The in-housing debate: How about culture plus conversion?

The in-housing debate: How about culture plus conversion?

As more brands embrace in-housing, David Golding revisits his thesis about culture vs collateral and explores what's changed and what he got wrong.

Two years after my "culture vs collateral" think piece was first published, I have been asked by Campaign to reconsider it in light of the sale of Oliver to You & Mr Jones.

Was I talking rubbish, as was suggested by the detractors who lined up against me in the subsequent issue of the magazine, or was there more than a grain of truth in my point of view? Do I concur with David Jones that advertising agencies are going the way of Kodak? And will I be jumping on the in-house bandwagon with my next venture?

All good questions. So, here’s a simple answer: I stand by almost everything I said back in 2017, with one big exception – I shouldn’t have used the word collateral. But more on that later.

The great adland divide

At the heart of my perspective was that adland is splitting between agencies that create culture for clients and agencies that generate their collateral. The former are the big broadcast and PR-generating campaigns that help position a brand in its audiences’ minds. The latter are the always-on campaigns that nudge an audience member along the path to purchase.

I likened one to hedge funds, making risky bets for big returns, and the other to pension funds delivering reliable incremental rewards.

First, let’s talk about Oliver. I made it clear that Oliver was the poster boy for in-house agencies making marketing collateral and that, had I not started Adam & Eve, I would have liked to have started Oliver. Simon Martin and his team have done an incredible job and deserve their rewards. They changed the landscape and led the way for other agencies such as The & Partnership and Wunderman Inside.

Of course, there’s disagreement on how best to deliver in-housing. Johnny Hornby, chairman, global chief executive and founder of The & Partnership, said recently in Campaign that neither Oliver nor Wunderman Thompson is exploring the proposition fully but, to me, all these agencies are great cases in growing a new marketing approach.

And I think that approach will account for about half of the overall marketing mix. We all know the 60/40 rule about how brands should balance long-term brand-building and short-term direct response, but Sir Martin Sorrell talks about marketing being divided 50/50, in terms of traditional media versus always-on digital and influencer marketing. Either way, the adland divide I talked about seems a fairly even split.

Of course, this is currently bad news for the so-called traditional agencies, because they used to have a bigger slice of the pie. But this rebalancing won’t signal their Kodak-style demise. Instead, we will see a rationalisation of ad agencies as they work to better serve their 50% of the marketing mix.

A quick look at the top of Campaign’s new-business table at the end of 2018 confirms that clients either want world-class creative organisations, like Mother and Adam & Eve/DDB, or world-class creative individuals found at the likes of Droga5 and Uncommon Creative Studio. The middle ground will be a hard place to occupy, as J Walter Thompson and Y&R have found. Meanwhile, in-house agencies will grow to fill their 50% of the mix.

There is a risk clients will annex their in-house teams, do it themselves and save on the agency profit margin. The defence against that is that clients are busy with their day jobs and can’t stay up to speed on tech developments. But good clients are pretty switched on, no less so than most agency folk. Regardless, for now, in-housing is a growth business.

A single agency will struggle to bridge the divide

One of the key criticisms levelled at my original article was that I was suggesting culture and collateral couldn’t be delivered by a single agency partner. It’s true, I was suggesting that. And I still believe it.

I have yet to see much evidence that the in-house collateral specialists can do the culture creation too. Their success at Cannes Lions is limited, and in all the interviews I have read recently with their principals, mentions of the creative work they actually produce are scant. Let’s also remember that the Kendall Jenner Pepsi ad was made in-house.

In fact, one of the great strengths of Oliver is that it rarely tries to deliver the big cultural ideas for its clients. We work closely with it on many Unilever brands and on The AA and it doesn’t attempt to answer our briefs. It knows what it is good at and it sticks to it.

This leads me to wonder at the wisdom of the recent mergers between VML and Y&R and Wunderman and JWT. The latter is the acid test: the world’s best experience agency uniting with the world’s oldest creative agency. It could be the case study that proves me wrong.

Certainly, the tale of Ogilvy and OgilvyOne in the UK supports my view. Two great agencies with two skillsets. But what have they been together? Not so great.

The recent car-account tennis in the US also backs me up. Last year, WPP lost a chunk of Ford business from its in-house Global Team Blue because the client wanted a decent ad agency to work on that part of its marketing. Equally, WPP won Volkswagen in the US with a small shop from Miami called David, because those clients also wanted a creatively focused ad agency, alongside their precision marketing teams.

What clients want was further made apparent at a recent Campaign breakfast briefing, "When brands take advertising in-house". Senior marketers repeatedly said on stage that they needed ad agencies to deliver the big, strategic thinking and big brand ideas, and need in-house teams close to their first-party data to deliver the always-on marketing.

The biggest and best clients, like Unilever and Sky, have excellent in-house agencies working with a group of the best creative agencies. There’s so much talk of "listening to what clients want". Well, actions speak louder than words.

I made a mistake about 'collateral'

Now to the mistake I made. I shouldn’t have used the word "collateral". Some took offence at this, despite it being a common term to describe direct marketing materials. I am not withdrawing it to appease the haters. Instead, it has become clear to me that collateral doesn’t really work very well without culture, and culture can work a lot better alongside collateral. The two are divided but should not be divorced.

So, I have a new "C-word" to replace collateral – conversion. Culture and conversion. It sets up a symbiosis that says the best in-house conversion specialists know how to generate a sale and an improved audience experience but they need that audience to be warm to the brand in the first place.

Equally, the best culture creative can generate brand "feel-good" but it needs to be turned into action by the smarts with the real-time data, the user experience skills and the programmatic algorithms.

Those slippers ads that followed us around the internet employed good conversion thinking, but lacked any brand equity to convert. The business is now in administration. Equally, every John Lewis Christmas ad has brought an increased ROI as the sophistication of the conversion marketing has improved alongside the culture driving creative.

So, there is a clear divide in adland between culture and conversion. The two halves of the marketing mix need each other. And clients need the best practitioners in each to work with them to maximise the potential of both.

Thinking about this need for balance, I was struck by something Alan Greenspan, the former chairman of the US Federal Reserve, wrote recently about the disastrous President Hoover: "He didn’t understand that you need to govern equally in poetry as well as prose." I couldn’t agree more, Alan.

David Golding is founder and outgoing group chief strategy officer at Adam & Eve/DDB

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