Marketing Organization
Delivering More Effective Marketing Budgets and Actionable Dashboards

Paying for In-House Creative: Chargeback vs. Funded Models

Matt Ferguson
May 01, 2017

image

Matt Ferguson, Managing Director, Eliassen Group

Matt Ferguson, Managing Director, Eliassen Group

There are many great reasons that I champion for bringing your creative in-house – internal teams are driven by the same passion and purpose as your entire organization, speed to market for campaigns increase and – along with it – your ability to be more nimble and reactive, you remove your reliance on agencies, and cost savings can increase dramatically, just to name a few. In past articles, I’ve delved into each of these considerations a bit more to help marketers evaluate whether it’s an initiative that is right for their company – and to help make a convincing argument for your Board.

But what happens once you’ve already received the green light?

First thing’s first, it’s of the utmost importance to have political strength and a voice in your C-Suite. You’ll need their respect and trust in order to build an environment for creatives to thrive in, get budgets approved and be a conduit for open communication. Trust me, great communication is key to making sure that the reasons and objectives for having in-house creative are both explicitly stated and aligned with the overarching company goals. And your leadership team will be the ones to help you enforce these.

Finally, there is the question of how this will all be funded year after year. During a recent Virtual Roundtable, my peers and I honed in on this question and compared the pros and cons of an internal agency that is funded versus one that operates with a chargeback model.

The Funded Model

The funded model is pretty straightforward: Your creative team will receive a set budget based on what the brand is expecting to work with, deliverables around the brand goals are established and a timeframe is decided upon. This allows the company to know exactly what finances have been allocated toward creative and get a clear picture of the value the agency is providing the company.

However, this also means that finite resources need to be tightly monitored to avoid scope creep. I’ve seen some companies struggle with setting boundaries for what their creative team will and will not be working on. But without doing this, you run the risk of multiple requests coming from all angles and an overworked and undervalued creative team – the ‘free ice cream truck’ idea, as one member pointed out.

To combat this problem, it comes back to the communication aspect that I had mentioned. Objectives need to be defined and agreed upon, with contingency plans thought out in advance. For example, what will your company do about surge needs? Will there be co-funding for these, will your creative team outsource to freelancers, or will the request simply be denied?

When you aren’t spending money as you go, it really forces companies and teams to go down the path of due diligence. This is an opportunity to be more intentional about what you are doing and how you are doing it, giving careful consideration to how your agency’s time will be spent on initiatives that move the brand forward. Gone are the days of just throwing things at the wall and seeing what sticks. People and audiences are overwhelmed with content as it is, and this method is only throwing away company dollars.

Finally, I recommend having your creative agency internally pitch and sell their campaigns at the end of each 6-month funding period to revisit campaigns and budgets and re-establish the value your creative team is bringing to the company.

The Chargeback Model

With the chargeback model, money is an expense versus a capital investment. It’s a shifted mindset and approach for accomplishing the same end goal but allows for a smaller operating budget and more scalability.

I find it to be a bit more difficult to push back on projects in this model because, even if a particular initiative doesn’t drive value for the brand, departments will say, “but we are paying for it, so do it.” And that’s how you end up with videos of company dinner parties. While there will inevitably be a little less control of the type of work coming to your agency here, it’s up to CMOs and the Board to make sure that the organization understands that the agency is more than a group of people that simply do admin work better.

Whether funded or chargeback, the most important aspect of a successful agency is to show the value of your in-house agency. For chargeback specifically, that means being diligent with your rate card, building a mission, defining services and providing cost avoidance where you can.

At the end of the day, marketers need to become a partner to the rest of the company instead of simply recreating the agency model in your own organization and department. Details need to be discussed before the creative team puts the first pen to paper, not as problems come up, because open communication, clear objectives and stellar output happen when the walls are dropped and goals are aligned at all levels.

Refer a Friend