Managing Marketing: The How, What And Where Of In-House Agencies

Chris_Maxwell

Chris Maxwell is the Founder and Managing Director of lution, Australia’s leading in-house agency specialist, with deep experience building and optimising in-house teams. Chris shares his experience building the in-house capabilities at Carlton United Breweries and how this experience inspired him to develop and offer this to other Australian marketing companies. He talks about the challenges and the benefits beyond simple cost reduction.

You can listen to the podcast here:

Follow Managing Marketing on SoundcloudPodbean, Google Podcasts, TuneInStitcher, Spotify, Apple Podcast and Amazon Podcasts (the USA, UK, Germany & Japan only)

Transcription:

Darren:

Welcome to Managing Marketing, a weekly podcast where we discuss the issues and opportunities facing marketing, media, and advertising, with industry thought leaders and practitioners.

Today, I’m sitting down with Chris Maxwell, Founder and Managing Director of lution; Australia’s leading in-house agency specialist with deep experience building and optimising in-house teams. Welcome, Chris.

Chris:

Hi Darren, thanks for having me.

Darren:

Chris, an absolute pleasure because I love the idea of the in-house agency. So, I think there’s been a lot of talk about it, especially in the US, but not a lot of action necessarily in Australia, is there?

Chris:

No, well, I think there’s probably more bubbling under the surface than most people would think. You know, I’ve got personal experience having built and run an in-house agency in one of Australia’s biggest businesses, Carlton & United Breweries. There are a number of businesses out here in Australia like Optus and Sportsbet and Commonwealth Bank, and a number of others that have built in-house agencies and are running them quite successfully.

Although, there’s plenty of debate about whether it’s the right thing to do in Australia or not. We’re firmly on the side of it’s a very valuable initiative for a business to undertake. If you look at the United States, a lot of businesses in the last 10 years have gone towards in-housing for a number of different reasons.

Darren:

Absolutely. But I think before we go too deep down this rabbit warren, we might just see if you and I have a very similar idea about what actually constitutes an in-house agency. Because I think a lot of companies have in-house studios, but I’m not sure that that actually is an in-house agency.

You know, having some Mac operators, making up a few forms and whipping out maybe a couple of little ads to run here and there, doesn’t necessarily make an agency, does it?

Chris:

Well, I think a lot of people start there. A lot of people start with a small design studio and there’s a good reason for that. You know, particularly, if you’re dealing with external partners and you want to be a little faster or have some design capabilities closer into the business, that’s often the way people enter into this space.

But our view is there’s plenty of efficiencies and effectiveness to be gained in expanding the capabilities beyond design in a studio into things like digital marketing, social content, even programmatic media, data and technology.

So, definitionally, it’s bringing inside the organisational capabilities that would typically have been outside the organisation through an external agency. It could be any one of those things. Our view is when I’ve seen it work really well, is when you’ve got an integrated service offering inside the organisation.

Darren:

Yeah, because there are so many things that you can … technology allows a marketer to bring in house. You can have video production for instance, and many of the other things that you mentioned.

From your perspective and your experience of what you built at CUB, what would be a reasonable scope of work for an in-house agency for a company like CUB?

Chris:

Well, I think, as a marketer, all marketers have a variety of different jobs and tasks and projects to work on. And a lot of it even up to 80% of the work is what you might call the day-to-day churn and burn of marketing or promotional work – below the line marketing, social content, community management — it’s all that stuff that’s engaging with customers on a day-to-day basis.

Whereas there is a smaller number of projects, but sometimes, highly important strategically; things like brand relaunches, innovations. And our view is, look to in-house for that day-to-day churn and burn of marketing because there are real efficiencies to be gained, and bringing that in closer to the business means it can be more effective.

Then we still believe that there’s value in bringing in external experts to look at that higher Tier 1 brand-building innovation relaunches, those kinds of campaigns. So, in our model, we’ve got in-housing paired with the idea of bringing in on a project basis, the best strategic or creative or production talent you can bring in to help bolster the capabilities of the in-house team.

Darren:

But sort of one of the misunderstandings when people talk about in-housing, is that it doesn’t actually mean replacing external agencies completely, does it? It’s not like it’s either in-house or it’s not. It is most likely going to be both.

Chris:

I think it’s both/and. It’s not either/or, it’s both/and. You kind of need both. And there have been examples of businesses that have gone fully in-house and obviously, there are lots of examples of people who don’t do it at all, and then go full external.

Our view is that there’s this idea of a hybrid model where you’ve got some capabilities inside the organisation, the capabilities that make sense to bring in, that it’s better when they’re closer into the organisation. It might be that you need ownership and accountability over the data or the decision-making, or it might need to be faster.

But there are also benefits to external thinking, bringing in people who aren’t necessarily as close to the brand because you want diverse, creative thinking or a different level of creative ambition or strategic ambition. And so, we think there’s real gold in the kind pairing of the two.

Darren:

And this is part of your solution, which is really neat, is not just helping marketers design and build their in-house requirements, but also pulling together almost like a panel or a marketplace of really top external creative strategists, producers to actually come and facilitate that.

Chris:

Yeah, that’s right. I mean, so one of my business partners, a fellow named Nick Garrett — Nick’s been in and around the industry in Australia and around the world for a long time. He’s a very respected leader in the creative industry.

And when we first were designing lution’s business offerings, it’s all built around this idea of bringing in-house capability, but we honestly, believe that there’s a real benefit in pairing that up with external capability for those projects where you’d need that extra firepower.

And so, Nick and I and our other business partners, Andy and Marty, have built out what we’re calling our panel of independent strategists, creatives, and production talent that we can help connect our clients up with on a project basis so that you can build your in-house team to do that day-to-day churn.

And then when you need that extra firepower of a specialist, whether it’s strategy or innovation or a brand positioning specialist, we can connect you up with people in the industry who are at that sort of real Tier 1 elite level to come in and do that piece of work for you on a project-only basis. So, you can kind of avoid that big, expensive external retainer, but still have all the proximity to the brand that you get with the in-house agency.

Darren:

Because that overcomes one of the big issues that a lot of marketers, especially in the US have struck, where they’ve tried to build the in-house agency to replace their requirement externally. And then, how do I attract that really high-end talent? And how do I keep them?

Because as you said, 70% of your work is going to be just the churn and burn, the collateral of marketing. So, they’re not going to sit around and be happy working on that for 70% of their time.

Chris:

Yeah, that’s right. And you don’t need them on that all the time. You know, some of the clients that we’re talking to, we’re talking about right-sizing the production values for different pieces of work. Everything doesn’t have to be the same production quality or the same level.

Darren:

I wish you’d tell a few agencies that.

Chris:

And that’s important because there’s work that’s going to have a huge media spend behind it that’s going to be seen by millions of people. And then there’s work that’s going to kind of be up and down in a couple of days and making sure that you’ve got the right calibre of quality and you’re investing the right amount of money behind those different pieces of work is important.

So, when you want to do that bit of work that’s big and it’s going to reach a lot of people and you want to put a lot of investment behind it, you want to get the best talent you can get to make sure that piece is as good as it can be. And so, we’ve built the panel out so that our clients can have the best of both worlds.

Darren:

A lot of this has been driven by digital technology, the digital platforms, because they are incredible consumers, incredibly demanding of marketing collateral, aren’t they?

I know Michael Farmer, my business partner in the US has been tracking this since the mid-nineties. He said the average brand would produce around 200 to 250 pieces of work a year. The average brand now will produce 3,000 plus and some up to more than 10,000 — by the time you count all the Instagram updates and the Facebook updates and the like. So, there’s the volume of work.

Part of this means that to your point a minute ago, that you couldn’t produce all of those thousands of bits of work in the same way that the agencies will often agonize over producing that very important 30-second or 60-second brand launch ad.

Chris:

No, that’s absolutely right. I mean, I think the other factor is you can see that the demand for content and collateral and creative has gone up as you were saying, sort of 10-fold, sometimes 20-fold. But marketers’ budgets haven’t gone up 10 or 20-fold. And certainly, marketers’ teams haven’t gone up 10 or 20 times.

So, you’ve got to find ways to do more with less. And so, we found a way when I was at CUB, I found it quite revolutionary to be able to bring that work in-house closer to the business. And it was faster, more effective. The work was better, we were able to get it out the door in 24 hours or 48 hours, instead of that longer timeframe that sometimes it was with the external partners.

And that is what I think you need when you’re in today’s marketplace, is that agility and speed and responsiveness to what the consumers are asking of brands.

Darren:

No, it’s quite refreshing, Chris, because in your list there, there was nothing about cheaper. And I’m sure you did that deliberately. But a lot of discussions around in housing, it’s almost, you feel like the number one driver was, “Oh, and it’s cheaper.” Is that your perception or is it the reality?

Chris:

I think a lot of people kind of go there immediately that we’re going to save a lot of money. And it’s fair to say depending on your agency situation today, there is an opportunity for savings in there, but that can’t be the driver of why you want to do this.

You know, the driver has to be, “I want greater proximity to the brand. I want ownership and accountability for my brand’s voice and tone. I want to own the data that our customers share with us and our ability to leverage that data. I want to be faster to the market.”

There are all these benefits to bringing it closer to the business that you get. And listen, if we can save a bit of money, great, but that’s not the driver. And actually, our perspective is whatever you can save on one side, you should be investing in doing better work on the other side.

So, those kinds of Tier 1, big campaigns, let’s invest the right amount of money in getting the best people and putting the right amount of media behind them.

Darren:

Absolutely. And the problem is, as soon as you start talking about savings, any procurement team within a bull’s roar immediately thinks, “Oh, well, we can drop that to the bottom line and look how well we’ve done.”

It is important though, because you made the point that marketers’ budgets haven’t gone up in the same way that the demands on marketers have. In fact, I’ve talked to a lot of CMOs who said in real terms, you often have less money today than you had 5 or 10 years ago for brands. Because of inflation, the amount that needs to be covered these days, even things like … the things an organisation will put onto the marketing team as mandatory things to come out of their budget before you even start to think about what do we really need to do to drive growth here; is that one of the challenges that you found in your career?

Chris:

Absolutely. I mean, the other thing is marketers are being asked … and I think this is those line items that are in the marketing budget that you’re referring to — marketers are being asked to invest in data and technology and platforms that they didn’t have to invest in, in the past.

So, before you even start thinking about creativity and reaching customers and engaging with customers, it might be that 20 or 30% of your marketing budget’s committed already. And sometimes, more than that. And so, that ability to have variable spend was in my experience restricted.

And I think particularly in an environment where COVID’s impacted the economy and a lot of marketers are kind of having to change the way they do things, that might be even more severe now than it was two years ago. And this model that we’re hoping to build with our clients is all around trying to find ways to do more with less.

Darren:

Yeah, and not compromise on quality because even to your point about there’s different sort of executional requirements for different levels of this work, you still don’t want to put something out there that looks like it was done with cutout potatoes and ink pads, by a bunch of three-year-olds. Though, that could work on certain strategies, couldn’t it?

Chris:

Some brands maybe, yeah.

Darren:

So, it’s interesting, the other point that I wanted to follow up with you, is the fact that a lot of people are inclined to not consider the other costs with in-housing. You must’ve when you went through that process with CUB because CUB is a very buttoned-up business. You know, anyone that works in the brewing area, they would have a very strong understanding of the cost of goods and things like that.

You must have had to have gone through quite a rigorous business case to actually build this.

Chris:

Absolutely, we did. And I think it took around 12 months to get the business case up at CUB to do this. And the leadership of the organisation had to sign off on it, and it was quite a big change to move from outsourcing a lot of that work to building a team in-house.

But the benefit, we were able to demonstrate really quickly. We were able to demonstrate the benefit in terms of the return on investment, but also the quality of the work, the engagement with our customers went through the roof, and we were able to produce some really, really high-quality work pretty quickly.

And the business, I think it got it really quickly. And if anything, the demand from the business came faster than we were expecting, because it was so successful in those early days, that we were quickly trying to figure out how to manage the demand that was coming into the internal agency, because not only the marketing team but then some of the other departments were starting to think, well, this team of creative and production and skilled people over here, how can we make use of them?

Darren:

There’s also (and you just touched on it then) — there’s also a cultural change, isn’t there? It’s not just about the dollars and the processes. It actually does have an impact on the organisation culturally.

Chris:

Absolutely. And that, to be honest, was I think the most surprising and pleasing benefit of building that in-house team at CUB, was the building of a creative team inside what was a pretty buttoned-down corporate organisation. And taking the time to think through how that creative team would have their own culture, and that culture could permeate the broader marketing team was this huge kind of benefit to the marketing team and then to the total business.

All of a sudden, we went from having a marketing team full of kind of buttoned-down suit-wearing brand managers and marketers to having designers and videographers. And they were riding into work on skateboards and wearing shorts and man buns.

And it was refreshing to have that shape of talent inside the organisation and the creative culture that it drove, just thinking that ideas can come from inside the business and outside the business was again, quite revolutionary for the business.

And all of a sudden, you had brand managers and innovation managers thinking, well, the ideas don’t have to come from outside the organisation. We can generate our own ideas and we can produce them and we can get them out the door really quickly. And that was quite freeing for the organisation.

Darren:

It is actually one of those things that we don’t hear enough about, but when I’ve talked to people that have successfully run in-house agencies, especially in the US, they do say that that was one of the unexpected benefits; is that the impact on the culture of the organisation of having this team of creative people actually in the organisation.

Another area is the idea of what do they call it? Agile ways of working. Most corporate organisations have embraced agile in some respect, haven’t they?

Chris:

Yeah, yeah, that’s certainly right. I mean, all the clients we’re talking to in some way, shape or form, are using agile, whether they are fully embracing these sort of agile Scrum and Kanban type methodologies, or just parts of it.

But when we set up the in-house agency at CUB, it was 2016, 2017. And it was early days. And to the best of my knowledge, we were the first team in the organisation to adopt agile. So, we were kind of running two-week sprints and daily stand-ups and that whole sort of model. And it didn’t take long for the business to look over and go, “Ah, that’s a new way of operating. Let’s all start to adopt that.”

And I know other departments within marketing quickly adopted that, and I think other parts of the business started to follow. So, it’s just another example of building that in-house capability style to do things a little bit differently, had a cultural impact on the ways of working of the business.

Darren:

So, it’s interesting, in that case, the in-house agency actually drove the change to agile. Whereas, we come up against where the businesses made a decision to become agile. And then when they get to work with the agency, they find that there’s this conflict. And the conflict is driven by the fact that really, most agencies have not changed their way of working in 50 years.

That it’s a very linear waterfall stage and gate approval process, that when it comes up against agile, it just falls to bits.

Chris:

Yeah, yeah. I mean, I certainly can’t speak to what all the agencies are doing. I think you’ve got a much greater perspective on that. But I think for an agency to be successful today, they’ve got to be able to work in the way that the client wants them to work and be able to work around their models and rhythms and processes.

And agile seems to be what everyone’s doing because it works and it gets you to good outcomes really quickly, and it helps businesses prioritise and manage capacity. So, if agencies aren’t working in an agile way — I think I’ve read enough and heard enough about a lot of them that they’re starting to go there if they haven’t already, that they should be thinking about that.

Darren:

Yeah, certainly, the smaller independent agencies have been able to do it. It’s the larger network agencies. Because I think the thing that works against them is a hierarchy, where you start having account executives, account managers, account directors, group account directors, client leads; suddenly, you’ve got this hierarchy that gets in the way of actually working in an agile manner.

Because agile requires you to become flatter and more horizontally integrated. I think it was Martin Sorrell that came up with a horizontality. I just don’t think they ever got to the point of making it work in real terms.

Chris:

Yeah, I mean, I was always a big one for pushing accountability and decision making down the organisation to get the organisation to move faster and having those levels of hierarchy and approvals kind of just slows things down.

So, obviously, for certain things, you need to escalate, but giving the people who you’ve trusted to run the business the ability and the right to run the business, is what we need. And we see whether it’s in-house agencies or marketing teams, when you enable teams to make decisions and empower them to move, then things move faster.

Darren:

One of the other things I’d like your opinion on is whether this move to organisations wanting to be more customer-centric. And one of the ways of being more customer-focused is through data, especially first-party customer data, and whether part of this is driven by concerns around privacy and security of that data.

Because we’ve seen a lot of companies get very uptight about having to share that first-party customer data with an external agency or external vendors.

Chris:

Yeah. I think if every business is struggling with … if they haven’t cracked it and not too many have cracked it, some have — struggling with how do they deal with first-party customer data, how they deal with personalisation, how do they deal with privacy? There’s a lot going on in that space these days.

My perspective is bringing accountability for customer data for privacy in closer to the organisation is in my opinion, the right thing to do, as opposed to outsourcing that. And there are plenty of organisations in categories where it’s mandated, it’s legislated that you can’t share customer data outside of the organisation.

So, you’ve got to build those capabilities inside the organisation. And most of them, if they haven’t already have done that because it’s important as the financial services industry, they’ve all got those teams inside the organisation because they have to.

Darren:

Yeah. So, the data analytics and insights team is churning through all this first-party data, and then the insights get thrown over the fence into marketing.

Chris:

And then what happens is, so if you think about first-party data, that moves you into personalisation. All of a sudden, you’ve got to now produce personalised content and that’s where the in-house model, being able to deliver personalised content, leveraging systems to do versioning and resizing in an automated way, enables you to produce multiple versions of content that are personalised; as opposed to the old way of kind of manhandling it and sending it outside the organisation, and getting it back three weeks later with a hefty bill attached to it.

Darren:

Now, this leads us to the next area, which we haven’t really touched on yet, which is media. And especially in the US, we’ve heard lots of stories about people taking media in-house. In fact, I think the most famous story was the client said to the media agency, “We’ll need 25 of your staff to populate our in-house agency.” And six months later, went back and said, “Can I have another 25 because all those ones left?”

But was media part of your experience at CUB?

Chris:

Absolutely was. And actually, the first person I brought in to help set up the in-house agency was somebody from our media agency at the time. And I won’t say her name, but she knows who she is and she’s still with the organisation and has grown and was promoted into another role not that long ago. And is apparently killing it, has been in the organisation for a long time.

And so, we did bring media in-house and we brought programmatic in-house and we were able to demonstrate pretty quickly through some testing there were significant savings, and significant improvements in engagement and efficacy of our programmatic media investments.

So, having that in-house was beneficial for us and, and I think I’ve heard and read enough about other organisations having done that.

One of the guys in our team at lution is a fellow named Stephen Hunt. He helped build the in-house programmatic team for Universal Music. And before that, he helped set up Tubemogul in Australia, which is one of the outsourcing programmatic buying businesses. And he was able to demonstrate … he told me of 30, 40% CPM improvements when he was bringing programmatic in-house at Universal.

And we saw something in that range, that 30% improvement at CUB. So, there’s an opportunity there, but getting the right people in the organisation and getting the tools and systems and processes set up is important too.

Darren:

And this will only expand as we’re talking about programmatic for digital out-of-home, programmatic eventually … well, catch-up television or OTT television, they call it in the US. I’m not quite sure why it’s “over the top,” but anyway — on top of traditional television, but this can only expand, can’t it?

Chris:

I think so. We’re already talking to some of our clients about digital out-of-home systems and it won’t be long before you’ll be able to buy most things from a DSP in some way, shape or form. And therefore, having that capability closer to the business, so you can not only plan but also interrogate that and ensure that the businesses are targeting in the right way and deploying their significant investments in the right way is pretty important.

Darren:

It’s interesting, isn’t it, Chris, that in 1995, agencies made the decision to spin-off media into one business and creative into another. It could be that it’s actually the marketers that bring the two back together in-house.

Chris:

That thought of integration is actually a pretty important one because I think there’s this real benefit in bringing some of these capabilities back in because it drives greater integration. It means that the media team, the creative team, the production team can be further up the planning pipeline. And the thinking can be integrated from the very beginning rather than at the end of the process, which generates a better outcome and generates more effective work.

So, that idea of making sure whether you’re using an external agency or an internal agency, making sure that you’ve got integrated thinking across your channels, across your media, and your creative, then it generates better work.

Darren:

From the point of view of a marketer sitting there listening to this, what’s the starting point do you think, for them to start doing this?

You know, because they could have, to your point, at the start of this conversation, they might already have a small studio or a bit of design work, but what do they need? What’s the thought process that you’d recommend that they go through to work out if they should pursue expanding an in-house agency?

Chris:

Well, we’ve got a rigorous process that we take our partners through to do exactly that, which is without going in to a huge amount of detail; we’ll do an audit of what they’re currently doing, what they’re in-sourcing, what they’re outsourcing, and have a look at where the opportunities are, have a look at what the requirements are for work.

Whether that’s content being produced, whether that’s creative, concepting, whether that’s media investment, and then design a future-looking structure, a future-looking strategy. And what the processes and ways of working around that would look like if we were to build an in-house team that was capable of delivering that.

And delivering what they need in a year or two’s time, not just what they need today. You take into account … if the vision is we want to get to our ability to deliver personalisation at scale or real-time optimisation of our media investments, having a look at what kind of people you need in the team, what kind of tools and tech you need in the team to be able to deliver that and then starting to implement that now, also that in a year or two’s time, you’re ready to do that.

Darren:

Have you found when you do that initial audit, that people are shocked at how much they’re spending on things?

And I’ll give you an example; one of the big consulting firms came to us and said, they’re spending a quarter-million dollars externally on video production. And that was just their marketing team.

We did a quick survey and we found it was almost four times that across the whole organisation, it was over a million dollars. By the time you added up HR and training and personnel videos — there are significant expenditures in these organisations that could easily be bundled into an in-house agency, aren’t there?

Chris:

Yeah, so just by way of example, we did something similar again referring back to my days at CUB, where we had a look at what our brands were investing in external agency partners in digital agencies and content. And like in many organisations, the brands would operate in silos. It was all one big part of one big team, but each brand had its own budget.

And when we centralised or took a look at that from a central perspective, I think it was quite an eye opener to see that every brand is looking at spending 3 or $400,000, but when you add it up across 20 brands, all of a sudden, it’s millions of dollars that you’re investing in that and there’s an opportunity there.

So, I think, further to your point, if you look in other departments and across total businesses, people would be surprised about the amount of money that they’re investing in these kinds of opportunities. And there’s an opportunity for not only generating efficiencies there but also doing better work there.

Darren:

Well look, and one of the issues for the head of marketing was suddenly, their in-house agency, which was primarily coming from their budget, was going to give them access to a huge amount of external comms and internal comms, that they’d never see previously.

And so, they could have a greater impact on making sure that every piece of communication from the organisation was supporting the brand positioning.

And this is one of the great things, isn’t it? Is getting that sense of consolidation, not just from the financial point of view, but also from a strategic point of view.

Chris:

Strategically, from a positioning, from a consistency perspective. I mean, it’s owning that brand voice. You know, that’s what we say, is own the brand voice. And that doesn’t just mean in social, but that means having full visibility and clarity on what the brand and the business is putting out there in the marketplace and being able to make decisions on that in real-time. And that’s part of the benefit of this.

Darren:

Now, I know you’re giving an overview of the process, it’s quite a rigorous process and quite a strategic process of defining and designing the requirements for a brand. But it wouldn’t be one that would happen in a lot of cases where someone starts off with, say, two designers on macs sitting in the corner and ending up being a full-service agency. It’s not something that you should really leave to chance, is it?

Chris:

Well, there’s plenty of in-house teams in Australia who have evolved over time and done exactly that. You start with a couple of designers and you bolt-on a content producer, an audio producer and maybe a media person, and you evolve to this place where you’ve got quite a robust team.

And one of the benefits that people find is that reviewing what that team does, having real clarity over the purpose of the in-house agency, the objectives, the KPIs, the ways of working, the processes. And that’s just another thing that we come in and help people do, is make sure they’re getting the most out of their investment because it is a significant investment, you’re investing in people.

And that’s the most important asset that you can invest in and making sure that they’re motivated and culturally aligned and doing the best work that they can do. That’s how you’re going to get the best outcome for your business and the best ROI. So, that’s something that we can help with as well.

Darren:

It sounds terrific because usually we get called in by the CFO that says, “I’m spending X thousands of dollars on this in-house agency, can you tell me if I’m getting value?” It’s pretty much the one-dimensional view from the C-suite.

Hopefully, your efforts with lution will help marketers start to build a functional in-house agency.

Chris:

Well, we hope so. That’s the vision, and if we can help one marketer do that, then we’ll be happy.

Darren:

So, Chris, look, we’ve run out of time. It’s been terrific to catch up and have this conversation. I’m really hoping that we start to see an acceleration of really high-performing and high-quality in-house agencies coming about.

Chris:

Me too. Thanks very much for your time, Darren.

Darren:

Just a question before we go, before we finish up; and that is how do some of your agency mates feel?

Ideal for marketers, advertisers, media, and commercial communications professionals, Managing Marketing is a podcast hosted by Darren Woolley and special guests. Find all the episodes here