Allstate, the insurance giant, announced that they’ve formed a 200-person internal creative team and it plans to take more marketing services in-house. The brand is maintaining relationships with its external agencies including Leo Burnett, which has had the account for 62 years. This has become a common theme in the marketing world and many agencies are considering it a setback to the advertising industry as a whole. The Association of National Advertisers reported last year that 78 percent of its members have an in-house agency.
The trend is strong and it will continue as long as the media landscape continues to proliferate at warp speed. In the recession, in-house agencies were a brief phenom driven by cost cutting in a tough economy. Quickly, clients realized the strain to produce solid work coupled with the constant overhead was not the way to go. Today, it is a completely different landscape. The amount of work that needs to be completed in a real time digital world has created more than enough work to go around. The primary reason clients have in-house agencies is “knowledge of the brand” according to the In-House Agency Forum. In-house doesn’t mean they do not use external agencies. Many companies believe that having knowledge of the brand and being able to integrate a message to a wide variety of contacts in the digital world is the reason to take it in-house. VWA believes external agencies have an opportunity to work with in-house agencies for the following reasons:
Creative Chops: Many in-house agencies are set up as production hubs getting all the materials produced and placed in a timely and cost efficient manner. Clients with in-house agencies often go out in the market to get a fresh perspective on their brand and look for agencies to bring ideas. Isn’t that what we are in the business for anyway?
Digital Experts: The changing pace of digital and the technology that comes out everyday keeps even the most nimble agency hopping. CMO’s recognize this and often rely on agencies to help set up digital processes and consult on analytics.
Partnership: An agency that is able to work collaboratively with an in-house agency will be able to find a place with the client that is productive and will end up improving the work for the client and agency. Even if you bid work against in-house agencies, you should look at it as an opportunity to enhance client knowledge and produce better work. A smaller agency that can react quickly can be a life saver to an in-house agency.
Cost: In-house agencies are set up as cost centers and charge between $50 and $175 per hour to the client’s production budgets. This is calculated with and without an overhead factor. Assuming the $50 is a without overhead number, smaller and less bureaucratic agencies should be able to negotiate a rate that is within this parameter. Often you can come in as a savings verses a cost to the client.