Why Are Brands Rethinking Their Approach To Using Agencies?

Many brands are re-evaluating their relationships with agencies.

In a 2024 report, 40% of companies surveyed said they were likely to switch from their primary agency in the next six months. Although down 15% year-on-year, it’s 33% up from 2021 and a signal that traditional client-agency models are under pressure.

Tightening budgets, the rise of in-house marketing teams, and evolving expectations are all driving brands to rethink how they use agencies.

Below is a breakdown of why this change is happening and what it means for both brands and agencies.

The Continued Rise Of In-Housing

Millions of businesses are bringing their once “agency only” services in-house and building specialist teams that handle strategic tasks like brand strategy, creative, or media planning.

Many brands no longer rely on external agencies for core marketing strategy; they’re developing that expertise internally.

So, why is this, and why are brands that saw agencies as a necessity now not needing this specialist arm of their business?

There’s a laundry list of reasons that are unique to each business, such as control, speed, efficiency, and expertise. However, the No. 1 driver is cost, with 83% of brands citing cost efficiency as the key reason for expanding their in-house teams.

If we think back over the last 30 years, the typical agency model hasn’t really changed. Agencies price based on several factors (percentage of media spend, deliverables, etc.) and then, once the business is won, apportion the fee downwards to be as efficient as possible. Marketing Week backs this up with brands stating that a big frustration is meeting a team during pitch, and a different, lesser-qualified team post-pitch.

What this means for brands is that they don’t receive the expertise promised, and may only get a small percentage of their fee allocated to the specialist, experienced teams, the ones who were involved in the pitch but then took a back seat.

In addition to this, a survey by WFA and The Observatory International found that motivators to move away from agency support included the desire for more agile processes (76%), better integration with the brand (59%), and deeper internal brand knowledge (59%).

So, has this move in-house impacted quality with specialist agencies out of the picture? Far from it. In many cases, it has improved with 86% of brands saying they’re satisfied with their in-house teams’ output, with one-third being completely satisfied, up sharply from 23% in 2020.

From an agency side, this may seem like doom and gloom. However, most brands still use agencies for certain needs, and it’s this shift in needs that offers a huge opportunity for specialist agencies to partner with brands to drive real change rather than being brought on to coast a service such as PPC or SEO along for 12 months.

Demand For Greater Value And Actual ROI

Another reason brands are rethinking agency relationships is a heightened focus on value and performance.

With economic uncertainty, marketing budgets under strain, and click costs increasing year-over-year, every dollar spent on an agency must be justified.

The Setup survey found that dissatisfaction with value was the No. 1 reason clients ended an agency relationship, moving up from No. 2 the year before, which was dissatisfaction with strategic approach.

Brands feel they’re not getting enough bang for their buck with agencies still bringing strong ideas to the table, but often charging too much to justify the return, and the actual execution of these ideas being few and far between, often getting forgotten about with the day-to-day management of accounts.

Budget pressures from the C-suite are further intensifying this scrutiny, and when CEOs and CFOs demand leaner spending, CMOs often look to agency fees as a place to trim the fat, and if there’s no wiggle room from the agency, more often than not, marketing teams will be directed to find a cheaper supplier.

Gartner’s CMO survey confirmed this, stating that 39% of leaders often look to agency fees as a place to trim the fat when looking to lean up.

When you take this, combined with the frustrations around agility, efficiency, integration, and most importantly, results, it starts to build a picture of why brands are cutting agencies more every year.

The days of big retainers with murky results are numbered, and brands are quicker to pull the plug if results and value aren’t there.

For agencies, the need to prove worth continuously has never been so important.

Speaking up, having a voice, sharing expertise, and challenging the clients they work for – a cliche that has long been part of the agency world, but rarely acted on.

Take paid media agencies, for example. They need to be digging deeper and having conversations around profitability, return rates, and LTV over short-term metrics that the marketing team doesn’t need regurgitating to them.

These conversations are the seeds that grow into established, long-term relationships, and the agencies with proven expertise will still win, as they will be proving their worth every single day and making themselves irreplaceable.

Fragmented Partnerships, Project-Based Work, And The Shortening Of Terms

Along with seeking more value, brands are changing how they engage agencies.

The classic model of a single agency handling all aspects of marketing has been fading (outside of the big six).

Many advertisers now maintain multiple agency relationships for different needs, for example, one shop for creative, another for media buying, others for SEO, social, PR, etc.

This fragmentation means the primary agency’s role is smaller than it was in the past, arguably making the role of a “sole lead agency” not as relevant this year as it once was.

If a brand can use a small specialized agency/consultancy for paid media where they can guarantee they will have an experienced account lead actually doing the work, then another for SEO, content, etc, they may not even need to invest the full budget yet get a better quality of work and a closer relationship with the partner they work with.

Leaning into this is the growth in project-based work vs. the traditional long-term retainer.

Instead of paying a single agency monthly to be on call for all needs, brands are bringing in agencies for defined projects or campaigns, essentially “auditioning” agencies through short-term work with/without a goal to find a long-term partner.

As industry veteran Avi Dan noted, “This shift from AOR to project-by-project is one of the most disruptive trends in the agency landscape.”

It gives clients more flexibility to test different partners and skills while pressuring agencies to perform in each project or risk not getting the next one.

There are pros and cons to both sides: A clear con being the management of multiple agency partners (and periodic Request For Proposal (RFPs) for new projects) being time-consuming, and another with brands risking losing the deep brand knowledge that a long-term agency partner accumulates.

Ultimately, the requirements depend on many factors specific to each brand, and the shift towards more fluid and experimental relationships with agencies allows for a more hand-picked approach to finding partners as and when they are needed, often with the underlying goal of finding a truly great agency to build a relationship with in the long-term.

Evolving Expectations Of Agency Partners

Beyond structural changes, brands’ expectations of their agencies have evolved.

It’s no longer enough for an agency to simply execute campaigns; clients want a true strategic partner.

According to the 2023 Setup survey, “chemistry” is the No. 1 factor clients look for when hiring an agency partner.

As much as a flashy portfolio or specialized expertise might be second to none, marketers are prioritizing cultural fit, communication, and a genuine connection as key pillars that are essential to execute great work.

Clear communication is absolutely key: no sugarcoating, hiding behind numbers, or excuses.

Straight talking, respectful and honest, three features that may not be the first three to spring to mind if brands were asked about their experience with agencies, but three that are critical.

This is a change, and a good change. One that gets spoken about in pitches and in my experience, is rarely executed as agencies fear rocking the boat when things are not going to plan, which in reality is the best time to speak honestly with clients.

Leaning into this is the need for agencies to build a deeper business understanding of the industry, business model, and goals, and not just ticking boxes and managing accounts with a short-term view that doesn’t break the boundaries of forecasts and KPIs.

I’ve spoken with many brands that have a sour taste for agencies after paying enormous fees to have junior teams managing their paid media campaigns.

Situations where 100% of their resource were invested in the day-to-day account management with no thought for measurement, buying, forecasting, attribution, CRO, modeling, etc, and this is on some of the highest spending accounts in the world.

Agencies that collaborate well with in-house marketers, respecting processes, share knowledge, and complement internal capabilities are much more likely to retain their client relationships and build upon their client base with this ethos at the heart of everything.

The Bottom Line

Brands are rethinking their approach to agencies because the marketing landscape demands it.

Faster turnarounds, tighter budgets, and more data-driven decision-making favor a model where brands take more control.

By building in-house teams, choosing smaller, more specialized partners, and holding agencies to higher performance standards, companies aim to achieve better agility and return on investment (ROI).

This doesn’t mean agencies are obsolete, far from it; it means the traditional agency model has changed.

What it means is that agencies must adapt to serve a new role: specialized, high-value partners who augment a brand’s own capabilities.

Brands want transparency and are tired of paying for cookie-cutter approaches to media buying, SEO, PR, and more, riding a contract out, and then moving to the next one.

Agencies need to prove the impact, dig deeper, and lead with accountability.

Now is the time for brands to define the value they want, and agencies to prove they can deliver it.

Done right, this creates leaner, smarter, and more productive partnerships that cut through noise and deliver outcomes that matter.

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