Moving marketing to in-house departments is a growing trend in the USA. Some of this is due to the rise of digital marketing and data analytics, and the need to manage these more tightly. Companies seek to gather data and make it available across all departments to improve everything from product development to sales to customer retention.
Of course, the in-house trend is worrisome for ad agencies and marketing firms, since it is pushing us further away from traditional agency-client partnerships on which the ad industry was built. As this relationship breaks down, companies are increasingly likely to see advertising and marketing as an expense, not an investment. In a down economy, the ad budget is among the first thing companies cut. In some corporate conclaves, it is even seen as little better than a necessary evil. But other factors are driving the growing trend to in-house marketing, i.e., removing marketing and strategy from an outside ad agency or strategic marketing partner.
Cost Efficiency is Pulling Everything In-House
EMarketer recently shared data regarding why companies are increasingly moving marketing in-house. Contrary to what many agencies may believe, programmatic ad buying is just part of the picture for the in-house trend. The Association of National Advertisers (ANA) asked client-side marketers which marketing services were handled in-house. Among the 78% of firms in-housing their marketing:
- 76% said creative was performed in-house.
- 52% said in-house handled brand/corporate platforms.
- 51% named marketing/product as an in-house chore.
- 36% now handle media in-house.
- 27% sales channel
- 24% programmatic
Just 12% said they do no strategy work in-house.
Per the ANA, roughly 4 in 10 marketers said cost efficiencies drove their move to in-house marketing; no other benefit (better brand knowledge, speed, creative expertise or control) gained even a 20% response in the survey.
Marketing Technology Is a Growing Expense
In a recent Gartner report, CMO Spend Survey, marketing technology now accounts for 29% of companies’ total marketing budgets. The growth of the technology “stack”—the multitude of programs and databases needed to collect, track and analyze sales, customer relationships and marketing efforts—is forcing CMOs and their people to spend more time and focus on tech than on actual marketing strategy. That includes spending less money, and time with, ad agencies or strategic marketers.
As more money goes to mar-tech, less has to go to talent, paid media and agencies, as marketing investment overall is not increasing. Meanwhile, mar-tech is in its awkward adolescence, so companies are testing and discarding technology, trying to find the right formula for achieving top-level mar-tech capabilities. The resulting over-investment and redundancies need to be sorted out before marketing budgets can be reapportioned and strategy can again be brought forward.
Currently, companies are putting time and energy into managing their tech stacks, rather than on good strategic planning, creative development or even better understanding of their customers. Our clients are caught up in “shiny syndrome”—if it’s mar-tech, it must be valuable, and therefore a must-have.
How Can Agencies Defend Their Value?
Know your clients’ customers. Customer knowledge remains deeply valuable, even as clients amass all kinds of customer data. That data only tells you what customers did or bought in the past… and cannot be relied on to accurately predict what they will do, buy or want in the future. Make every effort to talk directly with customers, seeking beliefs, perceptions, motivations and insights you can share with clients.
Help clients understand and accept creative risk. You’re asking clients to spend their money on creativity, when they really want to spend it on efficiency and conversion. But there are many benefits from grabbing customers in their emotions, including brand preference, brand recall and brand loyalty. You can make risk more palatable by becoming better at explaining how you arrived at the insight and strategy, and assuming some of the risk of execution through performance- or risk-based compensation arrangements.
Always ask WHY. When clients state their goals or objectives, ask them, “Why those goals? What data or research makes you believe this is what we need to solve?” If clients tell you they can only spend a limited amount for a project potentially worth much more in increased sales or profits, ask, “Why not move some of the budget reserved for X to support Y, so we can give it the best shot at success? Or, “Why do this multi-channel program when fewer, better-targeted grass roots and place-based efforts may do the job?” If a client hands you a project with an ill-defined creative brief, ask, “Why are we doing this project? What is the insight? Is there anything we’re missing?”
Negotiate on terms, not price. If you don’t defend your work as having value, why should clients treat you as valuable? Your price is yours to set. Use pricing strategies if clients try to pressure you to reduce the price of your services, including tiered pricing, phased payments and other tactics.
Be proactive. Don’t wait for the client to hand you a project. Propose ideas and strategies. Let clients know you want to help them succeed, and have a steady supply of ideas aimed at helping them achieve success.
Promote marketing planning and push clients to stick to the plan. Achieving cost efficiency while sacrificing effectiveness can only lead to reactive marketing. Reactors spend their time trying to avert disaster, instead of leading the pack. Lead clients toward proactive, long-term planning and strategy. Help them understand marketing is an investment, not a cost.