Why clients in-house and what agencies can (and can’t) do about it

Client in-housing has always been a factor for agencies, but the availability of ad tech and martech, the rise of automation and data management requirements have added new pressures. Half of digital agencies say clients moving marketing services in-house is a key challenge, according to our Digital Agency 2019 survey, released Wednesday.

To better understand how in-housing is impacting digital agencies, we talked to chief media officer of the Drum Agency Todd Silverstein, consumer division president at the agency SCOUT Cheryl Maher and Clint Tasset, CEO of AdSwerve a Google Marketing Platform partner that works with agencies and in-house marketers. The three industry veterans shared their experiences, what they expect to see in the near future, and recommendations for agencies to maintain thriving businesses.

Why in-housing happens. Maher said that while clients have discussed in-housing as a possible option, her company has been only marginally impacted by the trend during the last five years.

“One of our clients did add a content department in-house, and although this did not result in lost business for SCOUT, it definitely limited future opportunities,” said Maher, “Many of our clients have discussed this as an option, but size and a lack of confidence have kept it at a ‘what-if’ level versus actionable.”

Maher believes the trend is being driven by three specific issues on the client-side:

1. Continued pressure to do more with a smaller budget.
2. Increasing concerns around transparency into agency mark-ups (specifically with media).
3. Blurred lines between marketing and corporate communication tactics, i.e. social media versus customer service or recruitment versus social content.

Silverstein said clients moving services in-house usually occurs after an agency has proven they know what they’re doing.

“It typically happens soon after the agency has drastically improved performance, ironically enough, at which point the client begins to muse on whether or not they could replicate that level of success with an in-house team,” said Silverstein, “While this is a compliment of sorts, we would obviously prefer the opportunity to continue driving increased success.”

Services most likely to be taken in-house. As far as the digital marketing work clients are most often taking in-house, Maher and Silverstein report a variety of services.

“From our direct experience, it seems there is a higher incidence of in-house departments for content creation and social media. However, with larger companies, I do think media is a key focus for in-house agencies,” said Maher.

Silverstein thinks programmatic is the service most often taken in-house, with clients either working directly with platforms or through traders.

“The value of an agency relationship typically manifests itself via strategy and execution, but even more so these days it’s about connecting the dots across data, technology, disparate client departments and between the brand and the consumer,” said Silverstein, “Programmatic is but one aspect of this, so if a client thinks that focusing on tertiary channels will move their business significantly, then it’s likely they were looking for the proverbial dots to be connected in the first place.”

It’s about the data. Tasset said the in-housing trend is directly related to data. His company provides programmatic services to agencies and brands, helping with the everything from set-up to implementation and management.

“What we’ve seen is, no matter the spectrum of ‘in-housing’ — from bringing 100 percent in-house to taking a few first steps,” he said, “having the right data foundation is absolutely critical.”

Tasset believes brands will continue to need the creative and analytical skills available through specialists since building an entire in-house team would require an investment in training and specialization — which creates additional spend, resources and time.

“In the past year, all collaborators have seen their focus rapidly change as the ways in which we connect with consumers, and the ad business as a whole, has changed dramatically,” said Tasset, “With GDRP, personalization, data access and privacy being at the top of every conversation, we believe that the biggest change between agencies and brands will be how the two work together to bring more transparency into the consumer journey.”

The long-term effect of in-housing. Tasset thinks brands will always need external agencies to provide the benefits marketers want.

“Brands can pull more work in-house to better understand their customer journeys, get more transparency into their data and what campaigns are performing better. But it’s the vision and strategy from smart, creative geniuses that will continue to spark a brand’s need for agencies years to come,” said Tasset.

Maher’s concerns around in-housing echo Tasset’s take on brands needing direction from outside the company. She said the current momentum of more brands taking ownership over their digital marketing may lead to companies taking too much in-house, and the consequence will be the loss of best practices and consumer-focused strategy.

“It’s tough to remain objective and truly get into the mind and hearts of the core target when you think about one brand or product day in and day out,” said Maher, “In addition, agencies add value by playing devil’s advocate, and, at times, provide the voice of reason or realism against a brand vision or goal.”

Silverstein believes in-housing trend will continue, and that it should.

“There are some truly great agencies out there which deserve more opportunities to deliver transformational results by connecting strategy, execution and analytics with a heavy bias towards relevant data. Once we reach an equilibrium between agency supply and demand, we’ll see much better performance out of fewer agencies, with a more diverse talent pool spanning in-house and agency settings,” said Silverstein.

Establishing partnerships. When asked how her agency is safeguarding against the in-housing trend, Maher said her team aims to be a true partner to clients.

“We have worked hard to have transparent and supportive dialogue with our clients on where they may find efficiencies in-house versus SCOUT, and also cautioned against them where we think it may not be the best business model for them,” said Maher. She thinks a mix of internal and external resources can be a great solution for brands — but cost savings and efficiency should be balanced with a focus on disruptive, creative and culturally relevant strategies.

“One additional challenge with the in-house agency is that unless a true marketing communications and advertising leader is in place, the management of the in-house agency can be extremely taxing on the CMO and brand managers who often have marketing plus product profit and loss responsibilities,” said Maher. She noted that brands often lose out on current and relevant expertise across categories and companies when they move services in-house, as well as lowered costs for shared marketing tools owned by the agency.

Silverstein said there are situations where he doesn’t attempt to guard against the decision for a brand to take services in-house.

“Are we being engaged at a strategic level? Do we co-author enterprise-wide decisions? Are we being empowered to leverage our scale, expertise, technology and partnerships to meaningfully benefit the client? If so, then I’m fighting for those engagements. If not — for example, when we’re being used as an executional arm — then I say good riddance…as politely as possible, of course.”

This story first appeared on Marketing Land. For more on digital marketing, click here.