| by Green Square

The Consultancy Conundrum:
What next for digital agencies?

The Consultancy Conundrum:  <br />What next for digital agencies?  The Consultancy Conundrum:
What next for digital agencies?

Whilst in recent times it has been all about acquirers buying niche delivery ability (SEO, PPC, Apps, location based targeting, mobile etc) the main players increasingly now have these capabilities. That’s not to say there’s no market for such businesses, but the way we look at digital is rapidly changing as it becomes subsumed into an element of what is delivered to a client as part of an overall strategy.

We believe that in the not too distant future ‘digital’ agencies will be separated into two distinct silos – those that deliver strategic insight and guidance to clients – subsequently determining the tactics to deliver those strategies – and those that purely supply the tactical services.

Strategy is now where it’s at and the competitor landscape at the top level has changed. Digital marketing has had a seismic impact on the way businesses market their products, driving a shift from creative-led campaigns to ROI driven ones, where the impact can be directly measured in terms of sales.

Inadvertently, this has meant the key ability that management consultancies lacked, creativity, which allowed agencies to keep them at bay for so many years, has been pushed down the mix. As a result, the gateway to hell has been opened and management consultancies have been able to flood through to directly compete with marketing agencies.

So, where does this leave us?

Those agencies that wish to play in this broader context now have to up-skill, and rapidly. If they are to charge premium prices for services, and not simply be called on to deliver a pre-determined campaign scoped by others, then they have to be able to compete with the Accentures and McKinseys of this world. This will mean positioning themselves as a strategic consultancy, leading with an offer that involves the upfront scoping and determining of a client’s marketing strategy first and the tactics to be used to deliver it second. The ‘smart’ agencies will be those that mix consultancy with creativity and partial delivery – delivering those services that are not easy to outsource – still setting themselves apart from the broader management consultancies.

It is no coincidence that management consultancies are acquiring the more technically skilled digital agencies - they are coming from the other direction and want to be able to determine the strategy and deliver the higher margin activities that flow from it. They need to prove delivery capability but will not be interested in the lower margin activities – they can simply buy these in as needs be.

Agencies can still go the pure delivery route – and there is nothing wrong with it – but they need to do it large. Pile it high and sell it at a reasonable price, not a premium one. If you are in a competitive price-driven market place it becomes about volume. These agencies will need to be of significant scale in their chosen field to give their clients the confidence and comfort that they are best of breed and will not let them down.

Coming back to creativity – just to be clear, Techville has not killed Adland. People love to be entertained, now more than ever, and people love creativity. There will always be a role for creative eloquence to spark people’s imagination and as part of any corporate strategy, but there is no question that having forced creativity to take more of a back seat in terms of the marketing mix, it has broadened the competitive landscape.

It’s not all doom and gloom – it’s not as though a handful of management consultancies will rule the roost and every client on the planet will dance to the tune they play. Many companies determine strategies in-house, taking help as and when they need it. Equally, we may see a rush back to creative leadership as consumers get bored with the lack of imagination in many of today’s ROI driven campaigns.

However, the key message is that when it comes to today’s strategic marketing campaigns, the competitive landscape has widened and agencies need to think very carefully where they sit within it going forward.

Tony Walford
Partner
Green Square Partners

Tel: +44 (0)20 7182 4701
Email: Tony.Walford@GSquare.co.uk
Web: www.gsquare.co.uk
Twitter: @GreenSqTweets

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