A storm is brewing - at least for the 400 subsidiary Marketing and Advertising businesses that make the behemoth WPP.
As Martin Sorrell resigned Saturday before the disclosure of a personal misconduct hearing against him, The Ad Behemoth was dealt a staggering blow after Procter & Gamble's Marc Pritchard very publicly took aim at the agency holding company, calling for an end to the archaic 'mad men model' of agency holding companies, which has seen overzealous digital media buying on behalf of clients with nontransparent returns. According to Mumbrella it is a $200 million reduction in online spending for P&G. This resulted in a 13.5% drop in the FTSE 100 listed company's share price in a single trading day. In fact their first quarter of 2018 has reached a low not seen since 2009, The FT.
On top of this, Marketing Week reported earlier this year P&G's decision to cut down it's media agency reliance from 6000 to roughly 1,250 and will be in-sourcing a lot of the jobs carried out by agencies. In their words:
If entrepreneurs can buy digital media, why can't the brand team on Tide, Dawn and Crest be entrepreneurs and do the same? They can, and they will
Marc Pritchard has long rallied the cry for P&G to transition its marketing efforts in-house, cutting down on agency budgets and taking its marketers from project managers to brand managers. Citing that, cutting $200 million out of online advertising helped P&G eliminate 20 percent of its ineffective marketing and increased reach by 10 percent.
It is no news there are agencies out there willing to over inflate uplifts for their clients - but after a reduction in spending on Social Media of roughly 20 - 50%, P&G is most likely not seeing a decline in its overall coverage. Mark Ritson uses some interesting data to suggest that agencies may be pushing clients into digital media because it can result in greater commissions for the agencies - in some cases almost three times more than for traditional media. This stance has led to clients over spending on digital advertising that working smarter for half the spend for them would achieve the same result.
Why the hell do I care? Well listen up Rick.
There are good lessons for both client and agency in this slow moving car crash, which will most likely end with the osmosis of WPP into the just as dubious Publicis and Omnicom groups - yeah I said it.
A lesson for agencies - Be Transparent
Large media spends and management fees are only attainable for so long. Eventually we all get tired of under achieving results or stagnated performances.
On more than one occasion I have been happy to tell a client that a test campaign or trial of a new channel has not delivered the results we expected and after exhausting all possibilities as to why this has occurred, recommended they turn off said channel. While this effectively means I have lost our agency work, we were able to free up client budgets which was later reallocated to a more profitable revenue generating channel for them.
There are already calls from the internet that in-housing is the next buzzword. Soon to have over 30 million results in search like it's predecessor inbound marketing.
The reality is that in-housing has been around since outsourcing and we doubt a trend towards in-housing off the back of one (albeit large) company deciding to in-house two thirds of its marketing. Or despite the economic growth predictions for the UK in 2018 being dismal to say the least, companies are more likely to seek cost cutting measures, one of which would be to insource.
In-housing can be a productive use of resource. Marketers can become closer to projects and in turn their consumer base. I say this although I am part of a digital consultancy which needs companies to outsource.
In-housing is often referred to as a false economy. The skills gap between in-house marketers and agency staff is widely reported. If you are on the small side of the SME scale it maybe more beneficial for you to outsource your activities to someone like ourselves (shameless plug). The average cost of a marketing manager in the UK is roughly £32,209.That resource along with on boarding costs can be a big outgoing for a company who has historically not needed a heavy reliance on marketing to bolster its sales. There are marketing agencies in the UK which would be able to put £32k into productive use for companies looking to begin structuring their marketing efforts more effectively.
But can all marketing activities be effectively managed by a third party? Short answer - No. Let's look at inbound marketing. I have not met an agency in the last six months who were not at least considering offering inbound marketing to their client base. Even the recruiter service Indeed has begun to offer advice on inbound marketing. It has without a doubt been a profitable stream of revenue for many agencies but how effective has it been for their clients?
I'm sure many agencies have had roaring successes with content marketing for their clients but at it's essence is the art of producing relevant worthwhile content that a clients leads will find highly useful not just relevant. Apologies to the '5 Reasons Why [Insert basic overview of topic here] You Need to Know' articles that kept people occupied for the better half of 2016/17 but you often fell short of the pale. The agencies that wrote you, most likely did not do your topic the justice an in-house person would have been able to, because they are closer to their consumer base.
Overall you are more than likely in a mix of outsourcing, insourcing and understanding where the boundaries should be drawn, which is a difficult challenge. If it is a tactic that your team has strong consumer knowledge on and is a task they have experience in and are capable of doing, do you need to outsource the work?