Over the past decade, the marketing dynamics have tremendously changed. One such notable change is the increasing adoption of the in-house agency model. According to a 2018 study conducted by the In-House Agency Forum (IHAF), the adoption of in-house agencies has increased from 42 percent in 2008 to 64 percent in 2018.
The Need for a Hybrid Model
Though a decade ago, the fundamental drivers for adopting an in-house agency model were cost savings and speed to market, in today’s stronger economy, they aren’t alone in driving this trend. Knowledge of the brand and need for measurement, and analytics and insights to drive new programs and strategies are of paramount importance, especially in digital marketing.
Advertisers like P&G, Unilever and JPMorgan Chase have recognized this and have been able to sustain a successful in-house digital marketing model. However, some advertisers are going back to agencies and ad tech vendors after struggling to run digital marketing services themselves. Brands like Mazda, Adidas, and Heineken are opting out from completely moving to the in-house agency model. Difficulty in recruiting qualified personnel, challenges in developing/maintaining digital tools in-house, need for delivering on commercial outcomes, brand measures and overall performance are the main reasons.
For cases such as Mazda, Adidas and Heineken, a hybrid model of blending internal and external agency expertise and resources helps strike a balance between owning strategy and controlling execution. The hybrid model supports shared responsibilities, accountability, technology, and incentive to collaborate. Additionally, it’s often better to be able to tap in and out of specialized and evolving skills rather than invest in them as an internal fixed headcount.
Brands such as AT&T obtain an optimal level of performance by working closely with their agency BBDO, which is increasingly working as AT&T’s adviser and recruiter, as AT&T looks to take more digital marketing services such as e-commerce, analytics, lead generation, content, social marketing, and CRM in-house.
Today’s requirement for a successful in-house marketing function is no longer the same as it was a decade ago. Though the adoption of an in-house agency model is increasing at a rapid pace, brands need to carefully assess the performance of their in-house agency and re-evaluate to see whether such a model is working for them. In case the performance of an in-house model doesn’t make the cut, brands should rethink how their marketing function and their agencies can work together. Brands should also reconsider accountability and stop making the agency the sole scapegoat. By working together in blending their talents and resources, the brand’s marketing procurement function and their agency can achieve much greater results.