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In-Housing and Agencies Are Not Either/Or

By Laurel Erickson | March 31, 2020 | 0 Comments

MarketingLeading the Next Generation WorkforceMarketing Organization and Operations

The impact of the COVID-19 pandemic on the world’s economy has been a topic of much discussion. And while we may not know what the exact repercussions will be, it is likely we are heading into some form of economic downturn that will inevitably affect marketing budgets. As marketers are forced to do more with less, cost optimization becomes more of a consideration.

In-housing – developing skills in-house that may at one time have been done by an external agency – has received a lot of attention the past few years, not only as a form of potential cost savings, but also as a way to exert more creative control and brand consistency. According to Gartner’s 2019 Marketing Organizational Survey, 63% of marketing leaders said they had shifted some work from external marketing services to internal marketing services groups over the prior 12-month period.

Current trends in in-housing marketing skills, however, do not spell the death of agency relationships. Our CMO Spend Survey finds that spend on agencies has actually hung fairly steady at close to a quarter of marketing budgets (22% in 2019, down from 23% in 2018). Spending on external agencies and investing in internal marketing operations isn’t an either-or proposition. In fact, our research finds that many organizations that allocate a significant part of their budget to internal marketing operations also invest significantly in external agency partnerships.

Digging deeper into the data, we found a marked difference between less mature and more mature marketing organizations in the way they approach agency relationships: CMOs from less mature organizations engage agencies for operational efficiencies, to fill in skill set gaps and to drive down costs. CMOs from organizations with a higher level of marketing maturity engage agencies to fill in short-term resourcing gaps, but also for the higher quality work and to foster innovation.

The trend towards in-housing is redefining agency partnerships and the value they bring to brands and businesses. Initially, brands brought more production-level work in-house, along with internal IT and development teams. Increasingly, however, brands are bringing strategic and creative roles in-house. Leading agencies are embracing this change. They help their clients with everything from recruiting and retaining talent to change management and organizational design. Most importantly, however, they embrace the opportunity to be a true strategic partner to their clients, offering a critical outside perspective and in-depth consumer understanding that can guide clients away from insular decision making (Google the Pepsi Kendall Jenner in-house campaign for a good example of why this is important).

For a more in-depth look at Gartner’s data on CMOs’ relationships with agencies, see “Survey Analysis: CMOs Forge New Relationships With Agencies“. For more on specific agencies’ offerings, see our latest “Magic Quadrant for Global Marketing Agencies“.

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