Close-Up: Are agencies under threat from consultancies?

Ad agencies must accept that brand consultancies are here to stay and should adapt rather than complain, writes Chris Ingram.

I've been rather bemused by the heat generated from Bartle Bogle Hegarty's resignation of its Sony Ericsson account because of Wolff Olins' involvement in developing a brand strategy.

I don't have any problems with the fact that it happened - ie. that an agency resigned an account out of principle, or that a client chose simultaneously to use an ad agency and a brand consultancy. (I don't like the idea of secrecy or see the need for it - but the situation may well have not been quite like that.)

Having "crossed the floor" from agencies to consultancies three years ago, I can hopefully give a balanced overview; concentrating on the brand strategy issue and ignoring the communications strategy and innovation work that we do for clients.

First and foremost, advertising agencies and brand consultancies are not in competition for a client's budget. The share may be declining, but advertising still accounts for a very substantial proportion of a client's budget.

Brand consultancies, if they are true consultancies, are paid fees, usually for projects. They are paid for their ideas and experience and not for "things" they do not implement. They will produce strategic recommendations and may sometimes then project manage their recommendations to see them to fruition. This then becomes an additional revenue stream.

Brand consultancy (and communications consultancy) is a small and fragmented business - we have 28 employees and we are already a large strategic consultancy in the "marketing arena". Income in this sector is a fraction of that of agencies. Annual consultancy revenue of £5 million would qualify as a big brand consultancy in the UK (and anywhere else in the world).

Depending on an agency's objectives and ambitions, it may be right to fear the influence of a strategic consultant, but ad agencies certainly shouldn't worry that "they are encroaching on our revenue".

Second, branding agencies are unlikely to be any more or less objective than an ad agency. Note the words brand agency and not brand consultancy.

The key issue for agencies is that they are almost never paid properly for their ideas - they are paid for their implementation. This may be unfair, but it's true. This applies to ad agencies and media agencies alike and is the reason why they see so much of the client's procurement department. So it's difficult for agencies to recommend anything apart from advertising and, ideally, a lot of it. After all, they have a business to run and mouths to feed.

But when a "brand consultant" is really a design agency, don't let's kid ourselves that its motives are any different. It finds it a bit easier to charge for ideas, but essentially, it will be making its money out of designing new identities, annual reports, packaging, shop fascias, etc. The reality is that branding agencies have been almost as unsuccessful as ad agencies at selling ideas, so their recommendations to clients are as likely to be as biased as those of ad agencies.

If a brand consultancy stifles an agency's creativity, then it's not doing its job properly.

This applies to any form of marketing agency - advertising, PR, event ... The difference between an ad agency and all these other agencies is that they can produce great, campaignable ideas. What the brand consultancy should be doing when at the interface with an agency, is to give a brief based on a depth of understanding of all aspects of the client's business. That is usually beyond the skill-set of any advertising agency. It wouldn't be beyond an ad agency group, but surprisingly they are unable or unwilling to work this way.

If an ad agency wants to double up as a brand consultancy then, yes, there's going to be competition with companies like ours.

This will typically happen because an ad agency wants to be seen more as a strategic partner and be involved earlier in the process. This will often mean that an ad agency, using its account planners, will give the client or prospect free advice on its brand positioning.

Most marketers are happy to be given free strategic advice, but they rarely want to pay for it. It doesn't take a genius to work out if you are offering a free service you can't afford the best people to give it.

Our strategic advice is never free: we have no choice - we have nothing else to offer and so a fundamental part of our proposition is that clients get seriously smart, experienced people on their business.

The point is that clients don't expect top quality brand strategic advice from an agency and so won't pay (at least not sensibly) for it. I'm not gloating - we have a similar problem; clients are happy to hear our business strategy advice, but we've learned they won't pay enough for it: they expect management consultants to provide that and they'll usually pay top dollar.

There is no question that there are some outstanding account planners in ad agencies who are capable of really good brand strategy work (their names go in our Talent Bank), but far too many are now preoccupied with helping to sell the agency's creative work to the client. It will be nicely dressed up, but that's what it amounts to, and many senior agency executives quietly agree with me on this point.

At the heart of a great brand strategy lies a "controlling idea" - a core thought based on the history, culture, core competencies, market situation and competitive set that enables a company to differentiate itself in a sustainable way from its competitors.

There are exceptions, of course, where an ad agency can fulfil this role and it always comes down to people. The bad cases are where there is a rapid turnover of marketing director, who never engages with the rest of the company and who uses advertising as a Band Aid to stick over the perceived cracks in his organisation.

Often, the resulting campaign has nothing to do with the product and the advertising has no credibility/traction with the staff, including all those who represent the client every day: on the phone, behind the counter, on the forecourt, in the reception. The ad agency may have a big, but very quick, input into the brand strategy, but as soon as the marketing director leaves, with the next arrival there is a new agency and another change in direction. We tend not to be employed by this sort of client.

The honourable exceptions usually involve an entrepreneur who is still at his/her organisation or a new chief executive who acts like an entrepreneur and is into all aspects of the organisation combined with an ad agency individual with terrific instincts.

One of the very best examples is Nike, where Dan Wieden of Wieden & Kennedy and Phil Knight, the Nike founder, go back almost to the beginning of the company. W&K instinctively knew what Nike was about: irreverent; independent; quintessentially American and completely can-do in its attitude.

"Just do it" captured the spirit perfectly and was a great reflection of the gung ho staff it seemed to attract. The true test is that it became a huge business with almost no item made in the US, and yet the values still stuck.

These occasions are rare, but usually hugely significant involving the creation of billions of dollars of extra value for the client.

Expecting a strategic relationship with clients based on "how things used to be" is a waste of time. Ad agencies rightfully had a special relationship with clients in the days of the captive consumer sitting in front of the TV set with no alternative entertainment - or channels - and when the very promise of a TV ad guaranteed high distribution and the product then walking off the shelves.

The majority of ad agencies have not adapted sufficiently to today's unbelievably different scenario, either by accepting a more reduced, supplier role and restructuring and downsizing accordingly or conversely, of dramatically increasing the quality and scope of their services and charging for it.

While I have no time for those ad agency chiefs who do nothing but whinge about today's unfair world, I really don't think they should lose too much sleep over the threat of brand consultancies.

- Chris Ingram is the founder of Ingram.