More than one model in the sea
Erin Mckenzie takes a look at the capabilities moving into marketing departments to see if in-housing works, or does not work for organisations.
The marcomms industry is a fluid place. Clients come and go, new screens and platforms lure audiences’ eyes, talent moves from place to place, and in the face of these changes, the most efficient way to get a job done may not always be the same. Erin Mckenzie takes a look at some of the clients doing it for themselves and the changing role of agencies, and finds there's more than one model in the sea.
Pop the hood of The Warehouse Group’s headquarters on Auckland’s North Shore and you’ll see its studio space and marketing department is buzzing.
Thirty-nine creatives make up an in-house agency and a hire drive is set to see it turn into about 45 by the end of the year.
The Warehouse Group is one of a number of organisations locally and internationally that has brought creative and production capabilities, that have resided in agencies, inside its four walls.
Control and cost-saving are to be gained by making the move, and helping head up The Warehouse Group’s efforts is Andrew Berglund, its new executive creative director.
The title has also spread its wings to fly beyond the agency nest and when it landed at The Warehouse Group it’s just one of a number of changes afoot – Berglund thinks of it as a “wellfunded start-up”.
Alongside the increase in staff, the strategic creative thinking will also grow to match the production capability in-house that is currently 70 percent of the division’s focus.
“We are still predominantly production-focused because of the legacy of the in-house studio and I would like to move it to a point where we get 50:50 concept, strategic thinking :production.”
And beyond just coming up with ideas, Berglund and the team have an ambition to do live broadcasts, film-making and radio – “you name it,” he says.
Berglund joined the organisation to lead the internal and external creative teams and agency relationships, crossing over from agency side to do so.
His career has seen him work in a global executive creative director position at WPP Group, lead Samsung’s in-house creative agency Cheil Worldwide, and most recently be chief creative officer and founder of Human. International, based out of Amsterdam and Seoul.
When asked what led him back to New Zealand and into The Warehouse Group he says it was New Zealand’s innovation, with the likes of Soul Machines’ work in the AI space that piqued his interest.
And when he saw what Jonathan Waecker, The Warehouse Group’s chief marketing officer as of November last year, was building in-house, Berglund saw an opportunity to get involved.
However, it couldn’t just be any organisation Berglund would go in-house for, pointing out The Warehouse Group’s breadth of brands was an attractive offer.
“If I came here and it was a one trick pony, I would have got bored quickly. I crave the diversity. There might be some creatives that enjoy the one brand but for me personally, the attraction with The Warehouse Group is its portfolio diversity.
“There are four very diverse brands – The Warehouse and Warehouse Stationery are in close proximity to one another but then Noel Leeming and Torpedo 7 are diversely different.”
In The Warehouse Group’s Interim Report 2018, group chief executive officer Nick Grayson wrote about its transformation agenda, saying additions to the executive team ensure that transformation will be delivered.
Waecker was one of those hires, and Grayson said it’s crucial that it maximises its marketing and communications capabilities to deliver for its customers, who are beginning to expect customisation and personalisation when engaging with brands.
“Jonathan will be working on building an integrated marketing capability that delivers for our business and customers,” Grayson said.
However, alongside the transformation, in July it was announced a leadership restructure will see up to 140 full-time jobs lost, including supervisors and team leaders.
The interim report 2018 also showed for the half year to 28 January 2018, the group retail sales for the period were $1,598.1 million, down 0.9 percent on the same period last year. Its gross profit of $522.5 million was up 0.7 percent and other costs of doing business (CODB) were up 3.3 percent on the prior period. Suffice to say, as the traditional retail world attempts to evolve in the face of online competition, the pressure to change – and to save costs – is on.
Seeking efficiency
As its leadership restructure sees a drop in staff numbers, its in-house agency is on the rise. Berglund says it’s because the company is able to be more agile and can respond to the market faster with one reason being Waecker sitting opposite him.
“Conversation with the CMO team is fluid and agile, ideas are far more adaptable to the situation and reactive to the moment unlike with an agency when you have to schedule a meeting, see if the creatives are available and then chase the client.”
The need is particularly relevant in the age of social media, Berglund adds, when brands need to get to things quickly.
Air New Zealand was one of the first New Zealand companies to look at a new way of working at the pace the modern marketing landscape demands. Senior
Bringing more of that creativity in-house ensures the team is fully invested in the brand’s success. Maria Ryan-young
manager of content strategy and creative services Maria Ryanyoung says it’s been building up capability for years. Its global brand in-house content team supports domestic and international brand marketing campaigns, and the main design resource supports the wider business at Air New Zealand.
She says it started six years ago, when Air New Zealand made the commitment to bring design services in-house to support the varied needs of its business, with what was then predominantly product design and print collateral design and production. Ryan-young says it in-housed everything from in-house communication tools, training manuals, signage and event design.
More recently, in the last two years, it’s continued to expand those services to include inhouse video and photographic expertise, digital capabilities and specialist producer expertise.
Within the Content Hub– the in-house creative services team–there’s a full-time team of 15, plus contract resource that supports as the workload requires (this includes additional design, creative concepting, video direction and production).
She says other teams also support the creation and production of content for owned digital channels, retail sales advertising and its Airpoints programme.
Ryan-young says there are multiple reasons for bringing it in-house and one of those, like The Warehouse Group, is the ability to be nimble.
She says there are multiple efficiencies in terms of timeliness, cost saving and being able to tap into the inside knowledge of its team for guidance on content production.
Looking at Air New Zealand’s FY2018 results released 23 August, it achieved its second highest profit of $540 million, an increase from the prior year’s result of $527 million. It had a record operating revenue of $5.5 billion, up 7.4 percent.
Looking at sales and marketing, under operating expenditure, it increased to $357 million in the year ending 30 June 2018 after spending $352 million in the year ending 30 June 2017.
As well as efficiencies, the internal team aids the single vision for how the Air New Zealand brand shows up globally across hundreds, if not thousands, of customer touchpoints every day.
“Having one team internally supporting the breadth of our business with how our brand architecture and expression are represented ensures consistency – as we are typically the ones doing much of the design,” says Ryan-young.
An example of what it’s capable of is the ‘#crazyaboutrugby’ superfan video that launched on Facebook in August. It was concepted the week prior, shot by the in-house team, edited overnight by a production company partner, and on social within 12 hours of finishing filming.
Days later, the video had attracted hundreds of comments from people sharing the names of their rugby superfans who would be keen to see an All Blacks game.
However, like all work, in-house or agency-produced, there’s a chance it could go wrong. Last year when Pepsi pulled an ad featuring Kendall Jenner, it drew criticism of the in-house method.
Pepsi’s in-house shop came under fire for producing an ad trivialising demonstrations aimed at tackling social causes by remedying the situation with a can of Pepsi.
Many believed the ad could have benefitted from some external perspective, with one Reddit thread including the comment: "In-house creative directors are jaded, tired old-timers who simply want to get paid and go home."
When asked if there’s a challenge of creatives being too close to the company when they are in-house, Ryan-young says: “We are constantly looking outside our category and offshore and exposing the team to that inspiration. We have the benefit of being able to travel, to have great partners in our network from whom we draw insights, trends and creativity.”
In the past, she says working client-side in a design or creative role may have appeared a little tame, but in fact, now those roles offer an incredible amount of scope, challenge and reward. “Bringing more of that creativity in-house ensures the team is fully invested in the brand’s success.” Air New Zealand still works closely with its creative and design agency partners that bring new thinking and concepts to the brief. These include True, Host/havas, Designworks, lead production partner Exposure, and FCB – which works with the brand’s New Zealand market development team.
Ryan-young says it matches the project to the right creative and production solution – so for some projects, it may tap partners for some parts of the project journey – be it creative strategy, concepting, or production. But every project involves the inhouse team to some degree.
Over at The Warehouse Group, Berglund is similarly confident about its creative capability in-house.
When asked if there is any concern that being in-house may narrow its creatives’ scope and therefore the quality of the work, Berglund says it’s developing brand manifestos to help.
He explains the brand manifestos it’s creating give it precise parameters for the work. He says they give a foundation to the work and set rules that help inform the team of how to speak to consumers as a brand.
“The rules are in place so if you do flip on a moment and push something out in a minute, you know it’s part of the parameters and therefore the brand.”
And to ensure its in-house team doesn’t become a closed ecosystem, it will be inviting in experts and talent as needed and is formulating creative workshops to inspire the team with guest experts in production and creativity.
“As we grow and we bring more of this talent in-house, I’m convinced other creatives will think ‘hey I want a bit of that’ and that will move The
If I came here and it was a one trick pony, I would have got bored quickly. I crave the diversity. Andrew Berglund
Warehouse Group creative calibre forward.”
There certainly seems to be some momentum within The Warehouse Group’s HQ but not so much that it has driven clear of supporting agencies.
Just this year it appointed Omnicom Media Group (OMG) as the single media strategy and buying partner for its family of brands: The Warehouse, Warehouse Stationery, Noel Leeming and Torpedo7. And while the single media agency partner is about unifying its approach to media, attribution and measurement in an innovative way, there are still multiple creative agencies across its range of brands, as each has its own identity.
Berglund says it works collaboratively with its agencies and each party brings its own knowledge and skills to the table to better the result.
“I’m convinced if we bring those skills together like the Marvel Universe, we can do amazing things as a collaborative collective.”
DDB works with The Warehouse Group and, when asked about the inhousing trend, chief creative officer Damon Stapleton says models should be put to one side because they’re not what makes something succeed.
He believes there’s too much judgement on how things get done, when rather it should be about the outcome.
“If it’s an agency that works for you, excellent. If it’s another model that works for you, excellent. Don’t get hung up on the labels because it doesn’t mean anything, especially for creatives.”
He says creatives don’t care about structure, they care about trusting relationships and working together to make things better.
“The reality is great work does great things because you have gone beyond what someone has asked for and somewhere they didn’t ask you to go.”
Transparency and partnership are key
As Ryan-young pointed out, one of the reasons for taking capability in-house is the resulting cost-saving. The move saw Air New Zealand bring John Buckley on board as manager of paid digital channels, digital and direct marketing around two years ago.
On his Linkedin, Buckley says with the evolving digital landscape, brands are able to take advantage of emerging technologies, from virtual reality to the new wave of programmatic buying.
“But just as importantly, they must also ensure their reputation, and investment, remains safe. Fraud, verification and viewability consistently appear at the top of marketers lists of challenges with digital.”
Contagion managing partner of media Emma Bolser touches on this point, telling NZ Marketing that clients who bring work in-house will get the full picture of all touchpoints and how creative gets to market.
“With in-housing, they will be able to see every strand and there won’t be a markup in the background.”
Bolser says some vendors take 50 or even 70 percent of the dollar, so taking it in-house essentially “removes the need to be concerned over where the ticket is being clipped”.
She says clients want to feel they can trust the people around them and if the media agency is sneakily clipping the ticket or just looking the part, that trust won’t be built.
With this in mind, her advice to clients is to employ an agency but make sure it’s completely transparent.
Stephanie Creasy, managing director at Digital Arts Network (DAN), is also seeing capability move in-house (Che Tamahori, a long-time employee at DAN moved to Air New Zealand early last year to take up the general manager of user experience role). Looking at it from a digital agency perspective, she says it’s about a partnership approach.
“There’s a degree of experience, talent and specialist capability that’s still reasonably unique on agency side,” she says. “There are known phases of maturity when taking new capability inside large organisations – you can’t just go from zero to having a fullyfunctional new capability inhouse overnight and just having one or two user experience specialists does not make a new capability.”
No longer are agencies taking projects away to work in a black box before delivering back to clients, now Creasy says both sides are working in partnership and are able to feel they have contributed to the execution and outcomes.
Similarly, Martin O’sullivan, Iceberg managing director, describes its way of working with clients as being “an extension of the marketing team”.
He says it’s working with some clients who have in-house designers but will bring the agency in when it’s a bigger project and help is needed.
“We have a philosophy to play nicely in the sandpit – it’s not about us, it’s about what’s best for the creative.”
Learning as you go
Another company with a significant in-house team is Xero, and when its global director of media, Patrick Macfie, talked Stoppress through its thinking in 2017, he said the decision to take on this task with an internal team wasn’t made because of any animosity against advertising or content agencies.
Instead, taking all advertising and content creation in-house for the local, Australian, US and British markets, was about saving money and taking complete control of everything.
But with that control comes the challenge that in-house work can be perceived as inferior to that of agencies and Macfie wasn’t ashamed to admit that the Xero team has made a few creative missteps in the past. But
The reality is great work does great things because you have gone beyond what someone has asked for and somewhere they didn’t ask you to go. Damon Stapleton
these aren’t reason enough to give up on the approach.
“When you step into that realm and you really commit to investing in your people, you have to accept the good with the bad,” he said. “And, for us, there have been some rough times.”
Macfie welcomes this as part of the process, seeing creative errors as an integral part of staff development.
“We try to take risks, we try to break stuff, we try to grow new muscle, and we try to provide our creatives with a level of creative satisfaction at the end of every day,” he said.
While there might be the odd hiccup along the way and although there are risks involved, Macfie believes that in the future more brands will take an increasing share of their creative in-house.
“I think it’s very much the [way things are going],” he said.
It’s not about the journey, it’s about the destination
Taking a different perspective to clients’ needs to save costs, Bryan Crawford, chairman of FCB New Zealand, flips the picture to suggest a client’s first step should be reconsidering its approach to working with its agency.
His dealings with client procurement have shown him their objective is to save agency costs – which clients believe comes from an agency discount or going in-house – and more often than not, Crawford believes the secret to reducing cost is to look inside the client to see how they work.
“The cost inside the agency is often the result of the inefficiency of the client,” he says.
“Take two clients, one of whom writes incredibly clear briefs and works in a structured way versus a client who briefs verbally, or not at all, and uses the creative process to get to the answer – that’s an incredibly high-cost way of using an agency.”
His solution is a disciplined process with a clear brief and approval process. It’s a very efficient way to use an agency and if that’s how the money is saved, he asks, does it really matter?
However, in saying this, Crawford points out that there are benefits to working with an agency and there is a lot agencies could do to educate clients about those things.
One of these is the ability to deliver insights to clients from observing what’s happening in other categories and what’s happening around the world.
“If you are not bringing insights to clients then you are not leading your client,” he says.
Insights can also come from the future-thinking nature of agencies as they are looking to see the latest and up-and-coming innovations and capabilities to deliver to clients.
Crawford admits agencies face a challenge as they need to invest in new talent or tech ahead of clients needing it, and no one wants to pay for the future. But when done right, it can be incredibly valuable.
The point was also raised in Digiday’s ‘Confessions of a marketer: Agencies forced brands to in-house more marketing’ article, in which a senior marketer at a global advertiser said things move so quickly that marketers need agencies to know more about the technologies than them.
“Because agencies are in such a competitive market, they thrive off the need to innovate, whereas things can get stagnant with in-house expertise because businesses have internal politics and processes preventing decisions from being made fast.”
Another benefit Crawford sees in agencies, is the ability to hire the top-tier creatives and strategists because the wages can be shared across all the agency’s accounts. When clients only use a percentage of the planner’s or creative’s time, the amount they pay reflects this, so taking them in-house 100 percent of the time means 100 percent of the cost.
“Most clients would have far less than 50 percent of a chief creative officer being paid for in their agency fee. So the idea that they can afford to hire one 100 percent is pretty challenging.”
Creative directors in New Zealand earn on average $200,000 a year and an executive creative director earns on average $320,000 a year according to The Creative Store’s 2018 Salary Survey.
With those numbers, Crawford estimates the number of New Zealand organisations that can afford to hire senior creative talent full-time would be less than five – “maybe two or three can”.
On top of this, he explains the time that talent spends working is accounted for when they work in agencies, as agencies track how much resource was used and how long it was used for.
“There’s a discipline to using the agency because the only thing we have is time.”
“There aren’t many clients, at least that I know of, that has someone accounting for every 15 minutes and what they did in that 15 minutes.”
Crawford believes that can make the work of a client inefficient as there’s no incentive to have a disciplined process and without it, the decision-making and approval processes can become convoluted.
“Agencies are professional service firms – no different to lawyers and accountants in a way – so we have a fairly rigorous process of managing time and valuing time that most clients don’t have.”
But despite that “rigorous process” being all in a day’s work for agencies, not everyone agrees agencies are the most efficient at getting the job done.
According to Anne Miles, managing director and founder of International Creative Services, there is no incentive in the current agency model to work efficiently and effectively and the number one culprit is time sheets.
In an article on Linkedin, she explained with agencies billing by the head hour, the focus is on increasing head hours and reducing overheads to maximise return.
“Let's say a junior creative costs the agency $50 per hour, and a senior is $90 for example (note that the rates are fictional, but relative, for demonstration). If a junior takes 5 hours to do the job it will be a cost of $250 but the agency will bill it at $750 with a profit of $500, assuming a head hour billable rate of at least $150. If a senior does the same job, and finishes it in 2 hours the cost is $180 and billed to the client at $300 (assuming the same head hour bill of $150 per hour) with a profit of only $120. So see who is the real loser here - the Brands!”
Her suggestions include moving to project-based fees; making sure clients know who is working on their business and holding them accountable; using junior talent for facilitation and getting things done and leaving the senior people for their thinking and tapping into the benefit of their experience and speed; and moving to flat commissions on costs.
In total she has 19 different solutions to keeping agencies relevant and for brands to retain value in their marketing executions, so it’s no surprise Iceberg’s O’sullivan says brands are taking execution functions in-house.
“The bottom line is, by being able to control the creative and control advertising spend they will save quite a lot of money and be able to return that to shareholders.”
Variety is the spice of life
While seeing ex-agency staff in marketing departments is nothing new, Leighton Howl, talent director at recruitment agency The Pond, looks back at the GFC as a point where things changed. When it struck, agencies were forced to downsize and Howl says the talent market was flooded with account directors and senior management who took a pay rise to cross over and make a new home for themselves in client organisations.
“They are good strategists and good marketers – maybe better than traditional marketers,” says Howl.
But it’s not for everyone and, generally, for design directors, creative directors and art directors, Howl says the goal is to be at an agency working on a variety of clients and doing a variety of creative work.
DDB’S Stapleton is one of those creatives, and having worked on the Football World Cup in South Africa, car accounts, FMCG brands and banks, he knows how the variety gives creatives different ways of looking at problems.
“I know there are a lot of American agencies with creatives that have only worked on one account and I know it kills them.”
For many, the appeal of an agency environment is about being in a creative culture, being stretched, dealing with the stress of client demands and delivering the goods. And while in-housing sounds good in theory, Stapleton says creating great work and maintaining a creative culture is very difficult in practice.
“I don’t know if everyone understands how to make a creative department. They see it as capability but building a creative department is hard.”
Looking at his own department, he talks about hiring a diversity of thought because “if you have enough strange people in a room you will get somewhere interesting”.
He says it’s a constant experiment in the department but will deliver better outcomes than putting a lot of the same people in a room.
Another creative with a need for variety of work to sink his teeth into is Mark Easterbrook. Working on both sides of the industry as a freelance writer and creative director with Easterbrook Words & Ideas, and a contract copywriter for Les Mills International, he says he couldn’t commit to a full-time job on client-side because he enjoys the variety.
For other creatives, particularly those who have been around for a long time, he says to make the jump to client-side will require a certain degree of account service skills because in-house you have to have direct conversations, take feedback directly and do things an agency suit would.
“For some creatives, their worst nightmare is having to talk to the client everyday faceto-face. They would hate it,” he says. “Whereas I was always the person screwing up my face to the suit saying ‘can we just talk to them directly please? I don’t understand the feedback now it’s come through four people’.”
But when asked if creative talent coming into the industry now would see in-house as an option, he thinks yes.
For the younger people coming through it’s a perfectly viable option that might not have been there 10 years ago, he says.
And it might become a need, as Easterbrook sees the potential for there to be fewer agencies further down the track if in-housing continues.
Howl agrees. When looking at the future, he doesn’t see the “fat agencies that do everything”. They will be slimmed-down he says, to produce high-end, gamechanging, more specialised work in a tighter, leaner and faster way.
And as agencies shed some weight, marketing teams will grow and make a home for the day-to-day commoditised work.
“It will be a 50:50 marketplace,” he predicts.
And for those organisations that do in-house, The Warehouse Group’s Berglund would like to see the work to not be talked about as a product of in-housing.
Like Stapleton suggests not getting hung up on labels, Berglund wants the reaction to the work to be the same.
“I would like to get to the point where in-house and outhouse is not a conversation,” he says. “It’s just about the creative and not looked at as ‘oh it’s by an in-house, that’s a surprise’.”
“Because we can do it, without a doubt.”