Marketing/Advertising: In-house vs. Agency | Marketing Professor

“What to keep in-house (i.e., what to do with a team inside your company’s four walls) and when to use an agency?” Marketing and advertising dilemmas may be one of the most persistent. I don’t know.

There’s a lot of back and forth around this issue in the advertising zeitgeist, especially as we navigate different economic cycles.

Since this decision is so consequential, it would be ideal to apply some kind of lens to help you make some sense of all the noise around this topic.

I have worked in agencies all my life, and have also worked as a client and board member several times. So I hope that with both of my experiences I can at least share with you why we need to tackle this problem. The difficult decision to go in-house or through an agency.

This article discusses four key areas to guide your decision-making: core, economics, resource scarcity, and leverage.

Let’s take a look at each.

1. Is the job part of the core of your company?

Not every company is a good fit for in-house media, creative, analytics, and other services. The key question to ask yourself is, “How core is this service to the essence of my company, its mission, and its talent base?”

Let’s look at an example. For about eight years, I was part of a team that served as Capital One’s digital media and analytics agency. Capital One has been a great client and our team has done a great job for the company over his 8 years.

Towards the end of Year 7, the folks at Capital One were incredibly honest (praising them and their great culture of integrity) and suggesting that we should bring most of our digital media and analytics in-house. did. The reason for their change was a great lesson that I have carried with me over the years. “Capital One is a data company as well as a credit card company, so naturally we have to stay close to customer acquisition data.”

That’s no surprise, since Capital One had more data engineers than most of the modern digital ad agency complex combined. The company had the ability, the engineering ability, the will, and the business mission to get closer to the data.

To be clear, the company did not bring “everything” in-house. The company continued to outsource TV media buying to agencies and continued to use a number of other agencies for social media and campaign creative. Because these pursuits weren’t as core to their culture as digital media or analytics.

Think carefully about whether your brand has the internal DNA and team to be the best in media, digital, analytics, creative, social, SEO, and related services. Are they the core of your business and your strength? If the answer is no, that’s a good first signal to realize that it may be productive to partner (at least in part) for the greatest possible benefit.

2. Internal and agency economics

The weakest arguments for keeping jobs in-house are usually economic ones. Often, the hastily created cost reduction case is essentially a comparison of bananas and lamps in cost calculations. In other words, analyzes often do not compare the right things, resulting in incorrect conclusions about whether there are real savings.

Don’t get me wrong. There’s plenty of potential for savings, but it’s important to make sure you’re looking in the right areas and comparing the right ones.

Here are five things to include when considering whether the cost is lower than what the client is paying the agency.

A. Welfare benefits, medical expenses, miscellaneous expenses

When calculating the actual cost of internal labor costs, you should multiply that number by at least a 1.5x salary multiplier to account for things like benefits and medical costs.

Often that step is forgotten. 1.5x is probably light (and often much higher), but it’s a good starting point.

Simply put, if your client-side payroll includes employees, you are paying them more than just their salary, and your business case needs to account for that fact to be accurate.

B. Retrenchment and employment

If you have a team of three people running search, creative, or social (as an example) in your company and one person leaves, it could take three months to replace that employee in your current hiring environment. there is.

These were unproductive for three months and could not be selected from the bench. Additionally, this creates a situation where the remaining two become more burdened and more likely to leave. If productivity ultimately declines as a result of staffing shortages, the opportunity cost (loss of productivity) must be modeled.

It’s important to ask yourself, “Would a search marketing or social media all-star want to quit their current job and come to this XYZ company to work for me?” You know the real answer here deep in your heart. If you’re a new and up-and-coming retailer, the answer may be a resounding “yes.” If you’re an old-school steel company paying toward the bottom, the answer is probably no.

In any case, think about it for a moment to understand which type you are.

C. Technology savings

Agencies use many technology providers on behalf of their customers. This may include demand-side platforms (DSPs), data management platforms (DMPs), data lakes, clean rooms, as well as ad serving fees, API connections, competitive research tools, creative testing tools, and more. Agents typically receive favorable fees based on the volume of business they do with providers. This could cost him 10-30% less than the rate if the client were to trade directly.

Big agencies prioritize rates like Google, The Trade Desk, and Salesforce. We also offer competitive pricing for certain publishers, partners, and providers. They charge such fees because the total spend they bring to these huge platforms is in the billions of dollars.