Here’s a significant trend described in a very fine digital marketing research report from SoDA — 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 shift to marketing in house is even more remarkable considering the report also shows overall spending on digital marketing is going UP.
The shift in North America is a little higher — 28 percent. The association describes this trend as “alarming” (if you work for an agency) but stops short of fully explaining why. They say that more agency work is focusing on innovation and specialized tasks but don’t really say why more companies are bringing work in-house. A lot more.
What is the cause of this striking trend? I have a few thoughts about it. One of the best parts of my job is that I get to work with a diverse group of businesses — pharmaceutical, high-tech, manufacturing, retail, sports, and more — and I do detect a few common themes that could help explain what is going on …
1. “We’re too big”
An executive from one of the world’s largest ad agencies told me last year that his company was too big to compete in the lightning-fast digital space. “We have too many people, 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.”
2. Moving beyond advertising
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 act like an ad agency. Perhaps the cultural transitions are not happening fast enough at these agencies.
3. A person is not a campaign
When I teach about social media marketing at Rutgers University, I often point out the difference between funding an ad campaign and 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 model is not necessarily built for that.
4. Are you going to out-source relationships?
As analytics improve and Big Data gives way to the real insights in Little Data, we are able to drive our efforts down to individuals. I believe this is where the real power in marketing is going to be in near future — focusing like a laser on the most active customers driving our business (in the The Content Code book, I call this the Alpha Audience).
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 that?
5. Being irrelevant
Finally, I only have one data point on this, but I recently had a shocking revelation about 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 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, and simply destined for failure.
I simply could not believe these well-known agencies had provided plans that were so … dumb. There’s really no other way to sugar-coat it.
Like I said, this is just one data point but if this is going on at other places, no wonder agencies are hemorrhaging.
Maybe 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.
I would LOVE to hear your observations on this in the comment section.
Illustration courtesy Flickr CC and Holly Kuchera.