The study reveals that external agencies are losing ground with advertisers for lack of speed, with over two thirds (68%) of marketers expressing frustration with the time it takes external agencies to make decisions or turn around briefs. This dropped to 8% for on-site and 20% for in-house agencies.
The research, conducted by ISBA in association with Oliver and market research consultancy Future Thinking, finds that just under half of brands now have, or are considering establishing, an on-site (45%) or in-house (44%) capability. This shift in the UK is being driven mostly by the need for closer collaboration, deep sector knowledge, data confidentiality and transparency, as content needs increase across all channels.
The findings show external agencies are losing ground with advertisers for lack of speed, with over two thirds (68%) of marketers expressing frustration with the time it takes external agencies to make decisions or turn around briefs. This dropped to 8% for on-site and 20% for in-house agencies.
However, very few are handling traditional creative advertising briefs. Traditional creative and strategic work are still being allocated to external agencies. These in-house agencies typically employ under 25 people and are working on collateral/promo development, retail materials, direct-to-channel materials, low-level sales and marketing strategy, and a high incidence of digital-led activities such as e-brochures, social media content, and emails. Very few are handling traditional creative advertising briefs.
Marketers are the key decision makers in hiring agencies, with procurement having a background role (43% said that procurement was either not very or not at all influential).
Among the key advantages respondents identified for selecting an on-site agency were the desire for speed and agility (86%), improved cost efficiencies (68%), collaboration (64%), and operational control (54%) that comes with working in the same building, as well as the institutional knowledge (21%) and strategic capabilities (21%) that agencies offer.
Meanwhile, for in-house agencies, respondents cited improved brand expertise (61%), collaboration (52%), operational control (55%), and creative expertise (33%) as the main advantages.
Despite the trend towards in-house or on-site however, marketers are still using these capabilities mainly in a tactical function, with 54% using on-site agencies on a project-by-project basis.
Debbie Morrison, director of consultancy and best practice at ISBA, said: "Agility is increasingly a big issue for clients, especially in relation to digital activities, so it is no surprise that we are seeing a rise in these types of activities being handled in-house and particularly with on-site agencies.
"Adapting to the new demands that marketers have should be a key priority for agencies as they encounter an increasingly competitive market."
Nearly two-thirds (65%) of all respondents said they would not be working with more agencies in the next year. The survey also notes that while media buying is still largely outsourced, this could be because media agency contracts make it harder for advertisers to switch. In the US, 31% of advertisers are moving their programmatic buying in-house, according to the Association of National Advertisers.
Sharon Whale, chief executive at Oliver UK, said: "Amid increasing demand for closer collaboration, faster turnaround and more effective integration of the agency into a company’s processes, it’s clear now that the traditional external agency model cannot meet all of these needs. Having a unique model of working on-site, which enables you to get to know the ins and outs of the company, is becoming ever more valuable as marketers expectations continue to grow."
The study canvassed ISBA members over a two-month period between December 2016 and February 2017. It included responses from 85 senior ISBA members. In terms of UK advertising expenditure, half of the companies that responded spend more than £30m annually and over a third of respondents spend more than £50m.
The report follows a series of ANA studies in the United States, where 58% of advertisers were shifting towards in-house or on-site in 2013 (according to evidence from the ANA).