The Growing Relevance of Decoupling in Marketing and Advertising
- Marketers are seeking specialist service providers through decoupling
- Decoupling marketing efforts leads to higher cost savings
- Transitioning to a decoupled model requires a significant initial investment in time and resources
Since the Association of National Advertisers’ Media Transparency Initiative of 2016, the trend of decoupling creative and production services units has gained prominence among large marketers. Marketers have been progressively employing specialist service providers across various advertising verticals for the past decade.
Instead of a full-service agency, these days media-buying services are performed by specialists, while PR is managed by a separate specialist communications agency, and so on. Brands increasingly prefer transparency and are trying to avoid paying the exorbitant markups that come with one-stop shops.
The Pros and Cons of Decoupling: A Broad Overview
By decoupling, brands have the choice to work directly with a production house to execute their creative strategies, and they can decide on the extent of the creative agency’s involvement. Regional production houses are great alternatives for creating targeted marketing campaigns relevant to the culture and language of a particular market. Brands such as Coca-Cola, Nestle and Philips have routinely outsourced production for regional campaigns, ensuring better quality and shorter turnaround times.
The traditional model can cause cost inefficiencies, long timelines and reduced control over the output. Decoupling allows brands to engage specialists across creative ideation, strategizing and pre-and post-production services, which allows for competitive pricing. However, managing relationships with multiple vendors can become a time- and resource-intensive task. For a large Fortune 500 company with decentralized operations, decoupling requires meticulous demand planning for successful implementation.
Decoupling by Media Type
There is an increasing focus on obtaining best-in-class services for every niche marketing category to maximize potential reach. Engaging specialist digital marketing agencies, social media marketers and event managers are some of the ways that brands choose to decouple their marketing efforts.
U Mobile, for instance, uses three separate agencies to deliver specialized traditional media, digital media and social media services.
Costs and Margins
When brands are not as involved or have less control over the production process, using the production department of a full-service agency can increase costs by up to 20% every year. Agencies also tend to have high overhead and fixed operating costs, which can result in huge markups. Brands often end up paying for the extra personnel in production and other departments.
That’s another reason that large marketers increasingly prefer to decouple and look to adopt a performance-based pricing model. In 2009, Coca-Cola implemented this compensation approach and was able to successfully replicate it in 35 markets by 2011. Procter & Gamble involved its in-house media agency in its marketing initiatives and adopted a profit-sharing model, where the agency’s compensation depended on campaign performance.
Things to Consider Before Decoupling
As cost-effective as decoupling sounds, it carries the risk of fragmenting a brand’s identity across media and geographies.
For a company that has been using a one-stop shop as its incumbent model, transitioning to a decoupled model requires significant investments in time and effort from internal stakeholders. To get the most out of the transition, the decision to decouple should be based on a multitude of factors, such as the company’s need for cost savings, creative specialization, faster delivery and scalability.
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A recognized leader in supply chain management and logistics, David plays a critical role in the design, sourcing and implementation of supply chain improvements to GEP’s global clients.LET'S TALK