Why Brands Need to Focus on Value Creation Over In-Housing

The hyper-fragmentation of media has left marketers facing an explosion of consumer touchpoints and eroded the buying power of their traditional agency partners while simultaneously creating the need for new capabilities such as data science to make sense of the complex consumer journey. With customers demanding integrated Amazon-like experiences from every brand, the lines between ad tech and mar tech have begun to blur, along with conventional divides between marketing, service and commerce.

These changes, largely driven by technology and immense pressure on managing costs, have forced marketers to reevaluate their relationships with agencies, consultants and other partners.

Moving toward in-house agencies

Agencies and consulting firms are working harder than ever to be relevant to today’s CMOs. Just think of Accenture’s acquisition of Droga5 to beef up its creative cachet or Interpublic Group’s acquisition of Acxiom to boost data capabilities.

Nonetheless, companies are increasingly responding to the changing landscape by bringing marketing and advertising work in-house. Some of the world’s largest advertisers have expanded their internal capabilities, including Anheuser Busch In-Bev, which recently expanded its in-house team to 50 people. Nearly 80% of marketers say they have an in-house agency providing services like strategy, creative, data analytics, and media planning and buying, according to a 2018 survey from the American Marketing Association. Five years ago, fewer than 60% reported having an in-house agency, and just 42% had one a decade ago. By far the most cited benefit of an in-house agency was reducing costs.

An alternative approach: value creation

Cost efficiency is certainly appealing, but taking over all marketing communications functions internally isn’t necessarily the best way forward for every brand. Instead of taking a blanket approach, marketers need to adopt a broader view of value creation when deciding what to bring in-house and what to outsource to partners, including agencies, consulting firms and technology providers. Marketers should start by identifying the key growth drivers of their business and prioritizing the capabilities needed to execute their growth strategy plan. Then they need to figure out the best way to realize value within an ecosystem of internal resources and external partners.

Deciding what to outsource

A focus on value isn’t just about dollars and cents but also about what drives the company’s strategies forward. For example, many brands are seeking to develop direct relationships with consumers and achieve more personalized real-time engagement. Companies need to develop the internal capabilities to deliver on these goals, whether or not those functions are already a strength. Often that means bringing upper-level strategic planning and deep data management and analytics in-house.

Meanwhile, it makes sense for many marketers to outsource functions like creative development and technology solutions. Both of these areas drive value, but they don’t draw on the core competencies of most in-house teams. Developing and maintaining a technology stack requires a deep and ongoing investment of resources and talent.

That being said, brands need to have in-house professionals who master these tools that are core to the business, such as building a marketing analytics and ecommerce center of excellence if you’re an online retailer. Companies are building and maintaining these centers of excellence for data-driven marketing, which is usually composed of employees from marketing, analytics and IT, to codify the way data is applied in business practices. One example is having the analytics team formulate frequency rules for delivery of advertising and passing that along to their agency partners and vendors.

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