In-house marketing is a phenomenon that is currently rife across the advertising industry. The fallout from a difficult 2017 has prompted a great many company’s to begin streamlining costs by developing their own internal units to manage creative affairs, rather than hiring independent production companies. Services that have traditionally been outsourced are now increasingly being operated internally and this trend poses a major threat to the orthodoxy of ad agencies on the open market. The idea of contracting specialist firms to produce commercial work as an absolute necessity has been undermined by this desire to look inwards for creative solutions. But are brands playing a risky game in forsaking agencies?
The concept of self actualisation has long been an important characteristic of the American cultural lineage. It is defined loosely as the fulfilling of one’s own creative or social potential and was introduced by the psychologist Abraham Maslow in the 20th century. He argued in his Hierarchy of needs publication that “a musician must make music, an artist must paint, a poet must write” if they are to realise their potential. Within the industry today, ad agencies face a battle to preserve their access to a domain traditionally considered their own, creative advertising, and to demonstrate their indispensability to brands who are shunning their services. A significant moment contributing to this new landscape came in 2016, when Unilever announced its plans to be more thrift in how it operates, introducing an internal production unit ‘U Studios’ which promised to slash the company’s ties with external agencies and manage more work in-house. It was a decision that was initially met with uncertainty and anxiety over the sustainability in the long run of such a strategy.
However, comments made this week by Unilever in Campaign magazine indicate that the ends have indeed justified the means, as it’s “17 U-Studios in 12 countries are creating content for brand teams faster and around 30% cheaper than external agencies”. While it was revealed in it’s 2017 annual report that in spite of such sweeping changes, overall sales were up 3.1% to €53.7bn and it saved €300m in the first six months having retreated from outsourcing a major chunk of its work. Such news would have been received unenthusiastically by many ad agencies, who’s misery was then compounded when the FMCG behemoth Procter & Gamble shared their plans to reduce the number of agencies used from 6,000 to 2,500 and by June 2021’.
In this ultra competitive and results driven world, one man’s success can often be measured against another’s misfortune and Sir Martin Sorrell, Chief Executive of the world’s biggest holding agency WPP, couldn’t hide his frustration. Speaking last week he revealed that he was “embarrassed” that WPP did not meet revenue estimates in the last three quarters of 2017 and has already suffered a problematic start to 2018. Sorrell spoke with consternation about he called ‘pressures in the system’ and ‘structural stuff’ which have contributed to a climate in which agencies are being increasingly being bypassed in the distribution of creative work.
Unilever’s new model of self-sufficiency offers a glimpse into a kind of post agency world and they should be lauded for delivering on its promises with such efficiency. The virtues of adopting an in-house approach to marketing are clear at a time where consumers require new and more inclusive channels of communication from brands. It offers the possibility of launching dedicated experiential teams from within who specialise in using customer engagement in the form of face to face interaction, something considered by many as a lost art.
This kind of engagement, although less practical on a quantitative scale, is a more measurable way of working out the effectiveness of a campaign. On their website, Unilever emphasised that the key to implementing a successful in house operation is to tap into this kind of engagement and making the most of digital. “We are investing heavily in digital, experimenting with a range of new, direct-to-consumer business models, and embarking on an enterprise-wide digital transformation program”. Additionally, the emergence of more advanced technologies lends weight to the notion that an in-house teams can perform at the required level and offer brands more control over their own campaigns and messages. Emulating Unilever or P&G’s success will certainly prove a tall order for other pretenders; but ultimately the idea that we can engage customers on a human level and make the most of the technology available to us is a more effective medium moving forward and may prove the salvation of the industry as a whole.
With the giants of the FMCGs sector continuing to cut their margins and reduce the number of external advertising agencies they work with, the onus now falls back onto the latter to be more creative and find a way of emphasising their validity to be in the market place, so as to make to make themselves indispensable. If the trend continues to grow, significant strain will be placed on the conglomerates of advertising, notably WPP and Publicis, whose capacity to work with the required efficiency and to prove value for money will eventually wear thin. The processing work that is increasingly being executed in-house should be viewed as an opportunity for self improvement and for a rethink in how one creates a brand and adds value to client companies.
It would be foolhardy to suggest that the traditional advertising agency will become obsolete any time soon. Developing a brand and instilling a unique identity remains an immensely complex operation and the expertise offered by the likes of Publicis Groupe, WPP and Dentsu, all with their own unique qualities, will remain alluring to brands. However, now more than ever, they will need to convince prospective clients of their ability to create dialogue with mass audiences, or risk being left behind.