Dive Brief:
- The role of the CMO continues to evolve and expand, putting the traditional agency model "under economic attack," according to new research by Forrester provided to Marketing Dive. The report, titled "Agency Holding Companies Need a Brave New Business Model," shows agencies are continuing to feel a pinch as CMOs bring more marketing work in-house, more carefully manage agency fees and are more frequently being targeted for their business by consultancies like Accenture and Deloitte.
- Ad holding companies should embrace a client-centric approach to boost creative entrepreneurialism and brand execution, Jay Pattisall, a principal analyst at Forrester and author of the report, wrote in a blog post. Agencies need to build more agile client teams; add new layers of services, including those around business and strategic consulting and data and technology; accrue leaders with diverse skill sets; and implement more streamlined management and reporting and compensation structures.
- The largest agency holding companies, Dentsu Aegis Network, Havas Group, Interpublic Group of Companies, MDC Partners, Publicis Groupe, Omnicom Group and WPP, have been working to modify their structures, leadership and service lines to respond to these changes. However, Forrester's research suggests these realignments might not be going far enough or happening quickly enough.
Dive Insight:
The Forrester report catalogs trends that have been emerging in the marketing industry for several years now — ones that agencies have become acutely aware of amid stagnating revenue growth and a loss of clients to in-housing, boutique firms and global management consultancies. However, while these competitive threats have become readily apparent, the new research emphasizes how agencies' attempts to reinvent themselves need to grow in scale and speed up soon or otherwise put their businesses under serious risk.
Many traditional ad holding groups have responded to the encroachment of consultancies like Accenture and Deloitte by setting up their own consulting services. WWP's Grey Group recently debuted Grey Consulting to build a focus on business and brand design, innovation and digital transformation. The move followed similar ones by Kantar and Ogilvy, two other WPP shops that have ramped up consulting services since the start of the year.
Others in the space have been attempting to accelerate specialization in data, artificial intelligence (AI) and marketing technology — areas where consultancies have a stronger historical background. IPG earlier this summer purchased Acxiom's data marketing division for an estimated $2.3 billion. Publicis has also put a spotlight on its AI-powered platform Marcel, which looks to streamline operations and bolster efficiency across the holding group's agencies.
However, the Forrester report also suggests that CMOs need to shoulder more of the burden in order to improve their agency relationships. Ted Schadler, a vice president and principal analyst at Forrester, wrote in a separate blog post about the report that marketers might want to end category exclusivity when selecting partners, along with breaking down their corporate silos and rethinking cost-cutting measures than can hamper creativity.
These findings come as cost-cutting to marketing services has steadily grown among some of the ad world's top spenders. Procter & Gamble plans to reduce the number of agencies it works with by 50% to save $400 million over the next several eyars. The company had previously pared down its agencies by 60% since fiscal 2015, saving $750 million in agency and production costs and improving cash flow by $400 million. Unilever also announced in June that it will be piloting a new agency model combining talent from different holding groups. The CPG giant has also been bringing more marketing functions in-house.
