It is a topsy-turvy world: Management consultants have gotten better at marketing themselves than ad executives.
Companies used to rely on ads to promote brands. Now they have more direct ways to engage with customers. Luxury groups like Gucci have rapidly shifted their focus from Vogue to Instagram, while consumer giants like
which bought subscription-based razor merchant Dollar Shave Club, are investing heavily in e-commerce.
This accelerating shift is a headache for the traditional pillars of the ad industry: agency holding companies like WPP and
Not only is it hard to manage culturally—it is easier to get would-be Mad Men motivated by a new Super Bowl ad than a customer relationship management project —but it has also brought them face to face with deep-pocketed new competitors, notably consultancies
Some agency groups are bulking up for the fight, while others are slimming down. WPP wants to merge Young & Rubicam, a struggling traditional ad agency, with digital peer VML, and may also sell Kantar, the group’s ailing data business.
this year paid $2.3 billion for the marketing operation of Acxiom Corp, which has the kind of individualized consumer data Kantar struggles to match. Omnicom has been selling a steady stream of underperforming businesses, while
wants to spend between €300 million and €500 million a year on bolt-on acquisitions.
Consultants compete for large capital-spending projects such as website redesigns rather than classic ad dollars. Accenture wouldn’t be interested in pitching for a TV car ad, but it would be interested in helping a company reinvent the car-buying experience, says Brian Whipple, chief executive of the company’s marketing business, Accenture Interactive.
This is where the growth is. Accenture’s financial results don’t split out Interactive, but it probably grew by well over 20% in the year through August. It is also where the scale is, thanks to a bias toward big projects. Accenture comes top of ad-industry rankings of the largest digital networks.
As agency groups and consultancies rub shoulders, investors can expect plenty of debate about their relative strengths. Agency executives argue that consultancies don’t have the creative flair that underpins all good marketing. Consultancies say they are trusted advisers—a dig at agency groups, whose media-buying arms have come under fire from advertisers for inappropriate ad placement and undisclosed fees.
In addition to untainted corporate brands, consultancies have the advantage of relationships with more senior people, typically chief executives and chief financial officers. Agency groups answer to chief marketing officers, who often have to work alongside chief procurement officers looking to cut costs. Working on efficiency projects with the people who hold companies’ purse strings may allow consultants to cross sell big marketing projects.
From artificial intelligence to Amazon’s Alexa, digital technology has plenty more capacity to disrupt the way companies engage with consumers. It is hard to see the power of the consultants’ tech-heavy pitch getting any weaker. Agency groups have little choice but to follow where consultants lead.
REVOLUTION IN THE AD INDUSTRY
This column is part three of a Heard on the Street series chronicling how digital technology has gone from being the advertising industry’s best friend to its worst foe.
Write to Stephen Wilmot at email@example.com