The key task when working with an in-house agency is working out your ‘why’.
There are an array of reasons why brands may use in-house agencies (IHA), and cost is often not the sole consideration. For many brands, working with an in-house agency is about nurturing a long-term relationship; it is an investment for the brand, the people, and ultimately a way of ensuring quality and guardianship.
Are they actually cheaper?
Perceptions of in-house agencies are very important to their ability to bring better value for money relative to external agencies. Indeed, if they are able to show that they can deliver content, know their worth and also use the same size creative team to deliver, an in-house agency can be very successful at adding value.
However, there is a common misconception that because in-house agencies are part of an organisation, they are ‘free’, which can lead to cost overrun, scope creep and value being difficult to determine. Whilst this is the case for some in-house agencies, where in-house teams are fully unified and deliver content without the bureaucracy of payment, many in-house agencies use a chargeback model.
A chargeback model is a model of payment, which can be requested by an executive team and subsidised and based on a standardised day rate across projects, talent and seniority. The aim is not necessarily to make an internal profit, but ultimately to provide numerical value for an in-house agency’s work. In theory, by framing an in-house agency as a cost centre, it creates a level of accountability and asserts the value of an in-house agency within an organisation, giving them more esteem and freedom in budget allocation.
On balance, in-house agencies can be perceived as the cheaper option because they remove the overheads and complications that are often found with external agencies. Nevertheless, this is tempered by the fact there is always going to be an element of cost whenever creative talent is used, whether in-house or not.
The other common problem with in-house agencies is retaining the right talent, since not all creatives want to spend their career working with the same brand; they want the variety that comes with agency work. But, like with all things in life, you get what you pay for; if a brand is willing to pay for good talent externally, they should also be willing to pay for it internally…
The larger question is therefore what success looks like for an in-house agency, and how can you begin to benchmark it to make an informed choice between internal and external?
Success for an in-house agency is defined by the brand itself, and it is difficult for an in-house team to be successful without a clear metric of what that actually looks like.
From a brand’s perspective, the good thing about working with an in-house agency is that their KPIs are aligned: they are both working towards the same goal and there aren’t any conflicts of working on other accounts. Because of this, it means that in order to be able to benchmark their in-house agency , they will have to look outside their organisation. To do this, procurement leads will analyse how their in-house agencies stack up against external agencies and how relatively competitive they are. They may use their own internal benchmarks to validate these findings.
A potential metric to use may be to measure the monetary savings made by using in-house agencies, which can be reinvested back into the brand, as well as time savings, brand knowledge, service quality measures and peer dialogue: in-house agencies can sometimes save time as they know the brand and don’t need so much ‘exploration’ time for each project. Additionally, repeat business from in-house agency’s work is also a positive sign for in-house investment.
That being said, a lot of the benefits offered by in-house agencies are intangible and can’t be neatly measured, including physical proximity to brand, close relations with the marketing team and loyalty to the brand. As such, ROI could be framed in a more holistic way, looking at the longer-term, and more textured, nature of the creative output: a more forward-looking analysis of building the brand.
Without real independent benchmarking data, it is very difficult to get a true and tangible picture of the cost effectiveness of in-house agencies.
In reality, we need both objective data and a holistic understanding of in-house agency success, which will provide a more accurate representation for how and why brands use in-house teams: appreciating how although they may not be the ‘free’, or even the cheapest option, they are sometimes best for the brand.