Marketers: Is in-housing an effective way to make your money go further?
by John Owen
For some years now, there has been a trend towards in-house agencies (IHAs) – as marketers have sought to pay less for their marketing communications and exert more control in the process. Back in 2017, when ISBA surveyed its members about this topic, it found that over half of UK advertisers had either already established or were planning to establish an IHA (https://futurethinking.com/wp-content/uploads/2017/04/ISBA_Report.pdf). The numbers will have increased since.
With the impact of COVID-19, the pressure on costs will be even more acute. And accountability for the effective use of marketing investment will be even more important – making the twin benefits of efficiency and control even more attractive.
So, as marketers wrestle with new pressures and constraints, it is foolish – perhaps even negligent – not to consider the possibility of in-housing.
This is something I’ve been thinking a lot about as I do more and more work with Jim Hubbard and the team at WDC, who have advised clients like Specsavers, the BBC, Amazon and ASOS on how to get the best out of their IHA. My key role is to advise on cultural issues and to apply the lessons of behavioural science to the design and implementation of change. There’s lots to say about both these areas and I’ll post about their relevance to marketing teams and IHAs in due course.
This post, though, is about the core principles that underpin IHA success. Can in-housing make your money go further? If so, what's the catch? And how do you get around it?
As we’ve established, there are two clear “pros” to setting one up: cost savings and greater control for those commissioning the work. However, according to that same ISBA survey, there is also one major potential con: the quality of the creative output.
This is consistent with what WDC has seen and heard from its clients over the years – that, for all the cost savings generated and all the additional control afforded to marketers, the big risk is that the quality of the work suffers.
Now, here’s the thing: it’s not like these three issues of quality, cost and control are unrelated. Indeed, it is naïve to think that the “con” of low quality might not be caused, to at least some extent, by the two “pros” of spending less money and exerting more control!
In the US, where 72% of advertisers already have an in-house function, just over half of IHA leaders who took part in a recent survey said they weren’t adequately funded – so cost cutting had damaged their ability to deliver; and only 33% said they had sufficient autonomy in marketing communications and creative strategy – so marketing departments were exerting control in the wrong areas and thereby preventing the IHAs from doing their best work.
Furthermore, the study found that 54% of marketers were less diligent in their use of “planning around project initiation” with internal agencies, as compared to external agencies. In other words, they were looser with their briefs, and probably later too. If you're thinking that sounds like the opposite of "exerting control", well... you're right. But there's an explanation for this which we'll come on to. For now, it's just worth noting that poor briefing makes it considerably harder to produce good work.
So what’s the solution? First, we need to understand the problem in a bit more depth. We need to understand more about why the quality is poorer and what the exact relationship is between this outcome and the issues we’ve identified above: inadequate funding, control being exerted in the wrong areas and poor project initiation.
On the issue of funding, let’s be clear that spending less money does not automatically lead to lower quality work. Indeed, WDC’s entire track record is one of delivering financial savings to clients, while simultaneously improving the creative output – the BBC and Specsavers being particularly shining examples of this. But there’s an undeniable risk that once initial savings have been achieved, the focus on efficiencies doesn’t go away. Cost cutting has been established as a salient and achievable goal both for marketers and the business leaders they report to – creating an insatiable appetite for more. And, sooner or later, there comes a point where continued cuts start to damage the effectiveness of your marketing.
Resisting this almost inevitable pressure is a major challenge, but cost cutting also contributes to the other two issues of inappropriate control and poor project initiation, in perhaps more surprising ways.
Which brings us to the question of why marketers intent on exerting more control would initiate projects with less rigour, rather than putting even more effort in at this stage. The answer is human psychology and our irrational relationship with money. Put simply, when things cost less money, we tend to value them less and, as a consequence, take less care over them – so lower budgets result in looser, not tighter, briefings.
Similarly, when people cost less money, we tend to take less account of their opinions – so IHAs, whose costs often don’t get computed as part of the marketing department’s expenditure, find themselves devalued. This means they often find it difficult to influence creative strategy or challenge briefs. All too easily, marketers confuse “service” with “servitude” and, having briefed poorly in the first place, they then interfere constantly to make the work something more like what they think they need. This is the very definition of "exerting control in the wrong areas."
When two-thirds of American IHA leaders report feeling a lack of autonomy as a consequence of all this, that's pretty strong evidence that this is a widespread problem. And it's one that really, really matters – because autonomy is one of the most powerful sources of human motivation. Kill that and you kill the ability to produce strong work – which, in turn, leads to churn, additional recruitment costs and increasing difficulty in attracting the best talent. Which, by the way, is another oft-discussed problem that bedevils IHAs on both sides of the Atlantic.
So there’s a very clear relationship between the main goal of saving money and the problems which ensue: less discipline and rigour from the marketing teams, less motivation from the specialists in the IHA.
Now that we’ve got a clearer picture of the problem, what solutions present themselves?
Clearly how you manage costs is vital. There are two dangers here: firstly, that you get caught in an endless cycle of cuts, where spending less rather than achieving more becomes the salient goal. To counter this, measuring and communicating marketing effectiveness in terms that are relevant to financial and operations people is vital. Secondly, that you fail to account for internal costs as clearly as external ones, meaning you fail to put a value on the services of the IHA. To avoid this, you need to devise a means of “paying” for internal resource (WDC advocates a “wooden dollars” system).
As for the issue of control, it’s a delicate one. You have to be very clear about what you mean by this. If “more control” really translates as the ability to benefit from greater responsiveness and to apply more direct accountability, then that is what you should focus on – establishing service-level agreements, clarifying roles and responsibilities, agreeing the best ways to communicate, articulating specific objectives and being rigorous in defining KPIs. And, at a project level, of course, issuing tight, timely briefs and conducting rigorous project initiation.
What control doesn’t – or shouldn’t – mean is the micro-management of creative or production teams. A good brief should define the problem and ask the IHA team to come up with the solution. In other words, you should grant them as much autonomy as possible in the way they respond to the brief, so that they feel motivated to do better work, so that you get the benefit of their expertise, and, as an added bonus, so that they stick around for a decent length of time.
I’m not going to pretend managing all of this is easy. But the principles are fairly straightforward:
measure and advocate the commercial contribution of marketing
put a tangible value on the work of the IHA
agree what’s expected of the IHA (overall and in relation to each project)
give them the freedom to deliver against these expectations.
If you’re currently considering setting up an IHA of your own, or if budgetary pressures mean you are having to radically overhaul your existing one, then I’d argue it’s the perfect time to think about what these principles mean to you.
