The cost factor is usually at the very top of considerations. From a budget standpoint, an inhouse option seems like a better choice, as you don’t have to pay an outside firm. “Seems” is the key word as there’s more than meets the eye here. Just like the Snickers chocolate bar: from the outside, it looks like regular chocolate but on the inside, there’s the unmistakable chewy center with distinctive caramel and crunchy peanuts.
The industry standard for pricing is charging a media management fee that is a percentage of the media budget. Costs vary between 10% and 20%, depending on factors such as the agency tier, experience and the media amount (higher amounts sometimes lower the management fee, some agencies do it in a modular way). The common pricing alternative includes a performance-based pricing. The point being is you can hire an agency on an as-needed basis. The price is usually a hefty figure, considering they have to cover their costs and make a profit. A commission and/or a number of additional fees (production, design, etc) are also often a part of the package so, in the end, you are saving quite a sum.
However, doing your own work means having your very own expenses that are not quite like the agency ones, but certainly not neglectable. From people to training to software, the margin between inhouse and outsourced work grows thinner as the volume of work increases. In particular, the inhouse work usually requires longer periods of activity to really pay off, whereas outsourcing per project is a great option if you need advertising on an infrequent basis. The overall cost calculation favors the inhouse advertising option and depending on your resources, it is always viable if you can manage and justify your increased costs in the long run.
In the case of an agency buying your media, one of the more important aspects is retaining control and access to the data. You need to be able to track your campaigns and make sure you’re getting your money’s worth. One clear advantage of being your own boss, in a manner of speaking, is full control and transparency. You are your own number one priority, which isn’t always the case with agencies that often juggle a lot of balls in the air. Going inhouse results in undivided attention and direct communication, putting the sole focus on the one client - you. Then, there’s also the matter of a better, in-depth understanding of your industry or niche, which is better tailored to your customers. This is closely related to our next point...
By default, an agency brings more to the table in terms of creativity and objectivity. One of the biggest advantages an agency has over the inhouse method is the ability to see the bigger picture. It’s a breeding ground for creative types who have more chances to flex their creative muscles. With a creative thinking comes a great advertising concept, which might not be the case with the available staff within the business. If anything, the age-old idiom “two heads are better than one” is a good pointer here.
On the other hand, if all the inhouse staff does is carry out the management’s ideas, something’s lost there. In addition, part of the sometimes insurmountable challenge for the inhouse department is seeing their product from a different perspective. Having an external partner adds a new layer of objectivity, as well as the will to upgrade things that aren’t always found nor attained when positioned right in the middle of your own business. A much needed variety in approach and ideas from an outside agency also comes with a resounding “no” to a client, which is often all that you need to hear in order to avoid digging the hole deeper in terms of costs, time, and resources. Let’s not forget that this is a results-based line of work and that an agency’s survival depends on the fruit of their labor. The need to stay alive in their highly-competitive field of work gives them a sense of urgency and a slight edge here, as they are better positioned to be more critical when needed to.
Agency workforce consists of trained professionals who have more experience and are on top of trends, which can put your campaign in the forefront. For instance, they are aware of subtleties like which programmatic advertising mistakes to avoid, how to scale and so on. There is generally a larger treasure trove of knowledge at play, stemming from a longer experience in running numerous campaigns and solving different kinds of problems. Due to this fact, a third-party agency is set to know what will work and what won’t even before a campaign is launched. An inhouse team lacks that kind of knowledge and expertise that can parry the typically higher quality work of an agency.
“My programming may be inadequate to the task.” is a sentence Lt. Cmdr. Data would frequently utter, yet that undoubtedly relates to the issue at hand here. A slightly different data (not the least less encompassing) shows the ongoing trend of companies cutting ties with ad agencies and instead, opting for the inhouse route. With businesses, and especially social media, adding more agency-like functionality to their portfolio, where does this leave the marketing managers standing at the crossroads?
Inside option is more convenient and more dedicated to the cause. The target audience and market research are already done and there’s less chance for miscommunication. The potential lack of knowledge, experience, and expertise means there may be more training and education required, which raises the cost bar in the overall scheme of things. Working with an agency provides access to a number of experts without the need for a full-time hire, bringing an economical point to the entire equation. You effectively surrender much of the control but gain more from a creative standpoint and lose bias.
Both options are deeply invested in your success so it’s just a matter of resources. Larger companies may have the manpower to pull off the inhouse option effortlessly and diversify their marketing in the process. However, if you don’t have the necessary funds, you can get diversity for less by using an agency. Just bear in mind that the traffic will be the key driver of how well the advertising strategy will be implemented and that’s something more akin to the DIY method than outsourcing.