How Consulting Firms Build Advantages Over Traditional Advertising Agencies

Until recently, consultancies operated almost exclusively in the customer interaction side of marketing, which was reflected in their acquisitions of agencies focused on web and mobile development and user experience design.  That has changed.  In 2016, IBM iX acquired Resource/Ammirati, Deloitte Digital acquired Heat, and PwC Digital Services bought Fluid.  Each of these agencies is considered a leader in agile, creative design. Accenture Interactive has been even more aggressive, buying Karmarama in 2016 and Brand Learning and Wire Stone in 2017 to expand its creative platform.  This pace of acquisition activity is expected to continue and potentially escalate; some industry insiders anticipate the acquisition of one of the Big Six by a consultancy in the near future.

While consulting firms and advertising agencies offer increasingly similar services, important differences remain.  Despite the acquisition push by consultancies, agencies maintain a distinct advantage in creative reputation and a history of success in message-based advertising.  As once-common "agency of record" deals dwindle, traditional agencies must move to become more agile, breaking down departmental divisions and developing content on faster timelines.  Consultancies, by contrast, come equipped with stronger business and data analytics and a broader base of client solutions resources.  They bring a focus on holistic business goals and customer experiences aimed at building brand loyalty through constructive interactions rather than TV spots and other traditional messaging.  Consulting firms also have a distinct advantage in originating business; while agencies generally pitch costly campaigns to CMOs to win business, consultancies use CEO and board relationships to gain top-down access and pitch broader, sometimes organization-wide projects as cost-saving measures -- for a fee, of course.  While these projects may include traditional advertisements, they will typically focus on customer experience products such as digital content management systems for stores (e.g. adaptive advertising signage, ordering kiosks), improved mobile and web interfaces, and loyalty programs.

Consultancies are beginning to encroach on another domain of traditional advertising and marketing agencies: media buying.  Agencies frequently package creative and media buying assignments, which has led to concerns about conflicts of interest and transparency.  These concerns, which are especially pronounced as they relate to online ad placement, have driven many advertisers to take stronger control of media-buying practices. Consultancies, with their broader business advisory capabilities, are well positioned to help.  Some, like Deloitte Digital, provide objective media buying services as an alternative to potentially conflicted media buying services from advertising agencies.  Others, like PwC Digital Services, offer auditing services, or "media assurance," to ensure that ad content appears on the right websites, at the right times, accompanying the right content. Accenture Interactive is helping companies build in-house media buying, allowing advertisers to bypass traditional media buyers altogether and guarantee transparency in costs, placement and effectiveness.

These broad industry trends are starting to manifest in industry earnings.  WPP, the world's largest advertising company, recently reported a surprising decline in ad buying from the consumer goods sector.  On August 23, after three consecutive years of 3% or better sales growth, WPP reported a 0.5% first-half sales contraction.  Its stock price has fallen 14% in the weeks since.  Given WPP's reputation as a consumer goods industry bellwether, this drop is troubling for other traditional agencies.  Consumer goods manufacturers -- traditionally some of the largest advertisers -- are facing a host of pressures, from a Millennial preference for healthier, locally sourced products to the intervention of activist investors.  They have responded by cutting costs, particularly on advertising.  Many of these manufacturers are shifting focus to trendy, low-cost social media campaigns and online influencers, frequently at the behest of strategy consultants.

The pressures facing the traditional agency model are evident, and it remains to be seen how or if the agencies will cope.  Maybe they will become more agile, rapidly deploying their considerable creative resources to address their clients' needs.  Maybe they will follow the consultancy model, diversifying their business lines to create value in more situations.  Maybe, as the agencies have long claimed, the power of creative will win out over the brawn of their business strategy-focused competitors.  It is more likely, however, that the consultancies will prove capable of creating and delivering advertising content more accurately and effectively than the agencies ever could.

Click the social buttons above or below to share this story with your friends and colleagues.

The opinions and points of view expressed in this content are exclusively the views of the author and/or subject(s) and do not necessarily represent the views of MediaVillage.com/MyersBizNet, Inc. management or associated writers.