Many things keep agency leaders up late at night. The latest agency night terror is the pendulum swing of clients building in-house agencies to replace them. On the surface, this shift sounds dire for agencies. With brands building their own in-house services, agencies should be fading from the landscape – endangered species marching towards extinction. Right? Then why are new agencies, large and small, continuing to pop up and grow in every market? Traction Creative Director Theo Fanning, makes the case that there is still a need and an opportunity for out-of-house agencies.
The Curse of Knowledge
Traditionally, brands have turned to agencies as objective parties that can help them find creative (or more recently, technical) solutions to business problems. That is where agencies often provide the most value.
In its recent survey of in-house agencies, The Boss Group reported that 92% of in-house creative teams identified brand knowledge as part of their value. This is a blessing and a curse. It leads to standards-based thinking, which leads to standards-based work. In short, living and breathing a brand can blind people to new perspectives; they are unable to see the forest for the trees.
Agencies, by design, are always acting as strangers in strange lands. The crossroads where internal brand experts meet with external agency experts is when significant marketing magic can happen.
Jacks-of-All-Trades – Masters of None
Most clients will be quick to tell you they don’t think any one agency can be great at everything. Those same clients are hopefully smart enough to realize that applies to their own in-house agency as well.
Good agencies have developed skills acquired over long careers; skills that have been honed by working with a variety of clients solving a variety of problems. This gives them a unique ability to complement in-house agencies.
Premium Talent – Only When You Need It
Perhaps the biggest challenge of running an agency, internal or otherwise, is managing utilization, staying profitable while servicing the ebbs and flows of client needs. It is easy for a brand organization to look at hourly rates, do some cocktail-napkin math, and determine they should just do this in-house. What that doesn’t calculate is the cost of expertise, process, training, talent acquisition, equipment and operational excellence that go into running a strong agency team.
New Paradigm, Same Old Problems
A brand marketer recently shared with me that she hates working with her in-house team because “they aren’t as creative, and they cost her just as much” as an external partner. Another complained that he wished he could find a team to outsource a particular function, so he could “get rid of some headcount.” These anecdotes don’t mean in-house agencies can’t be successful or valuable, but that they can fall into the same traps any agency can. Outside agencies that understand these pitfalls – and can overcome them – will continue to be asked to collaborate with brands that need them.
The pendulum will eventually swing back. In the meantime, in-house agencies are not going away. This may diminish the volume of services external agencies deliver, but not the value they can provide when used appropriately.