Agencies, consultants battle for their share

Biblical melodrama, culinary conundrum, athletic cliffhanger. There are no shortage of metaphors for the ongoing turf war between agencies and management consultants....

Biblical melodrama, culinary conundrum, athletic cliffhanger. There are no shortage of metaphors for the ongoing turf war between agencies and management consultants.

Some liken the struggle to that of an ad industry David against the mighty management consultant Goliath.

Others say it’s more like a fight for sustenance. Agencies used to count on getting the entire marketing and media pie to themselves. Today, the slices of pie are getting smaller and smaller as emerging technologies fragment the media environment. Meanwhile, corporate consolidation is resulting in fewer and fewer clients making marketing decisions. The result? In an era when there’s less to go around, a feeding frenzy has broken out.

And then there’s the sports analogy. Ad agencies dropped the ball themselves, say clients and agency watchers, due to cutbacks and shortsightedness. So they shouldn’t be surprised to find other players running with it.

However the issue is framed, it’s a fact that in Canada and elsewhere, many management consulting firms now offer brand identity and strategic market planning to clients who once depended primarily on ad agencies for those services.

The problem hasn’t developed overnight. Downsizing prompted by the recession of the early ’90s did such deep damage that Bruce Philp, a partner at Toronto’s Garneau Würstlin Philp Brand Engineering, says ‘within a generation, agencies lost the ability to provide experienced, intelligent strategic counsel.’

Alan Middleton, marketing professor at Toronto’s York University, agrees. ‘Agencies haven’t been able to afford to grab the best graduate talent and they’re now abysmal at training the people they do hire. Proprietary research budgets were slashed. And the result is that many clients no longer look to agencies to do anything more than provide the words, the pictures, the media placement and maybe a bit of tactical input.’

That said, some clients are choosing to stick with ad agencies for overall strategic counsel. Among these is Sears Canada, which planned and executed the recent relaunch of Eatons with the help of its Toronto-based ad agency, Ammirati Puris. ‘We had complete confidence in them to pull it off,’ says Rick Brown, senior vice-president, strategic initiatives at Sears.

Ditto for Adams Canada, the confectionery division of Pfizer Canada.

‘We’re very happy with our long-time agencies, J. Walter Thompson and Bates Canada,’ says Adams marketing director Stan MacLachlan. ‘We depend upon on them to be full partners with us in establishing and building our brand equities.’

John Clinton, president and CEO of Toronto-based Grey Canada, says that was not the case with many clients of the magnitude of Kellogg and IBM. ‘Throughout the ’90s,’ he says, ‘it was ‘get in a consultant on this, get in a consultant on that.”

For the consultancies – companies such as Cap Gemini Ernst & Young (a separate entity from financial consulting firm Ernst & Young), KPMG, McKinsey & Co., Bain & Co. and Mandrake Management Consultants – adding marketing to their domain was a logical add-on to their core competencies.

‘What’s missing in the traditional advertising agency approach is what consultants are all about, which is overall business strategy,’ explains New York-based Carin Vanvuuren, director of client services for FutureBrand, the world’s largest brand consultancy (a status achieved through recent acquisitions by parent IPG Group of a slew of marketing, packaging and design firms).

‘Our starting point is addressing the client’s vision for its organization. Where does it want to go, who does it want to speak to, what business solutions need to be created before actually beginning to communicate?’

What further motivated some consultants to add marketing services to their portfolios, according to Middleton, was the need to combat a looming client shortfall ‘produced by a flattening demand curve in the [information technology]-based sector, where there had previously been sharp growth.’

And IT clients weren’t the only ones drifting out of consultants’ doors, says Vancouver-based Rob Whittle, president and COO of PJDDB Integrated (a division of Vancouver and Toronto-based ad agency Palmer Jarvis DDB).

‘Those that were most financially oriented had to cope with the loss of a lot of their accounting business since the advent of software programs and digital technology. No one needs to pay for an army of people to do spreadsheets anymore.’

Thus, while shopping for ways to shore up their bottom lines, consulting firms spied opportunity in the media revolution within the marketing world in recent years. A revolution wrought by technological innovations such as the Internet, plus a long-term trend that has seen advertising-heavy, mass media-based marketing strategies (print, television and radio) give way to below-the-line tactics. In fact, according to a recent report in the U.S. trade publication Adweek, as much as 70% of all marketing dollars are now spent on non-media communications, a reversal from a decade earlier.

Seeing the chance to provide overall strategic direction, many management consultancies made their move.

Take the giant McKinsey firm. ‘We had always done a lot of marketing strategy but, over the last five years, we’ve been moving deeper into branding and other aspects,’ says Dallas, Tex.-based David Court, head of McKinsey’s North American marketing group. ‘Clients were asking us to serve them in this area, so we purposely began building our capabilities.’

The result was a 150-member marketing division – including 28 brand specialists – spread over five cities, including Toronto. ‘Over half the branding team members have ad agency backgrounds,’ says Court, ‘because we need their skill sets to be strong on the idea and magic side of strategy.’

As consultancies like McKinsey, Bain and others have positioned themselves as marketing experts, their reputation for solid business savvy made them especially attractive partners to clients in the midst of an epiphany, says Middleton.

‘Marketers were recognizing quite starkly what under-investment in identity-building had caused – which was more commoditized brands, lower loyalty levels and vulnerability to price fluctuations.’

Small wonder, then, that consultancies are now routinely enjoying what some say the agencies have been losing – the respect and authority that produces ample face-time with the top brass.

‘Ad agencies today typically work with marketing managers, where strategy is [merely] executed, while consultants sit down with marketing VPs and other higher-ups who actually formulate business strategies,’ says Scott Hledin, strategic brand consultant at FutureBrand Canada.

In fact, adds McKinsey’s Court, in recent years, ‘branding has come very firmly into the CEO’s office,’ rather than being relegated further down the corporate pyramid.

So did agencies respond gracefully to the giants encroaching on their turf? Not exactly.

The feistiest counterattack came from Grey Canada, which beefed up its strategic capabilities in 1998 by launching a [now-defunct] subsidiary called War Paint. Others settled for dismissing their new management consulting competitors as strong on quantitative analysis but short on consumer insight and creativity.

‘Consultants often just seem to look in the rear-view mirror at what’s happened in the marketplace and then take a problem and try to line it up against their existing templates,’ says Bruce Philp.

‘At the end of the day,’ adds John Clinton, ‘stuff needs to get done. But what you end up with from a consulting engagement is not execution, it’s just a big, fat, expensive report.’

For many marketers, arguing about which direction the pendulum is swinging is beside the point. The future, they say, lies smack dab in the no-man’s-land between agencies and consultancies. So agencies had better get used to the idea.

Some consultancies and agencies are already starting to adapt – either working together on mutual accounts, or coming up with cutting-edge new business models, (see sidebar, below).

One thing is clear. Agencies aren’t simply going to allow themselves to be reduced to mere subcontractors without a fight. And consulting firms aren’t going to develop the creative wherewithal to fulfill all of a client’s needs.

At the end of the day, all parties agree, clients need top-notch strategic counsel from advisors who know what they’re doing – regardless of their professional disciplines. Marketing is not about just pushing product anymore. And creating dynamic advertising is only one component of helping clients achieve brand differentiation and correspondingly rosy bottom-line results.

Which may explain why Rob Whittle of PJDDB says debate about the purported right-brain creativity of agencies versus the left-brain methods of consultants is outmoded.

‘Both art and science are needed in the complex business we’re in. You use scientific tools to identify targets and key drivers of brand choice, and then you translate that into an art form that gets the customer’s attention.’

Sidebar: Three new service models aim to provide one-stop shopping

Three new types of service model are emerging as agencies and management consultants battle for marketing ground. Each is attempting to establish the resources needed to produce the depth of analysis and breadth of solutions neither possessed previously.

The ultimate goal? Offering clients one-stop shopping for all their brand equity needs.

• Management consultancies are adding branding, consumer and design skill sets by hiring new staff and acquiring smaller companies. While they’ll often spin these off into new divisions, they generally stop short of doing creative. McKinsey & Co. and IPG Group’s FutureBrand epitomize this trend.

• Agencies are strengthening their strategic counselling skills by assembling stables of well-trained professionals with a diverse range of experience to develop integrated marketing solutions. For evidence of this trend, look no further than PJDDB Integrated; Omnicom’s Diversified Agency Services unit; Grey Global Group; and WPP Group, which recently acquired three U.S. consulting companies.

• Ad hoc brain trusts and mission-specific coalitions are working together on behalf of mutual clients. For example, Toronto agencies Ammirati Puris and Garneau Würstlin Philp Brand Engineering have both partnered with consultants on recent projects. TP