On the surface this sounds like a good idea. You cut out the middle man. Keep the ad agency commissions for yourself and pat yourself on the back for tightening up the budget so to speak. If only it were that simple. Your ad agency does more than you know.
For example, in the automotive industry your agency will deal with compliance. Every ad is submitted to compliance prior to it being sent out. This step assures you will not be penalized by your manufacturer for running an ad that crosses the line on compliance. As you probably know, the penalties can be steep.
Then there’s the issue of co-op. Your agency makes sure that ads qualify for co-op before they run and then they submit your co-op to the manufacturer on your behalf. If there is ever an issue (i.e. missing documents, etc.) it’s the ad agency that tracks them down. The amount of manpower that goes into this is surprising and once you take on the responsibility yourself, it’s not so easy to step out of it.
Now let’s talk about legal. The advertising laws and regulations vary from state to state but it’s your ad agency’s responsibility to stay abreast of them. In many states, Illinois most notably, the laws are strict and the penalties for breaking them are high…sometimes tens of thousands of dollars. That doesn’t even take into consideration the bad publicity from news reports about your Attorney General lawsuit. A good ad agency protects you from running anything that might put your business in harm’s way. In the event an issue does arise, the agency should come to your defense. Without an agency it’s just you against them. And you’ve probably heard the old adage, “You can’t fight City Hall”.
Your creative message is also important. Without a good ad agency partner it is almost sure to suffer. An in-house ad agency lives inside a bubble. They only are exposed to a limited amount of outside messaging. A good ad agency does business in many markets and across several verticals so they have the pulse on what creative concepts resonate within the marketplace. This third party creative input is worth its’ weight in gold.
But let’s get back to why you wanted to do this in the first place. You’re going to save money. Right? Wrong. Many media companies will not allow clients to receive the ad agency discount unless the conform to strict agency guidelines. Even if the media does extend the customary 15% ad agency discount, you probably can’t negotiate as low a rate as the agency can. Why? Because ad agencies place large volumes of dollars for multiple clients and therefore have much more leverage with media than you could ever imagine! They also have media buying tools available that allow them to optimize your buy more efficiently. Agencies get lower rates. It’s that simple.
Before you make the decision to take your company’s advertising in-house, think twice. All that glitters is not gold.