Original link at HBR.
A new research report from the Society of Digital Agencies finds that in the past year there has been a dramatic spike in the number of companies who no longer work with outside marketing agencies — 27 percent, up from 13 percent in the previous year. This continues a trend The Association of National Advertisers first reported in 2013.
But these companies aren’t getting rid of marketing – they’re just bringing it in-house.Mitch Joel, president of Mirum, recently has also noticed this movement of agency talent to the client side, calling it one of the most disruptive trends in the industry right now.
SoDA describes this trend as “alarming” (and it is, if you work for an agency) but stops short of fully explaining why it’s happening. After interviewing several ad agency executives and marketing leaders in a diverse group of businesses — pharmaceutical, high-tech, manufacturing, retail, sports, and others — I’ve found a few common themes that could help explain what is going on.
1. Agencies are slow. An executive from one of the world’s largest ad agencies told me that his company was too big – and consequently, too slow — to compete in the lightning-fast digital space.
“We have too many people,” he said, “too many contracts and too many approvals to be able to react and work effectively in a real-time world,” he said. “The work is moving closer to where the customers are, where the responses can be more rapid and connected.”
2. Agencies are stuck on advertising. Agencies have been too slow to adjust to fast-changing industry needs.
A brand manager at a Fortune 100 company expressed deep frustration to me: “We want to connect to our customers in a new way. We want to leverage social media, content marketing, and integrated models but every time we ask our agency for a proposal, it comes back as advertising. I’m sick of it. I am ready to break our contract at any cost because they just don’t get it.”
Another brand manager told me that many agencies are creating social spin-offs but they still operate like traditional ad agencies. Perhaps the cultural transitions are not happening fast enough at these agencies.
3. Continuity has become more important than campaigns. There’s a key difference between funding an ad campaign and supporting a social media effort.
In an ad campaign, you make a pitch, win a deal, execute the creative, provide a report and start over. Agencies are generally funded and organized by campaigns.
But in a socially-oriented world, the connection never stops. You fund, staff, and execute continuously. The traditional agency structure, forged over decades, is not necessarily built for that model.
4. Companies no longer want to outsource customer relationships.
When the primary focus of our marketing finally shifts from mass broadcasting to discrete customer relationships, is that something we really want to send to an outside company? Do we want somebody else to own critical relationships?
5. Companies want to own the data. Marketing activities today generate unprecedented amounts of data.
In the “old days,” we might get a standard report of “impressions” from an agency, but today taming that data to make the numbers behave in surprising new ways needs to be developed as an internal core competency.
Who owns the data? Who owns the algorithms to interpret the data? This must be kept in-house.
6. Are agencies attracting the best digital marketing talent?
I only have a couple of data points on this, so I’m framing it as a question, but I recently had a shocking look into the digital competency at big agencies.
I was brought in to do marketing triage for a large company in Florida. They had already fired two agencies before they hired me. When I was finally an “insider” I was allowed to see the two social media marketing plans that had been provided by the two previous incumbents (both large national agencies).
I was dumbfounded by the total lack of digital marketing understanding these plans demonstrated. They had provided formulaic, cookie-cutter approaches that were unrealistic, out of touch with the strategy, resources, and political realities of the company. The plans were simply destined to fail.
Like I said, this is just one data point, but I was left wondering how these two well-known and respected agencies had provided plans that were so… well… dumb. There’s really no way to sugar-coat it.
One Atlanta agency friend told me, “Agency employees are stretched thin, and their ideas are too. It’s harder to invest in a brand and do a bang up, non-cookie-cutter job for a client when you have 12 other brands on your time sheet. Moving to the client side allows for more opportunity to really invest in one brand and watch it grow.”
The market dynamics and customer needs are rapidly out-pacing the agency model, at least for some traditional tasks. But perhaps this is a healthy trend. Maybe it’s time for companies to be more directly involved with their marketing, more accountable, and more intimately involved with their customers.