By Alexandra Bruell
Advertisers with in-house agencies increased to 64% from 42% a decade ago, according to an in-house agency trade group
In-house advertising agencies are on the rise as marketers look for more effective and cost-efficient ad models, according to a new study from Forrester and the In-house Agency Forum, which represents hundreds of large brands that have their own internal agency groups.
Advertisers with in-house agencies increased to 64% of the survey’s respondents from 42% a decade ago, according to the study.
In 2008, most marketers that replaced or supplemented their external agency with an in-house agency prioritized cost savings and speed, according to the report. Today, cost efficiency and speed are still hallmarks, especially as marketers need to produce more digital creative work at a faster pace, but they aren’t alone in driving the in-house trend.
More than one-quarter of respondents said the greatest advantage of having an internal agency was “knowledge of the brand,” while 20% said the greatest advantage was the group’s “knowledge of the business.” A number of respondents also selected “cost effectiveness” and “speed,” with fewer selecting categories such as “confidentiality” and “dedicated resources.”
Ten years ago, amid the recession, clients were cutting back on external services, making cost efficiency a priority, said Marta Stiglin, a consultant, former in-house agency executive and founding member of the In-house Agency Forum.
Today, in a stronger economy, there is less pressure to cut costs, and hiring a team internally that can do the work “fast and cheap” is irrelevant if it doesn’t perform in the market, she said. “You need measurement and analytics and insights to drive new programs and strategies,” she said.
“Knowledge of the brand and integrating at all points of contact, particularly with what’s going on with digital, is of paramount importance,” Ms. Stiglin added.
The In-house Agency Forum surveyed 325 companies, including marketers with and without in-house shops, as well as external agencies and vendors. Of the corporations that responded, 64% said they have internal agencies, 30% said they don’t and 6% said they don’t know. The number of questions that respondents answered varied depending on their industry.
In-house agencies might compete with external agencies for business from a brand team, but they also often hire external agencies. The majority of people who took the survey said that an uptick in internal agencies doesn’t pose a threat to external agencies.
The majority of brands surveyed said they can choose whether they want to work with internal or external agencies. External agencies can be more expensive for ad clients than in-house shops because their fees tend to include overhead, according to industry executives.
Blended in-house rates range from less than $50 an hour to $175 an hour, according to the survey. The rates come from companies with a range of models—some that include overhead costs in their hourly rate, and some that don’t, said Ms. Stiglin.
“We’re not trying to make money in the operation,” said Jarrett King, who runs the in-house agency at the Coca-Cola Co. focused on business-to-business marketing and internal communications. External agencies are “profit centers,” she said. “We’re here just to cover our costs. We’re studying rates; it’s all about getting to net zero versus showing shareholders or constituents a profit.”
“I’m salaried and bonused based on the success of work I’m actually doing for the business,” said Roger Hyde, who oversees the in-house agency for mobility and entertainment products at AT&T Inc. “That’s a very hard thing to swap in the external agency world.”
Omnicom Group Inc.’s BBDO handles AT&T’s external advertising, he said, including coming up with many of the company’s marketing strategies and ad campaigns. The in-house group handles marketing aimed at existing customers.
Feature Image Credit: M Photo: Otavio Photo/Otavio Barbosa
By Alexandra Bruell
Write to Alexandra Bruell at email@example.com