Toronto-based Mattamy Homes Canada announced Tuesday that it was working with theturnlab to create a new in-house agency.

“As our brand continues to face dynamic market conditions and digital disruption, we had to ask ourselves: how can we do this better and remain ahead of the competition?” said Brad Carr, CEO of Mattamy Homes Canada. Mattamy says it is the largest private homebuilders in North America. “And after much research, in partnership with theturnlab, we believe the answer is a new ad agency model.”

While in-housing has been a hot-button topic within the industry for a few years, this model is noteworthy because of its seemingly hybrid nature: an in-house agency managed by an agency.

But theturnlab co-founder Howard Chang said his agency does not resemble traditional shops. Until mid-2018, it was a full-service integrated shop called Top Drawer Creative. Since then, it has been more focused on technology, research and consulting, while still doing some creative and communications.

Theturnlab is about experimenting and new models that better meet modern marketer needs, said Chang. It’s why it put “lab” in the name, and it’s what it is doing for Mattamy.

Mattamy’s vice-president of marketing, Sepideh Morshedizadeh, said that theturnlab has created “a customized approach that promises more of the right full-time person-hours on our business, at a lower net cost.”

The Message talked to Chang to understand the model and how it benefits both parties.

How did you win this? It started with consumer research that theturnlab was doing on attitudes about home ownership and implications for the homebuilding industry.

“One of the big things we identified is that millennials are not looking to put money into housing, they’re looking to put money into other things,” said Chang. He got a 30-minute meeting with Mattamy CEO Brad Carr, who was impressed enough to engage theturnlab for a series of research-based, customer experience and development projects targeting the millennial market.

That work led to another discussion: “[Carr] said ‘We don’t think the traditional AOR model is working for us. Nothing negative about our incumbent agency, we just don’t think the model works,’” said Chang.

Carr asked theturnlab to audit Mattamy’s marketing and advertising operation to look for things that could be improved, and come up with a better model. “We never intended to pitch them to be an AOR—that’s not really what theturnlab is about anymore—but when he gave us the opportunity to design a new model, that was exciting,” said Chang.

What was wrong with the AOR model? In some ways, the shortcomings were representative of any AOR relationship, and in others they were a result of Mattamy’s unique requirements.

Mattamy needed a dedicated team that could focus on higher-level work like research, planning and brand strategy, combined with a lot of retail advertising output, usually on very tight timelines. “They’re this interesting combination of a lot of strategic horsepower… plus they need an always on service mode,” said Chang. “It was challenging, and I think it’d be challenging for any AOR to deliver on that kind of retail model.”

And the new model? “Essentially what they’ve done is outsourced their in-house agency to us on a cost-plus model,” Chang said. Creating an in-house agency is hard for a number of reasons—from recruitment and hiring, to training and day-to-day management. “It is a giant hassle for a lot companies to build that capability in-house, so we said it feels like something you need potentially as many as a dozen full time employees people working on the business.

“We said… ‘We’ll create that in-house agency, all dedicated to you, but we’ll manage them; we’ll train them; we’ll recruit them; and we’ll replace them and we’ll charge you a cost on top of their salary.’”

Mattamy is paying the salary of the agency staff as they would if they were working within the company, plus a premium to have them managed by theturnlab. An additional retainer gives that in-house team access to theturnlab’s own senior level expertise in research, digital consulting, media, planning etc. But if an agency’s hourly rate is typically in the $150 range, or three or four times the employee salary, this model is much less, said Chang.

There will be some additional project work beyond the scope of the agreement, produced on an ad hoc basis, “but the agreement covers 90% of their needs essentially,” said Chang.

If they’re in your agency working on Mattamy and working with you when needed, how is that different than an AOR?

“The difference is that for client the size of Mattamy, there’s never going to be a situation where an agency can dedicate, let’s say, 12 people to the business without charging millions of millions of dollars,” said Chang. “So this is a more cost efficient model because it’s strictly cost-plus. They pay for 100% of their time, plus a markup.”

The other key difference is that the in-house team of 10 or 12 people work on Mattamy all the time, whereas in a typical AOR arrangement the work gets shared by a larger group of people who also work on other accounts. “And so you lack that continuous intellectual property,” says Chang.

It’s common in an AOR relationship for the client to brief someone about a project and then the work gets done by someone else in the agency. That’s a problem for Mattamy. “They do act like a retailer, so it is a very fast turnaround,” said Chang. “It can get very tactical and they want to make sure that all the planning they want gets translated smoothly and consistently through to execution, which this model is designed to do much better. There’s a full-time planner, who works closely with the account team, which is also on the business full-time, and the creative team, so that there are as few speed bumps as possible between the thinking and the doing.”

So Mattamy gets… Agency people working exclusively on their brand; it pays only for those people, plus a markup for theturnlab. It’s a model that could represent a significant savings from what it would typically pay in yearly agency fees.

And theturnlab gets… Smaller margins than a typical AOR, but with less risk, says Chang. “We know exactly what the profitability on these people are for us. And it is a profitability that we can absolutely work with.”