In-housing of agency capabilities has been a common trend over the past few years and it isn’t about to go away any time soon. When asked to rank the external agency capabilities they're moving in-house, CMOs’ top three were:
- Brand strategy
- Innovation and technology
- Marketing strategy development
According to the Gartner's CMO spend survey, more strategic services are being adopted by marketing teams today. They are looking for talent that can provide them with business strategy and digital business transformation skills. Given the strategic importance of capabilities, CMOs must balance their need for cost-efficient internal resources with the scale and experience that strategic partners such as agencies provide.
Meanwhile, in terms of budgets, agencies’ share of the total budget has declined a little year-over-year (23.7%-23.0%). However, this small change masks significant in-housing activity, as CMOs reimagine the capabilities that can be supported by their internal teams.
Respondents to this year’s survey reported that 29% of work previously carried out by agencies has moved in-house in the last 12 months. While this number is similar to the proportion reported in 2020, the capability mix has changed significantly. Last year Gartner reported that in-housing had largely favored high volume, lower value agency services — this year CMOs are looking to high cost and high-margin strategic agency investments.
During a recent webinar by MARKETING-INTERACTIVE, in partnership with Celtra, Syed Mohammed Idid, head of strategic stakeholder engagement of PLUS Malaysia – Malaysia’s largest highway concessionaires or build-operate-transfer operator said that while working with a creative agency brings to the table “expansiveness of ideas”, often it is the intimate understanding of the brand DNA at a very granular level which adds that magical spark.
“When you are part of the in-house team, you get the depth of knowledge of the industry, and you know what creative elements you need to inject or the message the audience needs,” he said.
On the downside however, said Sagar Paranjpe, head of strategy and creative at Malaysia’s flagship carrier Malaysia Airlines, said that while in-housing has a myriad of positives, one clear downside is the lack of exposure.
“External [or agency] creative talents work with so many different accounts, and so they [are more] up to date,” he said. Internal teams have to work twice as hard to find out what is new out there.
How are budgets being allocated?
When it comes to budgets, marketing technology still dominates, taking 26.7% of the total budget — a small increase from 2020. However, given the decrease in top-line marketing budgets, this means that all resources will be squeezed, even in strategically important technology investments.
Social distancing rules transformed buying journeys for B2B and B2C customers alike throughout 2020. And these digitally-oriented journeys continue in 2021 — the majority of customers who used a digital channel for the first time in the first wave of the COVID-19 crisis state that they will continue to use them when the crisis passes, said the study. This means that even digital late-comers have been forced to accept the inevitable shift to online channels.
Seeing this trend, most CMOs have prioritised investment in the programs and capabilities that fuel digital commerce success. When we asked CMOs how they divide up their budgets by programs and operational areas, digital commerce investments were the most popular, accounting for 12.3% of the total budget.
Meanwhile analytics accounted for a respectable 11.0% of the total budget, it sits outside the top three areas of spending. This could be due to the fact that, while still viewed as a strategically important capability, data and analytics have failed to live up to marketing expectations.
While it isn’t surprising that the pandemic led to marketing dollars being cut in 2020, it seems that the trend isn’t about to be bucked anytime soon. According to Gartner’s CMO Spend Survey, the proportion of company revenue allocated to marketing fell from an average of 11.0% in 2020 to just 6.4% in 2021 - the lowest proportion allocated to marketing in the history of Gartner’s CMO Spend Survey. Cuts impacted marketing budgets across all industries tracked in the survey, with no industry holding a budget of more than 9% of revenue in 2021.