Here we go again. It’s that time when we get to make insightful pronouncements about the year that’s passed and the one to come.
Each December, I approach my own end-of-year assessment with enthusiasm. Going back through the notes I’ve made or the articles I clipped to Evernote over the last twelve months is a like a nerdy version of a child carefully going through her bulging Christmas stocking.
And, of the numerous inspiring, terrifying, and thought-provoking developments we’ve lived through this year, here are four trends that I think are going to stick around and continue to affect the way agencies pursue new business in 2019.
1. The In-house Agency is Dead. Long Live the In-house Agency!
Are we tired of hearing about in-house agencies yet?
Yes, the ANA tells us that 78% of its members have some form of in-house agency and that CMOs today require more control over costs, greater transparency, and the speed to pivot as needed.
We’re ending the year with undertones that all may not be right in the land of the in-house agency.
First, there was the high-profile announcement from Intel that it’s shuttering its celebrated in-house agency. It took a lot of us by surprise. The Intel team was not only credited with controlling costs but praised by the industry for high caliber creative work. It was even named Advertising Age‘s Internal Agency of the Year in 2017.
Following on the heels of this, Thomson Reuters announced that it, too, would shut down its in-house creative group, laying off more than 3,000 staff. A spokesperson for the company said: "Creative work is now largely done by external agencies…”
And, at the Digiday Brand Summit this month, there were numerous discussions about the challenges around recruiting talent, managing logistics, and realizing the cost savings of keeping work in-house.
For the enterprising agencies that have figured out how to make a dime on the in-housing trend, including MightyHive, whose success as an agency that builds in-house agencies recently led to its announced merger with Martin Sorrell’s S4 Capital, it may be time to adjust their business model.
2. We’re Finally Getting Smart About How We Pitch
A little more than a year ago, I had a call from a client who was excited about a big new business win. His main purpose was to thank me (we had worked hard together developing the agency’s strategic positioning and he credited it with playing a large role in winning the pitch). And then, he told me how the pitch was run.
The CMO had split from standard protocol. Instead of a drawn-out, multi-stage review, he held personal meetings with a small group of agencies. He based his selection primarily from the impressions formed at those meetings.
Wow. Think of all the hours we could reclaim if more agency reviews were run this way. Maybe this CMO was inspired by the streamlined MassMutual review that took place around the same time in which consultant Lindsey Slaby of Sunday Dinner eliminated the RFP step altogether, cutting the timeline by half, from six months to three.
Other consultants seem to be following suit and ditching the lengthy process and paperwork. Dana Anderson, chief transformation officer at MediaLink, was recently quoted as saying"nobody reads" RFPs. Instead, Medialink’s approach to agency reviews starts with getting clients to articulate their most important issues. These are distilled into just four questions, which are then sent to agencies.
Same with some clients. Jill Baskin, chief marketing officer at Hershey and a former Mondelez marketer, says she tries to avoid RFIs and RFPs, in favor of conversations.
What’s inspired this change, besides a shared sense of exhaustion?
In a recent Forbes piece, consultant Avi Dan points out that agencies used to be regarded as central to a client’s marketing operation. That also meant replacing an agency with a new one was a time-consuming complex project with no guarantee of success. But with more marketing activity handled in-house (for as long as that lasts), asking agencies to pitch for business is easier. There’s less exposure because the scopes are smaller, and the in-house teams provide some assurance that everything won’t grind to a halt during the transition from old to new.
My hope for agencies is that they too realize they have less to lose, start pushing back on onerous requirements, and regain more control over the pitch.
3. New Agency Models Inform New Business Models
In fact, this is happening to a certain extent among a new generation of agencies that were built to serve direct-to-consumer, digitally native start-up brands like Harry’s, Ayr, Everlane and Aday.
This group, which includes agencies like Gin Lane, YellowHammer and Azione, matured during the most recent pendulum swing in favor of in-house. Some, like MightyHive, are willing to work alongside—or even set-up—a client’s in-house agency.
These guys have earned the right to call themselves nimble (unlike other agencies, large and small, who optimistically use the term as a self-fulfilling prophecy) in order to adapt to their clients’ need for flexibility and experimentation. Despite the demise of the “agency of record,” they’ve found a way to build ongoing client relationships by embracing the unpredictability that comes with working with start-up brands.
And they’re not beholden to outdated rules that say the client controls the pitch process.
“Founders come to us with a [investor] pitch deck, not a brand, and our job is to extract the brand from there,” Nick Ling, a co-founder of Gin Lane told Digiday earlier this year. The agency has developed an eight-week process specifically for start-up brands that’s yielded marketing strategies and brand identities for DTC brands like Hims, Harry’s and SmileDirect.
This specialization has afforded agencies like Gin Lane control over how it pursues new business. “We don’t do pitches. We don’t do bids,” Gin Lane CEO Emmett Shine told Adweek.
If the market allows these agencies to grow and proliferate, they may be given the chance to establish their approach to new business as the norm rather than the exception. If that happens, we’re all going to feel the effects.
4. The Dominance of the Resident Expert
This September, The Agency Management Institute and Audience Audit released a reportthat explored when and why organizations decide to outsource marketing. They surveyed 500 marketers across the U.S. with budgets of $1 million to $10 million.
The research revealed three client segments. The largest (more than 50%) is called the Resident Experts and they’re a tough crowd.
According to the research, they’re likely to think their organization has no idea what it’s doing when it comes to marketing, and yet they’re highly confident in their own abilities (“I’d never trust an agency more than I trust my own marketing ideas”).
Their criteria when selecting an external agency reflect the realities of today. They want partners that will move fast, manage complexity, and require a minimum of oversight. Because they regard so highly their own marketing chops, factors like the ability of an agency to come up with fresh ideas or strategic insights rank lower on the list.
For now, these marketing leaders need to be convinced that hiring an agency is a smart business decision, which means in the short term the Resident Expert will be an agency’s most formidable new business prospect.
However, if the pendulum continues its swing back towards outsourcing, and if more agencies like Gin Lane and clients like Jill Baskin at Hershey are willing to set new standards for the pitch process, it’s likely the Resident Expert will need to learn how to hire and work well with outside agencies
One final note. There are a lot of smart people out there predicting a looming economic recession. If (or, better said, when) this should happen, it will magnify the effects of these trends. Marketers who are thinking about winding down in-house agency operations will do it sooner and faster, but they’ll also be more likely to hold on to any cost savings rather than invest it in hiring outside agency partners. This isn’t going to make things easier for agencies, although a side effect may be that some shops feel they have less to lose and are, therefore, willing to break some old rules around new business that no longer serve us well in favor of a simpler, more radical approach.