External Agencies: Challenges & Benefits
External agencies grew to prominence in a low-tech, pre-internet world where data on effectiveness was directional at best and proving a true return on a brand’s investment was difficult, if not impossible. The agencies survived on the qualitative buzz produced by compelling, provocative campaigns that boosted brand awareness. In return they earned agency-of-record status and made large profits delivering a spectrum of marketing tactics at envied gross margins, receiving high fees as long as their brand work sizzled.
What External Agencies Bring to the Table
Most companies place value on external advice. A third party’s point of view is important to a brand that is launching products and campaigns. Successful external agencies have high-end creative talent and experienced strategists who are adept at bringing this unbiased perspective to the table. As a result, many companies respond to the agencies’ fresh thinking and inventive approaches for selling their brands. But clients don’t receive these viewpoints and creativity without challenges. Namely hefty price tags. External agencies command high fees in order to pay for their platinum talent roster and prestigious addresses, among other costs. One look at the 4A’s 2021 Labor Billing Rate Survey Report will tell you that. Do their clients need all the extra expense, all the time? Not if the CMOs have a right-partner/right- work strategy in place. Under this assignment model, they use a particular agency based on its highest value to the brand, not its total offerings. And in many cases, their IHAs come out on top.
"We believe that IHAs will not replace external agencies—room and need exist for both. We know naysayers will counter with, “How many days do you really require a $500/hour Executive Creative Director or Copywriter?” On the other hand, it’s good to have an external resource’s viewpoint in regards to your brand. Not everyone you hear voicing an opinion should be an echo. Otherwise, you lose touch with your buyers and prospective customers."
Jackie Schaffer, Cella Senior Vice President
IHA: Huge Value and the Potential for Big Wins
There’s no doubt that the IHA brings huge benefits to companies—and that most are nowhere near maximizing the value that an in-house agency could provide them. When budgets tighten, CMOs and other leaders have an opportunity to redirect dollars and energy towards building a more valuable IHA.
The cost savings that come from increased reliance on in-housing can be invested in additional internal resources and capabilities needed to seize “big-win” opportunities and plan strategic initiatives that will keep business improvements building upon themselves.