By Penry Price, vice-president of LinkedIn Marketing Solutions
As marketing becomes increasingly driven by data and technology, ad agencies are having to compete for business against a newfound rival: consulting firms such as Accenture and Deloitte. While this tension has been brewing for a few years, it’s now reaching fever pitch. Deloitte has acquired a dozen creative agencies, while, last year, Accenture Digital was named the largest and fastest-growing digital agency network.
Ad agencies need to respond; what was once a pending threat to their business model is now very real. To see how consultancies are giving traditional agencies a run for their money, look no further than Del Monte Food’s hiring of Epsilon, a data-based consultancy, as its US agency of record.
CMOs now understand that a data-led strategy – not creative alone – is driving top-line growth. Data enables companies to discover customer insights and innovate products accordingly. It’s also key to creating an outstanding customer experience that is both individualized and scalable.
The business models of consulting and creative agencies are converging. While consultants, who have deep backgrounds in business strategy and enterprise technology, are adding creative agencies to their arsenal of solutions, large ad agencies are expanding their offerings too.
Omnicom, for example, created Hearts & Science, an integrated digital agency that uses technology to scale customer relationships. Since its formation this year, it has acquired Proctor & Gamble and AT&T as customers. Agency networks such as Publicis Groupe and WPP have also been rolling out their own consulting shops for some time, which can open the door to additional creative revenue and wider margins. Agencies that don’t have in-house consulting will need to show that they understand business strategy and the role of technology in marketing to keep pace with consulting firms. Creativity will continue to be essential to marketing success, but it’s just a part of the solution businesses need, not the solution.
Data is a key tool for consultants and it needs to become one for creative strategists too. In the days of one-size-fits-all marketing, CMOs simply asked: “What’s the best way to boost sales?” Raising awareness of the product was typically the answer and the best tactic was a creative advertising campaign.
But brand awareness is not enough today; you need to also create a great customer experience. Marketers have realized this and are now using data to see what entices customers and what doesn’t. For agencies, this means embracing the data-driven approach consultants have long championed. Agencies need to provide not only the right product messaging, but also the right marketing tools to drive that message – and measure the results. That’s why Razorfish, a division of Publicis Groupe, partnered with Adobe to build its own digital marketing platform.
Agencies have an opportunity to diversify their offerings, but they need to overcome several challenges. Talent acquisition continues to be a main hurdle. Agencies don’t have the money to hire the personnel to dive into digital and data, because resources are tied up in the infrastructure that served the era when TV was still dominant. Although TV still captures more than 40 percent of agency budgets, many agencies were set up for much more and this is limiting how quickly they can respond. As ad spend continues to shift from TV to digital, agencies will need to hire software engineers, designers and analysts who can quickly build tools and drive the customer experience their clients are looking for. This will be especially tricky for publicly traded agencies that can’t easily sell off outdated business units to develop new ones. This TV focus, combined with agencies’ personnel-heavy approach to client service, limits their ability to invest in new channels and tools they can offer customers.
The year 2017 will be a turning point for agencies. Those that aren’t singularly focused on technology to scale the customer experience may find themselves up for review. Given their expertise in business strategy, consultants have been more successful in acquiring creative talent and companies than vice versa. But agencies have an opportunity to reinvent themselves and doing so could open up new lines of business. For this to happen, they need to think more like consultants and offer a wide array of technical solutions. That way, they can ward off the consulting firms encroaching on their turf.