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Consulting Firms Make Inroads Into The Business of Ad Agencies -- WSJ

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06/18/2019 | 02:48am EDT

By Alexandra Bruell

Accenture LLC's acquisition of hot creative agency Droga5 earlier this year was just the latest and most dramatic salvo in consulting firms' steady encroachment into marketing services.

Accenture, Deloitte LLP and PricewaterhouseCoopers LLP for years have been investing in marketing services, acquiring ad agencies and hiring executives in droves in a bid to add some of the $70 billion-plus advertising-agency business to their established professional-services revenue.

These investments come as marketers are under pressure to modernize their operations and rethink the way they interact with today's consumers, a task that requires business and strategy support that goes beyond traditional advertising.

"We believe the marketers' agenda has been evolving to focusing on creating superior experiences," says Tom Puthiyamadam, digital services leader at PwC. "That's the business we built and continue to invest in."

The pitch is resonating with some marketers.

Deloitte, Accenture and PwC have all seen exponential growth in the groups that house their marketing services. At Accenture Interactive, revenue has ballooned to $8.5 billion in 2018 from $1.9 billion in 2014, according to the company, which has acquired a number of creative shops, including Fjord and Karmarama as well as Droga5.

PwC Digital, meanwhile, says its revenue has jumped to $5.4 billion in 2018 from $737 million in 2014, in part from acquisitions including Pond, Outbox Group and BGT Partners.

And Deloitte Digital had $16 billion in revenue in 2018, up from $6 billion in 2014.

Revenue in these groups is not necessarily comparable to revenue at a traditional ad-agency holding company, because the business units also include products and services that aren't tied directly to traditional marketing.

To get a better idea how marketers are using the new services offered by consulting firms, consider the experience of Aspen Dental Management Inc. In 2017, before it switched to a new agency, the company ran an ad in which a dentist foils a bank robbery but provokes even greater financial fear in the teller and bank customers. The dentist wins everyone over only when he says Aspen Dental offers low prices.

The ad, created by storied creative agency Crispin Porter & Bogusky LLC, was meant to help Aspen Dental's hundreds of offices recruit new dentists and attract new patients as it continues to expand across the U.S.

But Aspen Dental's new marketing chief, William Setliff, wasn't pleased with the ad or the results. Using humor to paint a picture of an industry that gouges patients was "tone deaf," Mr. Setliff says.

Crispin, which resigned the business in early 2018, declines to comment.

Deloitte's core consulting group did an analysis that showed patients would respond well to empathy, and a team from Deloitte-owned Heat joined the effort to create a more emotive campaign featuring patient testimonials.

The pitch resonated at Aspen Dental. "We needed to modernize our approach to marketing," says Mr. Setliff. "We needed a broader view to make decisions, from advertising to store design."

The company has seen a significant boost in new patient appointments and a 16% increase in revenue this year up to early June, compared with the same period last year.

The new structure with Deloitte is 5% to 8% more expensive for Aspen Dental than working with an agency and consulting firm separately, says Mr. Setliff. But it's worth it, he says.

Scenes like this are playing out across marketing. Accenture Interactive has handled marketing work for clients such as Subway and Carnival Corp., while PwC Digital has designed a new application to crowdsource donations for the Make-A-Wish Foundation.

The picture emerging strongly suggests that consultancies that buy ad agencies can do what the big agencies do, and then some -- at least, that's the promise -- thanks to broad consulting and technology resources, and the relationships with the CEOs and CFOs.

The model is far from perfect, however. The consulting firms are still struggling to win over some marketers. And firms that have grown quickly, sometimes as a result of acquiring creative shops, are struggling to bring together contrasting cultures of advertising and consulting. They are not always in tune with advertisers' needs.

Consulting firms pursuing advertising and marketing business "don't know quite how to position themselves as an agency resource," says Tom Denford, partner at ID Comms Inc., an agency-search consulting firm. Mr. Denford helped Puma with its agency review.

Hermann Hassenstein, head of marketing planning at Puma, tells a story that reflects how consulting firms trying to break into the ad business can still sometimes be perceived by prospective clients as out of their depth. When Puma reviewed its global media-planning-and-buying business last spring, he says, a mix of companies were invited to compete for the account. Invitees included large media-buying firms owned by advertising holding companies, and more integrated marketing shops with media capabilities.

A large international consulting firm's team arrived at Puma's Boston office wearing suits and Puma shoes and proceeded to give a long presentation about "digital transformation," Mr. Hassenstein says. The presentation looked very similar to one the consulting firm had given previously to another business unit within Puma, he adds.

"There were 80 slides full of prophecies and bubbles," Mr. Hassenstein says. "I was confused, and it was a very deterring experience."

By contrast, he says, most of the agency executives who met with Puma wore more casual attire. They assured the company they could handle the job, be it developing a content strategy, building a data plan or handling brand and performance marketing, he says. Puma ultimately hired Havas Media, an agency that was more relaxed in its presentation and helped provide a data and media offering in line with Puma's needs, Mr. Hassenstein says.

But one big factor that helps the consulting firms is their relationships with business leaders such as CEOs and CFOs. Through these contacts, they have gotten to know marketers newly assigned to such important and challenging tasks as unifying a brand presence in stores and online, for example, or building digital-loyalty programs and using data from those programs to rethink their marketing mix. These types of issues, involving technology and data, play to the consulting firms' strengths.

"We've had pressures from other parts of the [corporate] enterprise to look at Deloitte for marketing," says Greg Paull, principal at agency-search consulting firm R3. "That's going to be a common trend."

Ms. Bruell is a reporter for The Wall Street Journal in New York. Email her at alexandra.bruell@wsj.com.

Stocks mentioned in the article
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