Marketers like Chipotle are turning to consulting firms to help transform their businesses - and ad agencies are nervous
- Consulting firms like Deloitte and Accenture are increasingly being seen as coming for ad agencies' business.
- Their pitch to marketers such as Chipotle: we can help you with complex challenges, and can build digital products that can transform your business.
- Still, consultants will have to prove they can weave creativity with technical know how.
Here's why ad agencies need to worry about consulting firms: traditional ad shops can't handle burrito orders.
At least, that's what the consultants say.
Chipotle has recently tapped Deloitte Digital to build and maintain its Apple and Android Apps as it looks to implement mobile ordering across its network of restaurants. On the surface, that may not seem like that big a deal. It's just one app after all.
But as consulting giants like Accenture and Deloitte circle around the ad agency business, it's partnerships like the Chipotle app that some in the ad industry see as a harbinger of things to come.
They say that while traditional and even digital ad agencies are still great at making ads and buying media to make sure they get in front of the right people, they aren't as well equipped to make apps that are so vital to a company's business - let alone all the billing, data collection and logistical implementation required.
And as digital customer experiences become a crucial part of marketing - people are literally holding a company's brand in their hands after all - the argument is that consulting companies, with their informational services heritage, are best equipped to handle this kind of work. And the more that the Deloittes of the world can get their hooks into marketer's operations, the more ad assignments they'll be entrusted with - which puts classic ad agencies in a disadvantaged position, or so the thinking goes.
Indeed, in the ad industry, where the future of the ad agency model is constantly being examined, consulting firms have become the new bogeyman. Fair or not, firms like Accenture and IBM are seen as having a better claim on driving real business results in an industry known for making pretty ads and making sure they get where they are supposed to.
What's so great about consultants?
Greg March, the CEO of the independent ad agency Noble People, summed up the conventional wisdom regarding consulting firms as thus: "They've got MBAs, they've got money for days, and they have access to the C-suite decision makers."
Consulting giants have also been making lots of acquisitions in this sector of late; last year, Deloitte bought the San Francisco creative agency Heat, reported Adweek.
During an interview at the Cannes ad festival in June, Michael Kassan, CEO of the ad advisory firm Medialink, even predicted that a giant consulting firm would end up buying one of the big four ad agency holding companies like WPP or Publicis.
"The real difference is, we bring a few things they don't have," said Donald Brady, principal, Deloitte Consulting LLP and Customer Experience Innovation Leader at Deloitte Digital. "We have deep industry expertise and can handle complex technical solutions. [Agencies] are coming from creative world. They don't have the depth or scale."
By nature, companies like Deloitte see themselves as playing a more integral role in helping assess and improve their clients' businesses that goes well beyond marketing.
"Our clients come to us with really big challenges. Transformational challenges," said Oliver Page, Principal at Deloitte Digital. Transformational challenges such as changing the way people order and pay for food in thousands of restaurants - a behavior which is increasingly becoming the central way people interact with many brands.
Page said that in the quick service restaurant category, it's very early but in some cases ordering via apps is accounting for 1% of a company's business. Chains like Panera Bread have seen digital ordering take off, as Business Insider reported in June.
"That channel really is becoming a huge revenue driver for restaurants," said Page.
"This is a testament to where the market is going," Page added.
Left brain vs. right brain
Perhaps. For his part, March argued that both ad agencies and consulting firms have their natural strengths and weaknesses, and that each side's weaknesses can be addressed by hiring different types of people.
He admits to being biased, but he believes it will be easier for ad agencies to hire more analytic-driven people than for consulting firms to get more creative.
"From what I've heard from people who have worked on both sides, the consulting firms are not really strong on how to engage creatively," he said. "A culture of creativity is really hard."
March said that agencies are hardly bereft of offering their clients potential ways to change their businesses. The question is, do they know how to execute them?
At the same time, consultants have to prove they can deliver on ad campaigns that work. "The knock on these guys has always been, they give you decks and then leave," March said. "They've got to change that. If you are going to charge somebody $2 million for a strategy that's one thing, but now they are going to have to execute."
Gene Liebel, co-founder of the digital Work and Co, which works with Facebook, Apple and Marriott, and others, agreed that in 2017 more marketers need help building digital tools to help them directly interact with their consumers. But he also doubted whether consulting firms are up to the task of handling the little things, or can attract the right talent to deliver.
"Someone still has to do the hard work of designing and building successful digital services, and that execution piece is what's actually the toughest," he said. "The talent pool for the best engineers and best digital designers is surprisingly small, and those people are drawn to places where they can go beyond just concepting great digital experiences. They want to make real things. And actually witness their ideas make it out into the world to be used by real consumers."
In other words, Chipotle's app better work really well. Or like many marketers, the company might soon be looking for a new agency.