In-House Ad Agencies Are Gaining Room to Maneuver

The following is republished with the permission of the Association of National Advertisers. Find this and similar articles on ANA Newsstand.

By Chris Warren

Not long after COVID-19 prompted lockdowns and public health exhortations to wear masks last spring, Jill Baskin, CMO at The Hershey Co., heard something intriguing from a colleague.

“We have a brand manager whose wife works at Penn State Health and she told him that there is such a thing as mask breath,” Baskin says. She quickly tasked C-Sweet, the in-house agency she launched in 2017, with developing a campaign for social media that connected the problem of mask breath with a solution provided by Hershey’s Ice Breakers mints. The result was a 15-second spot urging people to “mint before you mask.”

For starters, the idea originated from inside the company and the in-house agency was able to execute it quickly and cheaply. “If you did this with an agency you would brief them and go back and forth and it would take so long,” Baskin says. “It wasn’t the most beautiful ad, but it was very effective and inexpensive.”

Baskin says C-Sweet was developed because Hershey’s 80-plus brands needed to produce a huge volume of social media advertising in a cost-effective way.

Initially, C-Sweet handled social media content creation for smaller brands such as Jolly Rancher and Rolo, but it now handles social advertising for all of the company’s brands. “I had a dual purpose of proving to myself we could do it and proving to the brand people we could do it,” Baskin says, adding that a gradual approach was intentional. “They’re not going to want this if it’s not as good as what they’re used to.”

Heavier Load

As in-house agencies grow in number, so do their roles and responsibilities. Indeed, 82 percent of in-house agencies reported that their workloads had increased significantly due to COVID-19, says a recent survey by The Winterberry Group.

A major reason for the trend: big brands want to fully leverage their customer data.

“Many corporations don’t want their now-valuable first-party data to be exposed outside their walled gardens,” says Robb Hecht, a professor of marketing at Baruch College. “Creative and content development has been tasked with coming in-house so it can leverage data insights more easily to reach and engage customer audience segmentations.”

A commitment to fully deploy first-party data to benefit its own marketing and to aid the marketing of partners was behind Walgreens’ launch of Walgreens Advertising Group (WAG) in late 2020.

“We believe we have a role to play and value to offer, and it’s grounded in a first-party data asset for 100 million members of myWalgreens loyalty program,” says Luke Kigel, VP of integrated media at Walgreens and head of WAG.

He adds, “We have people-based, deterministic data about the transactions 100 million customers make online or in our stores that is updated in real time. That gives us the ability to have a very different kind of conversation with brand partners than has been historically possible.”

The launch of WAG was preceded by what Kigel describes as a multiyear digital transformation at Walgreens. For marketing, the effort involved figuring out the legal and governance protocols that needed to be in place to use first-party data while also making the technology investments required to execute an entirely new marketing approach.

“We inverted what was a very traditional media mix and communications mix,” Kigel says. “We are now digital-led, data-first, and technology-enabled. One proof point is we haven’t delivered a printed circular since the end of May and we are continuing to engage new and existing customers through digital platforms.”

Not-So-Secret Sauce

On a practical level, introducing a retail media network means that WAG can sell advertising directly to brands and agencies so their ads are distributed on Walgreens’ own websites, as well as through Walgreens’ more than 9,000 stores, social channels, affiliate marketing, and email programming. What’s more, WAG can offer brands access to its demand-side platform (DSP), which benefits from the company’s real-time customer transaction data.

“A lot of brands want a purchase-based audience segment and then go to a third-party aggregator to build it,” Kigel says. “We know that first-party data leads to better performance. We know customers and what they buy and their attributes. We can target them directly with personalized messages or use them to model an audience that we can activate through a wide spectrum of channels.”

For example, Walgreens recently helped a pharmaceutical company promote the switch of a prescription-only product to an over-the-counter (OTC) brand. Walgreens used a combination of retail and pharmacy data — complying with HIPAA privacy rules — to gauge which audiences would be most likely to purchase the OTC offering.

“We then activated a campaign with a number of channels, including programmatically. In this case, we had our own measurement through transaction data and could see a true incremental uplift,” Kigel says. “Because we have a direct relationship with customers and can monitor purchases that happen both in-store and online, we can attribute purchases to media activation.”

One indication of the interest WAG is generating is that its landing page has had more than 10,000 visits since it rolled out late last year — a substantial audience for what is technically a B2B site.

Walgreens is not alone in expanding its in-house advertising capabilities. Walmart recently reimagined its ad-sales group, Walmart Media Group, to sell in-store ad space at checkouts and display screens.

Walmart is also implementing technology to empower brands that use the company’s data to sell to both in-store and online shoppers. Target and supermarket chain Kroger have also made investments aimed at leveraging shopper data to sell digital and in-store ads.

Maintaining an Outside Perspective

Hershey’s Baskin expects in-house agencies to take on even more responsibility. But there are limits to how much content can and should be produced within the company.

“We still feel committed to big agencies because they provide a perspective we can use,” Baskin says. “It’s hard to maintain your perspective of what the culture is like and how people are responding to our brands or to candy in general — or the world in general.”

Whether it’s expanded content development or the use of customer data to target and deliver personalized ads, one result of the expanding role of in-house agencies is putting marketing at the center of the table.

“Marketing leaders seek to drive greater personalization because we know it drives relevance and relevance drives performance and performance drives business outcomes,” Kigel says. “This accelerates the value of marketing back to the growth agenda and returns marketing to the forefront of being a business growth driver.”