want to find out about it immediately. You find out things if you’re measuring properly; if you are slow to respond to those, that’s a huge missed opportunity.”
But while the need for speed is lately pushing clients to bring more capabilities inside--including even creative strategy, according to the report--some marketers have had in-house agencies in place for decades. Take Fidelity Investments, for example, which established its in-house agency, called Fidelity Communications and Advertising, in 1987. “We have a full-service shop here—media buying and planning, creative development, video capability, print ads, digital and mobile, outdoor, branding, naming, trade shows, sponsorships, and creative and media strategies as well,” said Jim Speros, executive VP and chief creative officer at the financial-services firm. “We are soup-to-nuts.”
The company works with external agencies Arnold and Havas, meanwhile, “to supplement some of that capability,” Speros said. “Arnold does TV and Havas works with us on a lot of the digital media-planning and -buying.”
Why did Fidelity set up its agency in the first place? “We have greater control over the creative process; speed is certainly an issue—we find we can get things to market much, much faster with a high degree of control,” Speros said. “We have people here who understand the business and the industry. At agencies, you have the revolving-door syndrome. We have a lot more stability here. Plus, people understand the industry and culture. There is tremendous cost savings and also we are able to attract and retain solid talent because Fidelity has a lot to offer in terms of benefits, stability. Those would be main reasons, then maybe an additional reason might be tighter integration with our data and analytics team. We have teams of analysts who work closely with our creative teams also.”
Collaboration, of course, remains key. “A lot of the work emanates from here,” Speros said, “but there’s no pride of ownership. If Arnold has a terrific idea, we’ll take that idea and leverage it. We test everything that we do to make sure we’re on point, regardless of who’s developed it.”
The story is similar at Bank of America, which has had its in-house agency in place since 1986. Called Enterprise Creative Solutions, or ECS, the agency handles the work that is “close to the business and that requires that depth of understanding of the business,” said Meredith Verdone, senior VP and brand, advertising and research executive at Bank of America: collateral, direct mail, designs for credit cards, events, promotions on ATM screens. And the agency has been adding internal video-production capabilities. Agencies Hill Holliday, Team Bank of America at WPP, and Starcom, meanwhile, handle media strategy, media buying, social-media strategy, overall brand strategy, TV advertising, the major strategic work. “My team leads the brand strategy,” she said.
Certainly, in-house capabilities historically have been most prevalent among financial-services companies, for “two reasons,” Duggan said: “There are lots of mailings, collateral, retail work – which in-house agencies can excel at. Also, there are special legal/regulatory requirements in financial services, and an internal team is much more aware of those requirements.” Indeed, 39% of survey respondents were financial-services marketers.
To that point, Hill had a different take on the report findings. “There have always been certain kinds of organizations that have had the requirement to have in-house agencies: financial, tech companies—simply because of the volume of literature and communications that’s required between them and their customers. By the way, independent agencies and they have always worked hand-in-glove. There’s never been a conflict between in-house and independent agencies. I don’t think there’s a tension point there. I also don’t think most of the clients who responded in that survey indicates anything in terms of a shift away from independent agencies,” Hill said. “And I worry that it may be skewed to just those types of institutions as opposed to general-population companies.”
Duggan, for his part, expects to see a continued increase in the prevalence of so-called in-house agencies across industries. “What organization isn’t interested in cost-efficiencies and speed to market,” he asked, “as long as it does not come at the expense of the quality of the work?”
Hill, meanwhile, is seeing “some increase with regard to social,” she said. “Some clients feel that needs to be kept closer. That might be the one area where there might be a slight uptick.”
Of course, the “million-dollar question,” as Duggan puts it, is whether the quality of work that comes out of an in-house agency can rival that of an external agency. “There is no doubt that quality has been improving and in many cases is very good,” he said. “This is a very subjective statement, but I don’t believe the ‘average’ in-house agency has creative that rivals the ‘average’ external agencies. But I do think some of the ‘best-in-class’ in-house agencies are indeed doing work that rivals and even exceeds, an external agency.” Fidelity Investments’ internal agency, in fact, has won a Gold Lion at the Cannes Lions International Festival of Creativity, Speros said.
But on this issue, Hill demurred. “It’s highly unlikely and here’s why: Truly creative people like to work on more than one thing at a time,” she said. “The thing that an independent agency offers them is the ability to work with more than one client. And I think it is going to be very difficult for in-house agencies to attract the caliber of talent that an independent agency can attract.”
No doubt, whether the rise in in-house agencies is a hot trend or nothing particularly new, the report leaves external agencies with their own issues to ponder—especially as, per the report, 56% of clients with in-house capabilities have moved inside assignments that were handled by an external agency. “It’s been very clear for quite some time that agencies need to be much more agile and faster to respond, and that’s what real-time marketing has pushed us all toward,” Hill said. “That’s what clients are looking for. How fast can you respond, are you measuring it, and is it appropriate for the brand? Those are the three big questions.”
And there is plenty marketers will continue to leave to external agencies. “[The] tactical capabilities, they are becoming easier to bring in house,” Lewnes said. “But there are certain things that I am not considering bringing in-house: big creative ideas, which continue to be the foundation. I still rely heavily on Goodby [Silverstein & Partners] as my agency of record for the big idea. They have a much more objective view of the landscape; their business to me is big ideas and so I think that’s a huge leverage point for agencies. A big opportunity for agencies is to help accelerate marketers’ move to digital. Agencies have a huge opportunity to go in and be trusted advisors to go in and implement.”
Speros agreed. “I would not dismiss external agencies because they do have a lot to offer,” he said. “They bring an external perspective that is healthy, and they have the benefit of working across diverse industries, so you get a different view on creative. Also, the topic of staying on top of trends is an important one that in-house agencies can sometimes fall short on.”
Verdone similarly doesn’t eschew external agencies. “You need the external perspective. As a company, we are very focused on being customer-driven. In order to be that, you have to be outside-in. You always have to have an external perspective, for an understanding of the world around you,” she said.
“Agencies have got to have the pulse of customer trends, customer behavior—that’s probably the biggest topic right now: how consumers are behaving with media, with the changing marketplace, with the change in TV viewership, the change in the full media landscape,” Verdone said. “[Understanding that is] the real value an external agency can provide.”
