The golden age

There was a time when advertising was indisputably acknowledged to be the highest form of marketing – indeed, for many brand owners, advertising and branding were synonymous. But today, the situation has changed. As Niall Fitzgerald, CEO of Unilever, famously said a few years ago: “There is an alarming discrepancy between what our brands are going to need and what agencies are good at.”

The concept of “branding” has moved far beyond communicating product differences and building “image.” In order to improve brand performance, marketing experts need to consider product re-design, overhauling the supply chain, reducing costs, introducing loyalty rewards for customers and many other variables. Yes, advertising still has an important role to play, but it is not the driver of branded businesses that it once was. Indeed, in an American Advertising Federation survey only 10% of senior executives put advertising at the top of their priority list.

So, if clients don’t need traditional advertising, do they need traditional advertising agencies? Ad agencies have, after all, developed in order to fulfil their core purpose – making ads. Does this mean that they are unsuited to providing the broader branding advice that today’s clients need?

The limits of the ad agency

Some would argue that, if advertising agencies are to continue to occupy a central role in their client’s lives, they need to shift from creating advertising to providing high-end strategic advice about not only marketing, but the business as a whole. But studies suggest that brand owners do not yet believe that agencies are delivering at that higher level.

A survey by Farmer & Co, a consultancy which specialises in the advertising sector, shows that clients still rate their agencies highly for their traditional skills, notably the creation of brand advertising. However, while nearly 75% of those interviewed wanted their agency to give them more strategic business advice, 46% were not satisfied with the strategic services provided – specific areas of weakness cited were failing to help identify or acquire new brands or services, and failing to develop new channels. Michael Farmer, MD of Farmer & Co, thinks the origins of the problem lie in the way agencies have historically been paid: “The commission system means that many agencies are uncomfortable pitching for work that doesn’t have an advertising outcome”

Some believe that advertising agencies have too little general marketing knowledge to help clients at a wider strategic level; Pat Stafford, marketing director of BUPA, has been quoted as saying, “I have never found a lack of willingness by agencies to get involved, perhaps just a lack of skill.” Other observers do not trust agencies to be objective; after all, making advertisements has historically been the source of their big money, so it is counter-intuitive to believe that they could recommend solutions that do not involve commercials.

Pretenders to the throne?

So if agencies are failing to deliver at the higher strategic level that clients would like to see, who is stepping into the breach? A survey of Europe’s top marketing executives by Media and Marketing Magazine found that 60% of respondents believe that management consultants are a significant threat.

But are management consultancies really equipped to take over where advertising agencies have failed to go? Critics would argue that such consultancies have numerous skills, but understanding consumer relationships and brand building are not among them. Traditionally, management consultancies have excelled at data processing and organisational consultancy, while not being highly rated for the creativity of their solutions. Management consultancies focus on stripping out costs rather than adding value. As Raoul Pinnell of Shell has been quoted as saying, management consultancies simply offer “analysis, not solutions.”

Filling the gap

While it is undeniably true that management consultancies are increasingly offering marketing consultancy, many would say that there is still a void. Many companies no longer call themselves design agencies – they have become “brand consultants”; some groups have renamed themselves to make their new focus clear. Companies like Wolff Olins and Interbrand routinely employ accountants and management consultants to boost their broader strategic capabilities. Design consultancy is now only one of the services offered by such groups, along with high level strategic advice, e-consultancy and internal communications strategies.

The power struggle

Among these diverse groups of agencies and consultancies, the question of who owns the high brand with the client can often be hotly contested. Indeed, brand consultancies and advertising agencies can scramble in an unhelpful way for “brand ownership,” frequently leading to feelings of tension and insecurity on both agency and client side. The big networks – Omnicom, WPP, Interpublic – all have their feet firmly in both camps, owning both world-renowned advertising agency groups, as well as international brand consultancies.

To some, the hierarchy of importance within the client company is as follows: marketing consultants (mostly management consultants) sitting at the top table with the CEO; next down, brand consultants; then, at the bottom of the pyramid, communications companies, who simply execute the strategies put in place by others. This is where some critics feel that advertising agencies currently sit.

The way back for ad agencies

So what, if anything, can advertising agencies do to reclaim the high ground? Most attempts to unbundle old-style ad agencies have focused on repackaging creative advertising, for example, splitting off the media functions, rather than recognising that advertising itself is not a critical element for all clients. Most agencies have additionally developed some kind of strategic offering, usually set up as a “shop within a shop.”

Some have identified a need for a new agency model – one which can build marketing partnerships with clients without needing to make adverts. Others would claim that this is precisely what the brand consultancies offer – though critics believe that many of these businesses are as biased toward offering design solutions as ad agencies are toward ads.

There have been suggestions that the way forward lies with “virtual” lead agencies, who advise at a strategic marketing level, and then bring in, as required, excellence in advertising, design or PR. Such a virtual agency would have the advantage of being objective about possible solutions.

The real brand guardians

Of course, to talk about conflict between different types of agency and to debate who owns the high ground today can be seen to be missing the point. After all, how much do brand owners really care about any of this debate? The real question must be this: Should the vital area of strategic business advice be placed outside the brand owner’s organisation in the first place? Shouldn’t the brand owner be guardian of the brand?

It is arrogant of any of us to assume that we should be brand guardians, whatever our credentials. All brand owners want is people to work with who really understand their needs, and can provide workable solutions.