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Agencies Make Strategic Play

More shops are eyeing business usually handled by management consultants

Carla Hendra is global chairman of OgilvyRED.

In a classic Mad Men scene, Don Draper pitches a new Lucky Strike commercial to a room full of the marketer’s most senior executives. Such meetings that used to be routine have become a rare thing of the past.

“With the CEO, CFO and COO, agencies in this country just don’t have that access anymore,” underscored Brian Wieser, senior analyst, Pivotal Research. “Back then if your numbers lit up, the CEO would be able to distinguish whether a TV commercial worked or not. As marketers got larger and more factors could impact sales, business became much more complicated and agencies didn’t evolve accordingly.”

Agencies are making up for that now by taking back strategic services from management consultants like McKinsey & Co. and Accenture. But rather than expand their capabilities via acquisition, agencies are creating new specialty units from within. Ogilvy, one notable example, launched strategic consultancy OgilvyRED in May 2011; it uses an open-source approach drawing on 21 Ogilvy units—from digital and health and entertainment to cross-cultural, green and Islamic branding—plus other resources at corporate parent WPP.

Other agencies are developing new expertise on a smaller scale, like The Mom Complex at The Martin Agency and TBWAChiatDay’s new content arm, Let There Be Dragons.

This “build-it-yourself” model contrasts with how agencies expanded resources and developed new revenue streams in the past. Examples include JWT buying Digitaria two years ago and WPP adding digital shop VML and attaching it to Young & Rubicam in 2009. The new models are less expensive, use existing resources and are easier to assimilate and coordinate as well as to leverage existing agency-client relationships and pitch new ones.

To regain a more strategic voice in the C-Suite, BBDO set up Batten & Co. two years ago. It was born of marketer conversations focusing not just on communications but also the bigger intersection of brands and business strategy. “There is a new breed of CEO and executive team that’s been emerging over the past 10 years,” said Tracy Lovatt, Batten’s chief. “They know the value of a brand as a strategic asset and that brings us in upstream from communications.”

There’s another good reason for agencies to take business away from management consultants. Growth rates for consulting services are projected to be higher than that of advertising. U.S. management consulting is forecast to grow at an average annual rate of 4.1 percent to $200 billion over the next five years, per IBISWorld.

Industry upstarts argue that they have better resources to target an increasingly elusive consumer. “I hear from clients: ‘We’ve been focused around brands; how do we organize around a more consumer-centric model?’” said Carla Hendra, global chairman of OgilvyRED. “This model is new, but the ability to provide strategic services at Ogilvy is not.”

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