Nathan Hodges, Managing Director of TrinityP3 ANZ, discusses the complexities of agency rosters in the marketing landscape. He outlines the evolution of agency models, the impact of in-house agencies, and the importance of data-driven decision-making.
Their conversation emphasises the need for marketers to actively manage their agency relationships and adapt to the changing technological landscape, particularly with the rise of AI. Key insights include the necessity of flexibility in agency models and the importance of understanding both current and future marketing needs.
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“You can have the most perfect solution in your head and the most perfect roster model you’ve ever designed, and then you go out into the market looking for triangular shaped agencies to fit in triangular shaped holes and square ones to fit in square holes, and they aren’t around”.
Transcription (Edited):
Darren:
Hi, I’m Darren Woolley, founder and CEO of TrinityP3 Marketing Management Consultancy, and welcome to Managing Marketing. One of the most important and interesting consulting services we provide is advising marketers on developing and designing their agency roster. Some may refer to it as their agency village; however, in many cases, it’s often evolved organically rather than being strategically planned. The approach to designing and managing this roster has become increasingly complex, considering the impact of in-housing, technology, fragmented media channels, and artificial intelligence. To help navigate the issue of the ideal agency roster, please welcome Nathan Hodges.
Nathan:
Thanks, Darren.
Darren:
This is an interesting conversation because what was relatively simple once upon a time has become increasingly complex. The number of options seems to be increasing rather than decreasing. Is that your observation?
Nathan:
It’s always been our observation, just by degrees. But I’d go back a stage. Most marketers don’t really think very much about whether they have a roster model, an ecosystem, or a village. In our experience, it’s common to find the marketing team hasn’t given it much thought, which is dangerous because it’s likely arrived by default.
Every roster model sends a message to the agencies within it, whether intended or not. For example, if I were back in the agency world as an MD of a lead agency, and I watched three or four other creative agencies being appointed around me—along with digital agencies and an AI specialist—the spend is fragmented and the role diluted. As a leader, I would ensure I don’t invest too heavily in new strategy or capabilities because it doesn’t have the swagger it used to. Every model sends a message.
Darren:
When marketers approach us, the problem is usually, “I have too many agencies in my village, and they don’t seem to work very well together”. I find it interesting that it gets called a “village” because it sounds quaint, yet it doesn’t lend itself to the actual underlying commercial tensions.
Nathan:
A village sounds idyllic—people come and go, there’s a village square. But it’s not commercial, it lacks structure, clarity of role, and efficiency. It’s likely lacking remuneration data or resource data driving who is doing what. “Roster” is a really good word because you draw up a roster; it has order, strategy, and structure. That points out the marketer’s required role here: you can’t just set and forget. You’ve got to drive it.
The Hidden Costs of Fragmentation
Nathan:
Adding agencies is lovely, but every time you add agencies to a roster, it costs you between 12% and 15% in lost efficiency. Plus, there is the cost to the marketing team running between agencies, trying to force together recommendations from different discipline perspectives. It’s like forcing together pieces of a jigsaw that come from different puzzles.
Darren:
Even in the big network agencies, we see around a 15% margin applied to services to pay for that coordination factor. Whether you operate across multiple markets or use multiple agencies from a network in one country, you pay a margin—often hidden in overheads—for that coordination. The insight here is that either the marketing team takes responsibility for the management of the roster, or they appoint someone externally to do it.
Nathan:
Marketers often ask, “Can you find us a new agency?”. The answer is, why do you need that? Where is the performance falling down?. Why are my media agency and creative agency not collaborating? Well, are you paying them to do it? Have you incentivized it?. The answer is nearly always no, which leads you back to looking at the roster model.
Darren:
You mentioned the duplication cost is around 12% to 15%. That infers if you wanted to maximize your budget, you would want to consolidate as much as possible with one agency. The question is, can you find that one supplier that provides the quality and volume of work needed?.
Nathan:
You need the right levels of skill sets in your roster, which means having the fewest agencies you can get away with—and no more than that.
Navigating Market Complexity and AI
Darren:
Do you think these challenges have driven the rise of the in-house agency?. Marketers might feel it’s too complicated engaging all these agencies, so they build what they need in-house.
Nathan:
All developments over the last five to seven years can be put down to marketers thinking, “That might be cheaper, easier, or simpler”. This includes in-house, the reappearance of full-service agencies, the explosion of the independent sector, and Holding Companies getting smarter.
The biggest driver currently is AI. AI affects not just promotion, but all four Ps of marketing—right into product and business models. To make sense of this, you don’t listen to people claiming “the old model is dead”. You get data together on the size, remuneration, and nature of the tasks.
The In-House Agency Paradox
Darren:
I realized there are probably marketers with an in-house agency thinking, “But my in-house agency isn’t part of my roster; it’s part of my marketing team”. Can you design a roster where the in-house agency isn’t actually part of it?.
Nathan:
You have to have it as part of the roster. For many, the in-house agency is like a creature in the corner eating all the pies. If your agency partners traditionally made their money on production and tier-two work, and the in-house agency swallows that, the external agency isn’t making the money it used to. Consequently, they are less likely to push back on you or invest in the relationship.
Darren:
I’ve seen examples where the in-house agency is treated as an extension of the marketing team, while external agencies are treated as vendors. But the more you can integrate your in-house agency into being part of your roster, the better. If it’s just operators bashing out collateral in the corner, it isn’t meeting its potential.
Nathan:
I am yet to meet an in-house operation that’s actually properly managed. You often see a headline saving, but hardly ever does that include the cost of premises, onboarding, offboarding, or the brand team’s time managing that agency. It is often an illusion.
Darren:
In-house agencies have a role, particularly regarding data security and real-time content production. But this goes to your point: first, get the data.
Step 1 & 2: Data Gathering and Defining Requirements
Nathan:
Getting a scope of work requires input from both sides—marketers know what they spent, agencies know what they produced. Even if the data is scarce, 70% is much better than 0%. You must also capture the hidden costs: the brand team running between agencies and the duplication costs.
Darren:
If they don’t have the data, how long would you need to collect it?.
Nathan:
As quickly as possible. If you’re an Australian advertiser, you’re probably talking about three or four weeks to get a good picture. Just keep your foot down; if you stop, you’ll bog.
Darren:
Next is articulating current and future requirements. How far out do you look?.
Nathan:
For strategy and brand, you go out as far as you can. The imponderable is how AI and tech affect what you do. The critical thing is to build a high degree of flexibility into any model.
Darren:
This is also the point where you engage with your agency on where you need them to be in 6 to 12 months. You need to understand clearly what the technology platforms look like and how they are plugging together.
Nathan:
Exactly. This allows you to say to agencies, “The opportunity is not to screw you over, but to form a sustainable partnership that builds both our businesses”.
Step 3 & 4: Designing Models and Meeting the Market
Nathan:
The critical thing is to put two to three alternative models on the table, not just a single recommendation. You are trying to gauge the appetite for change. If you don’t match the model with the cultural appetite to implement it, you are just talking to yourself.
Darren:
It’s a good strategy for marketers to build out a number of solutions to test if a proposed solution actually meets their needs.
Nathan:
Finally, you have to meet the reality of the market. You might have a perfect model, but if you go out looking for triangular-shaped agencies and they don’t exist, are conflicted, or aren’t pitching, you have to adapt.
Conclusion: The Strategic Approach
Darren:
So, let’s recap. It’s best not to call it a village or ecosystem; a roster means you have to actively manage it. To get the best roster:
- Get the data: Understand where you are currently investing and what you are getting.
- Articulate requirements: Define current and future needs and discuss them with suppliers.
- Develop models: Create alternative models to test solutions.
- Meet the market: Be prepared to be flexible based on what actually exists in the marketplace.
There is no one model that suits all marketers. Thank you for your time, Nathan.
Nathan:
No worries.
