In-housing of agency services has become ubiquitous in the past decade, with their own industry associations, their own award shows and even their own industry research to demonstrate how popular and every day they have become. According to Kantar, 78% of advertisers have an in-house agency.
In-housing has come to include almost all aspects of agency services, from as little as a design studio and production capability through to a full-service media and content capability to rival the most established commercial advertising agency.
This makes the concept of an in-house agency difficult to discuss because of the significant variability in what it represents. What is clear is that how these in-house agencies are positioned within the organisation falls into three distinct categories, which could be seen as an evolutionary journey over time. Or it may simply be the underlying strategy for in-housing in the first place.
However, it is crucial to identify this position and understand the opportunities and limitations of the current in-house agency model. This is why, when tasked with reviewing the design and performance of a roster of agencies for our clients, we insist on including the in-house agency.
Critical observations
The first thing to acknowledge is that the in-house agency is not necessarily filled with organisational employees. Increasingly, these in-house teams are filled with freelancers and contractors. But the most significant trend is to outsource the larger in-house teams to external suppliers, such as an advertising agency or one of the increasingly common specialist third-party in-house agency management companies.
Second, it is rare for in-house agencies to be planned and executed with a predefined strategy and plan. Instead, the agency is more likely to have evolved from an initial need or started as an experiment. The shape of this evolution is more often driven by a combination of the marketing team’s needs and the marketing leaders’ philosophy regarding fulfilling those needs using external agency suppliers.
Finally, except for the small marketing teams, few of these in-house capabilities fulfil all the needs. Therefore, one or more third-party service providers, including creative agencies, media agencies, public relations, and others, are usually contracted to provide marketing services and constitute a vendor roster, whether it is defined as such or not.
The studio
This is often the typical entry-level in-house service within the marketing organisation. While titled a ‘studio’ service, it could be one or more standard capabilities. Typically, we see services that range from print, digital, audio, and video content creation. It could also be paid social media, performance media such as Google paid search or one or more of the other platforms that facilitate the end user in managing their advertising campaign directly.
These are typically well integrated into the marketing department so that they are shielded or protected from interaction with any of the rostered agencies, with marketing and brand managers acting to manage the external agencies. In contrast, the in-house agency is seen as part of the marketing team.
Often, the studio provides services to other organisational stakeholders outside of marketing, including sales, retailing and others, reinforcing their positioning of being integrated into the organisation.
The issue with this is that it relies on marketers to manage the relationships and workflows between the in-house and external agencies, defining where and how the workflow moves from one to the other. This often means the in-house agency’s capability could be under-utilised or poorly utilised in an overall supplier management process. There is usually resistance to this concept, as it challenges the idea that the in-house agency is part of the marketing team.
The agency
This approach acknowledges that the in-house agency is a ‘special’ part of a roster of service providers required by marketing (and possibly the broader organisation). It positions and manages these services to optimise their role and utilisation as part of that roster.
While the in-house services remain physically located within the organisation and aligned with the marketing team, their role and responsibilities are managed as a part of the overall marketing roster. This means roles and responsibilities for project initiations, briefings, handovers, and the like are defined across the roster of external suppliers and the in-house agencies, positioning it as an integrated part of the marketing go-to-market process.
The benefit is that it creates opportunities to identify capability gaps and duplications within the total roster (in-house and outsourced) and design the best solution to address these. Depending on demand, this could involve developing expanded in-house or outsourcing capabilities until demand justifies the investment.
The lead agency
An in-house model designates the in-house agency as the lead agency or, in traditional terminology, the agency or record (AoR). This model has the in-house agency as the primary point of contact and interaction with the marketing team and the broader organisation. It is also responsible for managing any external or outsourced suppliers who provide additional or complementary skills.
This can involve creative, production, or both capabilities in content development and delivery. In media, it is typically non-digital paid media. No matter the capabilities being outsourced, the in-house agency takes a leadership role in delivering the response to the marketing team by working with and managing external or third-party vendors.
This model benefits marketers by allowing them to focus on developing and executing the marketing plan. The in-house agency takes on the responsibilities of managing the roster, relieving them of this task and allowing them to develop and execute the marketing plan. This model is better integrated into the business than the traditional AoR, which is an external supplier. The objectives and goals are more closely aligned with the marketing team.
Typical Evolution
While any of these three models can be the starting point for an in-house agency capability, we have observed that many marketers commence this process with a studio capability to test the concept of bringing these services in-house. Typically, this will also involve maintaining existing external agencies but with a reduced scope of work.
However, over time, with changing needs and accessibility to technology and resources, the studio will evolve, adding capabilities and resources to the point that it is identified as a legitimate alternative to the current external agencies. At this point, it becomes pragmatic to consider the in-house agency as part of the roster and ensure that the whole roster is optimised to deliver the capabilities required by the marketing team.
We have seen lead agency models created from day one, but they are more likely to have evolved from a studio or agency model. This is because they require substantial trust and goodwill from all parties: the marketing team, the lead agency team and the external agencies. We have also seen this lead model collapse when trust and goodwill were lost for several reasons, typically due to a change of marketing leadership or strategic and financial imperatives.
These in-house models are not discrete, with many hybrid and transitory versions in the market. But they provide markers of the leading models we have identified. These models highlight that, like external agency suppliers, the in-house agency model is rarely stationary, with marketing demands and capabilities changing.
Our approach to roster performance measurement, modelling and management will always include the in-house agency if permitted, as the role they play, no matter what the current model, will significantly impact the structure and performance of the external agencies in the marketing roster.
To read more about our Agency Roster Alignment Services here, or contact us to discuss your agency roster model, performance measurement and management.
