A few years ago, I was interviewing for a head of marketing job I’d eventually land at Ampush when one of the co-founders asked me about when it made sense to find an agency and when to take something in-house. That prompted this blog post and the most colorful two-by-two matrix I’ve ever created.
I stand by the conclusions I drew then, but in the years since, I’ve come to recognize another important consideration that’s relevant to the “in-house or agency” question:
“Is the activity in question revenue-generating?’
If the answer is “yes,” you’d best bring that in-house. If it’s revenue-generating, it’s going to affect your prospects for growth. That makes it strategic to the C-suite, as well as your board and investors. It matters most of all to your employees. Failure to grow means limited career advancement and sour morale.
Since generating revenue requires selling to more customers or getting existing customers to buy more, it also matters to product, engineering, data science and customer experience teams. That’s because generating more revenue means getting more customer data, which powers innovation in new product features or extensions.
It’s true that companies bring activities in-house if they can save money, too, but cost saving often is a futures game that depends on a lot of assumptions going right. As Kraft Heinz has shown us, sometimes those cost savings don’t deliver as planned. For this reason, revenue generation tends to get executive teams a lot more excited.
All sorts of functions that agencies once dominated are moving in-house. That includes media, meaning the teams responsible for advertising budgets. Media strategists, planners, and buyers now are able to link changes in customer behavior to ad exposure in more precise ways than ever across both digital and analog advertising channels. Once they’re able to show their bosses that $1 in media can produce $1.01 in revenue, the whole function must be reassessed. It goes from a cost to be ruthlessly reduced, like paper for the copy machine, to an asset that needs nurturing and protecting.
So many companies on the cutting edge of driving growth out of their media budgets, especially in the direct-to-consumer (D2C or DTC for short) treat their whole marketing approach with the sort of secrecy in which Coca-Cola and KFC shroud their eponymous food offerings. That’s why B2B marketers struggle to get branded case studies or award entries. Brands have little incentive to share such proprietary information.
It’s no secret that traditional agencies are facing enormous headwinds. It’s clear why: agencies that value media metrics over business outcomes are losing in this new reality. Expect more of them to try to replicate Horizon Media’s new Big agency, which aims to be compensated based on actual performance.
So ask yourself, “What’s really happening here?” when you learn about some company bringing work in-house that once fell to an agency. Sometimes, it clearly will be motivated by efficiency, but more and more, it’s about making more money.