Consulting firms will ‘decimate’ ad agencies: Confessions of a marketing consultant

As management consultancies move further into the digital advertising arena, they will make a play for media buying budgets even if they won’t openly admit it. That is the view of a marketing consultant, who spoke as part of Digiday’s Confessions series, in which we exchange exchange anonymity for candor. This person believes consulting firms are quietly building their own media buying services which could “decimate agencies.”

Agencies have guarded their budgets against other threats before. What makes consulting firms different?
Agencies are talking to clients about low CPMs when it comes to how to buy media. That happens despite everyone accepting that’s a bad way to buy online media. Consulting firms are telling clients, “Forget about CPM; let’s talk about the cost per sale,” and asking, “How much are you willing to pay for that?” The reason that the advertiser is in digital is because they’ve been convinced by their media agency that they’ll save money, and it will be cheaper to reach their audience using digital. You turn that around and make that performance-based media, like the consulting firms want to do, and suddenly you can make great money on it because the client is willing to pay $1 per view and $100 per acquisition, for example.

Conflicts of interest at consulting firms aren’t new, so why haven’t they been pressured more?
Marketers have a different set of ethical standards for management consultants than they do for agencies. The big consulting firms run pitches when they’ve got agencies themselves. It’s so easy for them now to audit a big advertiser, while also saying, “You guys are missing this skill set, but guess what? We have a new media strategy and analytics department that could give you what’s needed.” The management consultants don’t see conflicts of interest; they don’t want to be exclusive to a client. In 2018, marketers must reconsider how they define a conflict of interest.

Will those conflicts of interest become too big to ignore as marketers take more responsibility over strategies?
Let’s be honest — marketers are looking for ways to make their lives easier. If that is consolidating their requirements with one of the big consulting firms who can give them a one-stop package, then that’s incredibly attractive. But when the management consultants start to cross-sell services that go to the heart of the brand communication, then that’s a harder sell because this is the most visible expression of what a brand marketer is doing in the organization and to their peers in the industry. They’re not going to risk that with a consulting firm that’s only proven for being good with data and technology.

How will this play out in 2018?
The more the big consultancies move from their current focus on digital technology performance into the brand and advertising space, the greater the threat to marketers and agencies. This [creativity] has been core to the relationship, and having the consulting firms operate here, even under the guise of acquiring agencies, the greater the threat and potential conflict. You are already seeing conflicts between consulting firms and agencies both trying to influence marketers on their choice of ad tech and competing against each other for the big, juicy commissions offered by the large tech firms.

Why aren’t marketers willing to address those conflicts of interest?
We recently did some consulting for the CMO of a brand that’s spending nearly $20 million across three different consultants on various projects. I pointed out that was more than they spend with most of their agencies, and they said, “You’re right, but none of them [the consulting firms] are coming out of my budgets because those interactions between the CMO and the consulting firms are usually being facilitated by the CEO and CFO.” You might think the marketing budget is substantial, but the fact is that every part of that budget is already committed to executing the marketing plan. The big-ticket items like the digital transformation or the customer-centric technology implementation comes out of the CEO and CIO budget for a long time before it ever comes from the CMO.

Will those conflicts of interest become too hard to ignore as more transparency-driven marketers request more audits?
Senior marketers are really nervous about how their budgets are spent. They’re second-guessing and checking everything. That’s creating a vacuum for the consulting firms to fill, as they’re conducting those audits for advertisers. And as they provide that service, the likes of Accenture and Deloitte are saying, “We’re really good at driving and measuring performance.” The consulting firms aren’t making a big play into media, but they will because while currently it’s low-margin, it’s a high-volume business. When they do make their move, it will decimate agencies.