Maximising
agency
partnerships in an era of in-house
capacity building
In recent years, there has been a notable shift in how companies approach their communication and marketing needs. Increasingly, organisations are investing in building in-house capacity to handle certain functions traditionally outsourced to agencies. This trend has raised questions about the future of agency partnerships and the evolving dynamics between companies and their external service providers.
The evolving landscape As companies seek greater control, efficiency, and agility in their operations, the allure of in-house capacity building has become increasingly attractive. According to recent industry reports, there has been a significant rise in companies bringing communication and marketing functions in-house, signalling a shift away from reliance on external agencies. "In-housing is great for clients but it puts margin pressure on agencies. High margin agency work – the volume “pull through” activities - are often in-housed." - Steve Boehler, Partner, Mercer Island Group
Challenges facing the communication house
This trend poses challenges for the communication house model, which has long relied on providing full-service solutions to clients. With companies building internal expertise, the scope of work for agencies is shrinking, and client expectations are evolving accordingly. Data from client satisfaction surveys indicates a decline in overall satisfaction with communication house partnerships, highlighting the need for adaptation in the industry.
Key findings
1. Strategic alignment over full-service models: Our research indicates that companies are increasingly prioritising strategic alignment over traditional full-service models when engaging with agencies. Rather than outsourcing all communication services, organisations prefer to partner with agencies that offer specialised expertise and can seamlessly complement their internal teams. 2. Flexibility and responsiveness: Agencies that demonstrate flexibility and responsiveness to changing client needs are poised to thrive in this new landscape. Data from industry surveys underscores the importance of agility in agency partnerships, with clients valuing partners who can adapt quickly to shifting priorities and market dynamics. "Agility and efficiency are paramount today. All clients expect enhancements in speed to market and agility, and AI is helping to create huge expectations that agencies can do more for less and faster." – Steve Boehler, Partner, Mercer Island Group 3. Process adaptation and collaboration: Successful agency partnerships hinge on the ability to adapt processes and collaborate effectively with internal teams. Our findings suggest that agencies that align their workflows with those of their clients and foster a culture of collaboration are better positioned to deliver value and drive results. "With over 80% of large enterprise marketers now maintaining an in-house agency services operation, new collaboration practices and increased flexibility are critical for agencies to succeed." – Steve Boehler, Partner, Mercer Island Group
Best practices for agency partnerships
Based on our research and industry insights, we have identified several best practices for agencies looking to maximise partnerships in the era of in-house capacity building: • Prioritise strategic alignment and specialised expertise over full-service offerings. • Cultivate flexibility and responsiveness to meet changing client needs. • Adapt processes and workflows to align with those of internal teams. • Integrate with the other agencies and the in-house team • Foster a culture of collaboration and open communication to drive success. "In the agency reviews we’ve been managing recently, there is a clear theme of alignment, integration, and agility. Agencies that fail on any of those attributes won’t survive long." - Steve Boehler, Partner, Mercer Island Group
Conclusion
In conclusion, while the rise of in-house capacity building presents challenges for agency models, it also offers opportunities for innovation and growth. By embracing strategic alignment, flexibility, and collaboration, agencies can position themselves as valuable partners to clients navigating the complexities of today's communication landscape.