Agencies hit back at consultancies, offering strategic services upstream
As management consultancies vie for big brands, agencies are beefing up their business acumen to stay in the game.
Correction: An earlier version of this story included a reference to the wrong Attune Insights, a consulting division of Baru. The article has been corrected.
Ad agencies are no longer just struggling against competing shops for business. Management consultancies like Accenture, IBM and Deloitte are more often attracting big brands by offering creative services. Increasingly, agencies are hitting back.
Brands, which are looking to drive efficiency and profits from their marketing as well as to simplify efforts in an ever-more complex digital ecosystem, are willing to throw their business to consultants. In fact, more than 60% of marketers are now open to handing consultants business previously handled by agencies, according to a report from Forrester Research.
In response, agencies are starting to offer their own management services. However, hiring employees with the necessary skills could prove to be an unneeded financial burden. Slow to adopt to some of the changes brought about by the growth in digital marketing, traditional agencies find themselves racing against the clock to turnaround declining revenues. Accenture's recent acceleration of its acquisition strategy only adds more salt on the wound.
"Agencies should be worried because clients have performance problems and consulting companies are built to solve performance problems," Michael Farmer, president of Farmer & Company and author of the book "Madison Avenue Manslaughter" told Marketing Dive.
"People hanging on to creativity as a special capability are not paying attention to what their clients need," he added. "They can hang on to that lifeboat as long as they want but they should know it has a hole in it."
Agencies swim upstream
Many agencies are not taking these developments lightly. The list of creative shops bringing in their own consultancy expertise includes R/GA, Publicis.Sapient — which recently teamed with tech consultancy Capgemini to help McDonald's with digital transformation — Dentsu's 360i and Publicis' Zenith.
Baru, an integrated marketing and media agency, recently launched a new consulting division called Attune Insights, which promises on its website to create "audience-inclusive strategies for today’s diverse marketplace." Playing on its strength as an agency, the company pushes "actionable" services in research and strategy.
Baru's founder and CEO Elizabeth Barrutia said the move into consulting came from client demand. Clients including Disney suggested that if Baru could provide more insights, then it could be part of the strategic planning from a much earlier point in the process.
"Many of our clients are wanting to go much deeper than just a services model," Barrutia said. "They want thought leadership. We wanted to provide these complementary services to our services model which function together under one roof."
Other agencies are getting into consulting through acquisition. In March, independent Kansas City agency Barkley acquired St. Louis-based XperienceLab, a consultancy firm focused on experience strategy and design. The acquisition came about after the two companies had partnered on several projects. Dan Fromm, president of Barkley, said capability was the biggest driver behind the acquisition, as the agency was looking to provide additional, more upstream services.
Fromm said the move didn't happen overnight and came about organically. The agency has been offering proprietary research and consulting services for clients as needed for almost a decade. Fromm said agencies are better positioned to deliver recommendations and follow through on them because agencies are designed to create actionable work as opposed to just sharing opinions. He also pointed out that agencies are constantly on deadline and are built to turn out work in a timely fashion, a competitive advantage to monolithic consultancies, which are known for their slow turnaround times.
Providing connective tissue
Ultimately, agencies are looking to improve what they do best and expand on their services to be more attractive to clients, not to fundamentally change how they function.
"We are not looking to become a consultancy, the same way Deloitte is not looking to become an agency," Fromm said. "It is more about creating the connective tissue in certain situations to better serve our customers."
Smaller agencies that offer in-house consultancies also sell themselves on integration.
"Large consultancies go in and buy a creative agency and a digital analytics company, and yet many times they are working in separate buildings and they are very siloed," Barrutia said. "So the barrier to true solidity still exists, which is not a great client experience, because it doesn't influence customer behavior."
Baru's small size could help it overcome this issue. Barrutia, who leads both the consultancy services and creative services at her agency, said that all team members are trained to be cross-functional as the agency focuses on agility and being nimble.
"They work together very synergistically and are complementary services to each other," Barrutia said.
Still, it could be an uphill battle for ad agencies when it comes to attracting the right talent as they expand into new areas. Farmer said these companies can't gain consulting skills as easily as consulting firms can acquire creative capabilities, since agencies are challenged by "inferior economics." He estimates that agencies earn on average about 2.2x the cost of the people on the account, whereas consultancies rake in 5x the cost of consultants on an account. With the hefty salaries that consultants demand, Farmer says it's not that easy for ad agencies to go out and hire consultants or MBA graduates and bring them into a culture in which data analysis isn't as highly regarded.
"Most agencies have a policy against hiring MBAs because they think they don't fit into the creative environment," he said. "And even if they could attract people with this skill set and offer the higher salaries, then there could be resentment in the agency once word gets out about how much these people are paid."