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

We explore why in-house agency is proving to be the right choice for more Australian marketers, looking at brands from Sportsbet to Carsales, The Star and more

One of the great benefits of digital media is the speed at which an idea can be brought to market.

So when Sportsbet general manager of marketing, Tim Hernadi, heard that a video of Indian cricketer star, Virat Kohli, smacking balls around in the Adelaide nets had gone viral, he knew this was something his team could jump on.

“Our guys picked up on that very, very quickly,” Hernadi tells CMO. “We’ve created some characters called The Grubs, and so we sent the guys down to the local cricket nets and recreated that scene and had that out the door within an hour.”

Although The Grubbs’ effort hasn’t matched the 2.4 million viewers of Kohli’s video, the 300,000 views it has achieved is a great return for an hour’s work.

What made such a rapid turnaround possible was Sportsbet’s investment in creating an in-house creative and production capability, including a video production team, broadcast studio, and design team.

According to Hernadi, Sportsbet’s capabilities have now matured to the point where the internal team can run solo without external agency support. Sportsbet has also bolstered its in-house capabilities with automation technology, which means they can now create a TVC in as little as 20 minutes.

“That was a process that took three days previously,’ Hernadi says. “When we have to respond to a competitor offer that has just changed, this is really where you do get the benefit of having your own capability in-house. Agility is really, really important, and speed to market is really, really important. I don’t know whether many agencies could be that responsive.”

Insourcing's popularity

Sportsbet is one of a growing number of brands that have chosen to bring in-house some or all of the activities once handled by an external agency. In 2020, the growth in interest in in-house models led to the formation of the In-house Agency Council - Australia (IHAC), with the goals of building capability, sharing learnings, and advocating for the Industry.

IAHC has attracted some of Australia’s prominent marketers as board members, including Optus’ consumer marketing director Angela Greenwood, CMO, Kellie Cordner, and MYOB’s head of head of design, agency and brand, Belinda Watson, as well as Hernadi, with many more signed up as members.

According to IHAC founder and chair, Chris Maxwell, the idea came to him as a result of his own prior experience as marketing director for classic and domestic premium brands at Carlton & United Breweries, an organisation which had operated its own in-house agency under the name Speakeasy Studio. That agency’s creation had come about from Maxwell’s belief that CUB had not developed the quality of its digital and content work quickly.

“We were spending a lot of money outsourcing all of the digital content, data, and tech work to a variety of different agencies, but we just hadn’t gotten better,” Maxwell says.

His solution was to recruit a team to programmatic media, content, technology and other skills, which led to the creation of Speakeasy.

“It was transformational for the business,” Maxwell says. “The brand team and the trade marketers, and to some extent even the sales teams, saw the benefit - the speed, the effectiveness, the cost efficiencies, and integrations we were able to deliver by having a team of subject matter experts inside the business.”

In April 2020, Maxwell left CUB to form his own consultancy, lution, which is dedicated to helping businesses build and optimise in-house agencies. It was through discussions with potential clients that he saw the need for the IHAC, to facilitate peer networking and learning.

Maxwell believes the current interest in in-house models is a direct reflection of the pressures that marketers face today.

“Now there is an always-on culture, there are many more channels to engage with consumers or customers on, and the level of complexity and demand for content and interaction and activity is higher than it has ever been,” he says. “The old model of big, expensive agency briefs and big ideas is still relevant to for some businesses, but more and more, businesses need always-on content and always on engagement with their consumers.

“You need people closer in to the business to turn the work around at the pace consumers expect.”

Turnaround times

Speed of turnaround is a key attribute of the in-house model that appeals to Cordner at Carsales. Her organisation has built a content creation team consisting of journalists, videographers, editors, animators, postproduction specialists and more, producing about 500 pieces of content each month.

“We just thought there was an efficiency for us in having them sitting in the building,” Cordner says. “That provides some really great savings and benefits, especially when you are doing repeatable digital activity. When it is not the big brand strategy stuff, you have to find a way to get your efficiencies, so you can do more. Not everything has to win an award. Much of it is very functional, like buying keywords, or putting out an EDM.”

Cordner says this capability proved especially useful at the onset of the pandemic, with Carsales able to create and distribute communications in a matter of hours.

One of the potential negatives of the model is it immediately adds headcount to the marketing team. Cordner says her team has grown organically with the company.

“We are still pretty lean,” she says. “We don’t bring new heads into the team lightly, because you can run the risk of becoming quite swollen. So we try to have people how are broadly skilled.”

Another potential downside Cordner has watched for is the potential for monotony to creep into her teams’ working days, given the limitations of working within a single organisation.

“Creative types need stimulation and variation,” she says. “So what we do is switch what brand they are working on, and we will often pull them out of a job and put something more creative in front of them. And they will put their own pitches in. That gives them that variety.”

UP next: What drove The Star's CMO to build an in-house agency, plus the external versus internal debate

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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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