This post is by Darren Woolley, Founder of TrinityP3. With his background as analytical scientist and creative problem solver, Darren brings unique insights and learnings to the marketing process. He is considered a global thought leader on agency remuneration, search and selection and relationship optimisation.
It is interesting for us that when a client/agency relationship goes wrong the marketers can call a pitch and put the agency to a market review. But when the agency relationship in question is an in-house agency it is not as simple an option. In-house agencies are increasingly popular according to a survey by the ANA, but even in-house relationships go wrong and it is big news when an advertiser decides to close their in-house agency. It is also a big issue internally because all of those people in the in-house agency are employees, who need to be exited from the company.
In the past few years, we have been asked to assess and optimise these in-house relationships. These case studies provide insights into some of the issues which can arise with in-house agencies and approaches to addressing these challenges.
Case Study 1
Financial Service – In-house Agency Performance Optimisation.
Challenging Problem: The in-house design studio had started with three designers/finished artists and was not more than 70 people who were taking up almost half the floor in the head office. The CFO raised the issue of headcount with the Head of Marketing, who then engaged TrinityP3 to assess the performance and efficacy of the in-house agency.
Creative Solution: We undertook a qualitative and quantitative assessment of the current in-house situation with interviews of key stakeholders and assessment of the resources, structure, costs and activities. It became clear that while there was great support for the in-house agency, not just from marketing, but across the organisation, it was clear there was a significant lack of detailed information on the productivity of the in-house agency.
Process: With no reliable data on the volume or type of work being undertaken by the in-house agency the best we could assess was the cost, which was at a reasonable discount to market and the organisation was very satisfied with the delivery. But we opted for the in-house agency to keep detailed records of the projects and the specific outputs and deliverables for a period of one month. The data was collected and assessed.
Results and Feedback: What we discovered is that almost 40% of the work done by the in-house agency was for non-marketing departments who were not contributing to the cost of the in-house capability. No wonder the organisation was positive about the service as the cost was coming from the marketing budget. Also for the number of resources the amount of work being delivered by the in-house agency was significantly lower than the market benchmark.
Observations: In this case, the in-house agency had evolved from a few designers/finished artists to a full production agency of more than 70 people that included writers, photographer, video production and editing and more than a dozen designers/finished artists. What had not evolved was the management systems to ensure the performance of the agency kept up with the growing financial investment. By the time we had identified this, the investment was significantly higher than the return on that investment and it was decided to significantly downsize the in-house agency with a major loss of jobs.
Case Study 2
Entertainment – Agency Remuneration Assessment.
Challenging Problem: An in-house agency has been developed with the view it would eventually replace the external agency partners currently under contract. However, changes in Marketing Leadership and Strategic focus had marginalised the in-house agency. TrinityP3 was engaged to assess the current agency fee models across the external agencies and the in-house agency with the view of recommending the best roster mix and fee allocation.
Creative Solution: TrinityP3 captured 12 months of data on agency fees, agency resources and scope of work delivered along with the proposed scope of work for the coming 12 months. We also undertook interviews with key stakeholders in marketing, the in-house agency and the external agencies to discover that the in-house agency was perceived as too expensive and not reliable.
Process: The process revealed that while the in-house agency was designed to be a full-service agency the underlying financials and the salaries paid were benchmarked at the top tier of the industry, significantly higher than the external agencies were charging under the competitive pressure of the tender. Also the in-house agency had struggled to attract and keep high-quality strategy and creative talent and had used this to justify significantly higher salaries for the in-house agency. It was decided to limit the type of work for the in-house agency and to provide a scope of work that would allow them to rescale to suit the requirements.
Results and Feedback: The in-house agency responded to the reduced scope of work by presenting a proposal that was twice the cost of the external agencies and so it was decided to downsize the in-house agency to be more a production hub than an in-house creative agency and rely on the external agencies for the creative ideas that would then be amplified in-house.
Observations: Before entering into taking agency services in-house it is important to clearly define the scope of these services. While it may be exciting to try and create a full agency in-house immediately, the fact is it is more complex and difficult to change an in-house agency and therefore the advice is to make sure you can crawl before you try to run.
Case Study 3
Communications – In-house Agency Performance Optimisation.
Challenging Problem: An in-house agency was developed to initially supplement the work of the external agencies on the roster with the view that this would expand with time to take on more work and develop greater capabilities. But as the in-house agency expanded it became obvious that the very nature of the agency set up meant there was less flexibility when there were changes in budget and workload. TrinityP3 was engaged to review and assess the in-house agency to determine ways of managing these issues.
Creative Solution: While the marketers still relied heavily on the external agencies for strategy and creativity, the in-house agency was undertaking the vast bulk of the work and the marketing budget. But the qualitative interviews with the marketing stakeholders revealed that the quality of the in-house agency was questionable and while working in-house was convenient the quality of the work was not up to the quality of the external agencies.
Process: To create the flexibility required in the in-house agency was incredibly difficult. It made more sense to either move more work volume to the external agency or even appoint an external agency to undertake more of the work of the in-house agency. But this would simply be providing duplication of the existing resources. The alternative was to actually outsource the in-house agency with an implant of the agency in-house but resourced and managed by the external agency. This would provide the flexibility of resourcing and cost that is difficult with an in-house agency of employees.
Results and Feedback: A tender process was undertaken for an implanted in-house agency. The tenderers were drafted from the incumbent external creative agencies and a number of specialist transcreation companies. The outcome was the appointment of one of the incumbent creative agencies.
Observations: If you think there are a lot of considerations with appointing a new external agency, it is nothing compared to the creation of an in-house agency. The option of appointing an external agency to provide the services in-house as an implant is often overlooked, but it delivers most of the benefits of an in-house agency with a slight premium for the service. Yet it comes with the ability to restructure the arrangement or to scale it up or down or to even terminate with less implication than a homegrown in-house agency and worth consideration.
Do you have in-house agency services? Are you considering bringing your external agency resources in-house? You can read more on the TrinityP3 In-House Agency Performance Optimisation here.