Why more CMOs are investing in an in-house agency model

Agency rationalisation

Variety of work has not been a problem for The Star Entertainment Group thanks to the range of gambling, entertainment, accommodation and hospitality venues it operates in Queensland and Sydney. But ironically, the merger of its Queensland-based Jupiters and Treasury brands into The Star brand partially informed the decision of chief marketing officer, George Hughes, to create an in-house agency when he joined as the company’s first CMO in November 2017.

“When I joined there were five marketing departments reporting into five group executives, so it was a highly decentralised operating model,” Hughes says. “One of the first things I did was a full assessment of the operating environment.”

What he found was a number of operational challenges and areas for focus and improvement, including the realisation that the company was working with 34 agencies.

“We were actually spending more money on agency fees than we were on bought media,” Hughes says.

The Star was also running a small in-house studio, which Hughes used as the nucleus for what is now a full-scale creative agency, operating under the brand House, and headed by managing partner, Marnie Darren. While The Star continues to bring in external capabilities for specialist activities, such as the higher end of technical video production, Hughes says the only agencies it has on its books are for media services.

The House team benefits from the variety of work that The Star can offer including, hotels, bars, restaurants, nightclubs and theatres, as well as the three casinos.

“The team will work on menu design, right through into product price promotion, to campaigns of the venues,” Hughes says. “You don’t have the variety of brands for people to work on, but you do have the variety of work.”

The Star also runs masterclasses with external experts to help build its team’s skills and maintains a relationship with WPP, whom it turns to it for creative input at times. Importantly, Hughes says he is now aware of the exact value that he is receiving for the money that The Star is paying out in salaries to the in-house agency team.

“We’ve got a lot of very astute and commercial individuals, so it is very simple to create a business case, and a case for change,” Hughes says. “Every time we have increased the headcount, we have ensured there is a business case, or at least an identified cost, that could be saved.”

And just as importantly, he has put systems in place to ensure that the creative output of House is on par with what might be expected from a top-quality external agency. The general managers for The Star’s NSW and Queensland businesses are ultimately House’s clients, holding the agency accountable to performance metrics.

“At the end of every half we have a quality assurance assessment,” Hughes says. “They talk about strategy, they talk about what works on both sides, they rate the client, and they rate the agency, and we adjust accordingly.”

Hughes says The Star’s in-house agency has expanded its activities significantly since it was founded and is increasingly used by other functions within the business, including its internal communications, people and performance, and investor relations teams.

It’s a similar story at Carsales, and according to Maxwell, expansion of the in-house agency’s ‘client base’ is becoming a more common occurrence.

“Most corporate businesses typically outsource creativity,” Maxwell says. “But there is a level of benefit to having creative people inside your business, thinking about your brands and your business all the time. Every business wants to be more creative, and wants to take more risks, and be more innovative, and solve problems in new and different ways. So having people inside the business who can do that makes a big difference.”

Agency versus in-house

But while the growing enthusiasm for in-house agencies might put some external agencies on alert, Maxwell believes there is room for both models.

“You are always going to want to get the best possible thinking on your biggest, most important challenges,” he says. “It doesn’t necessarily make sense for you to have a top much ECD on your payroll 365 days a year when you probably only need them for two days a year.

“There is a need for external and diverse creative thinking to complement the close proximity capability that you can build inside.

“The agencies that will win are the ones that figure out ways to work with and partner with and complement the in-house agency capabilities, and not fight against it and feel threatened by it.”

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