Live Issue... Can ad shops become consultants?

M&C Saatchi’s recent layoffs in Hong Kong were, according to the agency’s Asia CEO Chris Jaques, an attempt to shift the company toward a brand consultancy model.

Jaques, complaining of ad agencies undercutting each other in the Hong Kong market, argues that consultancy offers a “high growth, high margin strategy”. Recently, it has launched Clear and Sunshine in Asia to provide consultancy. But is this a viable strategy for ad agencies struggling to turn a profit on traditional advertising?

Agencies reinventing themselves is not new. Many have launched specialist offerings in all sorts of emerging disciplines. Consultancy, argues Jaques, is the right fit for the current market.

“Brand consultancy is an emerging industry that has only existed large-scale in Australia and Japan, giving it a high growth potential in relatively untouched markets such as China,” he says.

Raymond Tao, president of Ogilvy & Mather Advertising China, agrees there is a growing need for consultancy in the market. “During a recession, more clients pay greater attention to the strategies behind their marketing investments. They know that the time has passed when they might have seen a return from less strategically solid marketing investments.”

However, Michael Wood, CEO Greater China at Leo Burnett, questions whether standalone companies can prosper. He points out that clients in China prefer agencies that offer services “from thought to reality”. In Hong Kong, he adds, clients are not inclined to pay for strategy, “only solutions, implemented and executed.”

Brand consultancy specialists, meanwhile, have mixed feelings about ad agencies’ renewed interest in the area. Ismael Ibnoulouafi, CEO at Singapore’s The Brand Union, which works with Ogilvy & Mather, says he is “pleased” that the sector is being acknowledged but argues that consultancy and advertising are best handled by different companies. “Those who want to do everything at once cannot deliver the best job.”

One Hong Kong agency that has arguably made an ad-to-consultancy model work is Eight Partnership, having built a client base that includes American Express and The Economist. Charles Brian-Boys, managing partner at the company, says that he has seen growing demand for consulting services, but argues that it is not something that can be built overnight. “Significant slog is needed to generate raw data and insight. This is an expensive and time-consuming process that most traditional agencies are ill-equipped to provide.”

For a smaller company such as Eight, a bottom-up approach can work, expanding client relationships bit by bit and taking on work as an d when needed. “Eight’s ability to offer either a very specific solution or a full-service solution makes them very responsive and nimble to our business needs,” confirms The Economist’s Asia-Pacific marketing manager Andrew Au.

For big networks with large overheads, however, it is far from clear that this is an area they can move into wholesale. Wood adds: “Brand consultancy has no scale. Small agencies may have no chance but to become experts in one discipline - specialists.”
Not that any of this sways Jaques, who concludes: “We are building a business to challenge the status quo, not follow it.”

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