Fair or Not, In-House Agencies Take Heat for Pepsi Gaffe

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Pepsi's Kendall Jenner ad that was pulled amid criticism
Pepsi's Kendall Jenner ad that was pulled amid criticism Credit: Pepsi
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The Pepsi-Kendall Jenner ad fiasco was barely a few hours old when some people at ad agencies targeted a culprit: Pepsi used an in-house shop, which in the eyes of many led to the marketing mishap.

The criticism was particularly sharp on a Reddit thread dedicated to the ad. "In-house just doesn't cut it, as there are too few people in the chain saying 'no.' Advertisers clearly don't have the self-discipline," a self-described creative from New York stated. "In-house creative directors are jaded, tired old-timers who simply want to get paid and go home."

But the issue is a little more nuanced and complex than that.

Certainly Pepsi could have benefited from some external perspective that potentially could have saved them from unleashing the spot, which has been widely ridiculed for co-opting protest movements for commercial gain. But external agencies are not a cure-all. "I've seen good agencies make work that was just as bad [as Pepsi's]," said one high-ranking executive at a major ad agency. Blaming in-house agencies is "overly simplistic," said Brian Wieser, an analyst at Pivotal Research Group who covers advertising. Agencies can also be guilty of groupthink or being overly concerned with pleasing a client, he added.

Indeed, highly-regarded shops have been involved in some high-profile gaffes in recent years, some of which have failed on advertising's biggest stage -- the Super Bowl. Who can forget Nationwide's widely mocked "dead boy" ad by Ogilvy that aired in the 2015 game? Groupon made a major gaffe during the 2011 Super Bowl with an ad that tried to get laughs by juxtaposing injustice in Tibet to a deal on fish curry. It was by CP&B and directed by Christopher Guest, who has plenty of hits under his belt.

Still, several agency executives said that clients can reduce the chances of failure by bringing in some external perspective. Agencies provide a more thorough check against ideas that might not land well, said Chris Loretto, executive vice president at Denver-based Digital First Media, which operates digital marketing agency Adtaxi.

"I think it's always better to have diversified thinking in any context, and specifically when you're looking at a strategic-type campaign that really focuses potentially globally," he said. "Can something go wrong with an external agency? It absolutely still can," he added. But "I think the likelihood is reduced for sure. As you bring in more outside thinking or additional thoughts and folks who aren't as passionately connected to the brand on a day-to day basis, I think you end up usually with better outcomes."

Echo chambers and big-footing clients
Keeping creative work in-house means a company might miss out on crucial pushback it could receive from an external agency, said one industry executive. "Every organization has its own version of an echo chamber. We have one, everyone has one," this person said. But when you don't have other points of view, "you lose that check and balance, which is so crucial to hitting the right note culturally and hitting the right tone. When I look at what Pepsi did, I actually think it was well-intentioned. They were trying to do something positive, but they hit the wrong note and there was no backstop to put pressure on that note. And I think we're seeing the consequences of that."

Of course, no matter what an agency recommends, clients have the final say. And one high-ranking agency executive complained that clients are overplaying their hand. "What I have seen change a lot in the last 10 years is clients inserting themselves way too far in the creative process," this person said. "They think they can write and direct and come up with ideas. And while that is true, very few demonstrate the sustained ability to do world class work. And so you get product and brand communication and ideas that are lacking."

And when ads are made "with a heavy client hand," the "problem is agencies don't push back and we get less effective work each year. It's a trend and it's not slowing down."

Pepsi's ad was created by PepsiCo's in-house content creation arm, Creators League Studio, which is overseen by Brad Jakeman, president of PepsiCo's global beverage group; and Kristin Patrick, senior VP-global brand development. The studio's business model is to bring in writers, art directors, cinematographers and other talent on an as-needed basis. Credits on the Kendall Jenner ad include Pete Kasko as creative director, Michael Bernard as director, and film production by Picture Farm.

It is unclear if Pepsi sought outside counsel, or tested the ad with consumer panels before releasing the spot because marketer has declined interviews about the topic. In a statement issued on April 5 when the brand pulled the ad, the brand stated that "Pepsi was trying to project a global message of unity, peace and understanding. Clearly we missed the mark, and we apologize."

The upsides to in-house
In-house shops have plenty of upsides, including cost savings and a potentially tighter link with company needs. And there are numerous examples of great work emerging from internal shops. Consider Intel, which has experienced a marketing rebirth in part to work from its in-house shop, which is called Agency Inside.

"We're sitting in the catbird's seat," Steve Fund, Intel's senior VP-chief marketing, told Ad Age earlier this year. "We have visibility to all the things people are doing with our technology—how it works, and how to apply it—that an external agency can never have. Being on the inside lets us stay on top." But one of Agency Inside's strengths is that it works seamlessly with outside agencies such as McGarryBowen and TBWAChiatDay.

Coca-Cola Co., which works with the likes of Wieden & Kennedy, Ogilvy and McCann, quietly established an internal agency called KO:OP in 2015. Last month, the agency created its first TV ad, a spot for Mello Yello that tapped into the brand's Nascar roots.

One impetus of establishing the group was to bolster Coke's internal know-how around emerging marketing tactics, like using virtual reality, said Brynn Bardacke, Coke's VP for content and creative excellence in North America, who oversees the group. "We are embedding creative thinking into the business by hiring creative people from outside the company to come and work directly for us," she said in an interview last month. Another advantage is "having people in house that can join meetings that we would never otherwise ask an external agency partner to go participate in." Still, she stressed that "this absolutely is not an attempt to replace or compete with [external] agency partners."

PepsiCo, too, has continued to use outside agencies. The company has a long-running relationship with Omnicom Group. But the Creator's League Studio has established itself as a significant force inside the company. The shop, for instance, was behind the Pepsi-branded Tony Bennett lead-in to this year's Pepsi-sponsored Super Bowl halftime show starring Lady Gaga. The group has also taken the lead on a project to make a feature film based on a Pepsi ad character: Uncle Drew, who is played by NBA star Kyrie Irving.

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