The Consulting Model Agencies Won't Build
Why agencies are using AI to become efficiently obsolete—and how reframing from cost reduction to revenue expansion could save the industry
When the Math Stops Adding Up
Walk into any agency office today and you’ll hear two conversations happening at once. The first is the confident pitch about AI-powered efficiencies and how automation will transform client deliverables. The second, quieter conversation happens behind closed doors: how do we survive when procurement demands we charge for fewer hours while investing millions in the technology that’s eliminating those hours?
Recent modeling of a major creative agency office found that AI could reduce fees by 24% if traditional hourly billing continues The Destructive Effect of AI on Agency Fees if Man-Hour Billing Continues: A Case for Changing Agency Remuneration, cutting deeply into the staffing that generates revenue. Meanwhile, AI agency pricing has actually increased 20-50% over traditional services DesignRushDigital Agency Network, creating an uncomfortable paradox: agencies are investing heavily in tools that reduce billable hours, then struggling to convince clients to pay premium rates for AI-enhanced work.
The holding companies aren’t helping. They’ve poured billions into proprietary AI platforms, convinced they can sell these systems back to clients as premium services. But they’ve forgotten something fundamental about procurement: agencies pitching AI benefits often promise up to 60% savings, making it nearly impossible to then charge premium fees for AI services What are the real considerations and impacts of AI on agency fees?.
The Wrong Questions
Most agencies are asking “How do we get paid for AI?” when they should be asking “What problem are we actually solving?”
CPG brands grew at just 0.7% annually over 15 years, with giants like Nestlé managing only 0.3% and P&G hitting 0.6% — well below inflation Bain & CompanyBain & Company. That’s the crisis. Not media mix optimization. Not creative production efficiency. Growth.
The CPG industry needs to deliver 4-5% annual top-line growth at 15-16% EBITA to return to top-quartile performance CPG industry trends in 2024: Rescuing the decade | McKinsey, but current agency models don’t address this challenge. They’ve been optimized for cost reduction, not revenue expansion.
Think about what consulting firms figured out decades ago. McKinsey’s transformation consulting approach focuses on improving cross-functional business performance with a tailored path to success McKinsey & CompanyMcKinsey & Company. Leading consulting firms deliver strategy and business transformation with comprehensive service suites Top Consulting Firms of 2025 | MBB & Boutiques Ranked. Successful consulting businesses achieve billing multiples of 5-6x the cost of their people The 4 Proven Consulting Business Models (2025) | Consulting Success, while agencies languish at 2x multiples.
The winners reframe the problem entirely. McKinsey research shows that 170 million new jobs are projected by 2030, not the 92 million displacements everyone focuses on AI in the workplace: A report for 2025 | McKinsey.
A Different Conversation
Imagine walking into a client meeting with this proposition: “We’re cutting our production costs by 30% through AI. Instead of passing those savings to you, we’re reinvesting them in three senior strategists whose only job is figuring out why your brand hasn’t grown in a decade.”
Procurement would balk. Of course they would — their KPIs are built on cost reduction. But if those strategists could identify even a 1% improvement in brand growth rates, the value would dwarf any production savings.
Companies like Church & Dwight strategically narrowed focus to seven power brands and allocated more resources to highest-potential areas How are CPG companies positioning for long-term success?. McKinsey found 71% of CPG leaders adopted AI in at least one function by 2024, up from 42% in 2023 CPG trends 2025: Consumers at limit on rising prices; brands look to personalization, loyalty to spur growth. The technology exists. What’s missing is the courage to change the pricing model.
The precedent exists too. Twenty years ago, Toyota and Saatchi & Saatchi made exactly this bet. They found 30% efficiencies in traditional advertising, then reinvested those savings into digital capabilities rather than cutting fees. Both companies are better for it.
What Gets Measured
If agencies don’t transform remuneration and move away from hourly billing, procurement will use AI to severely cut agency hours and fees The Destructive Effect of AI on Agency Fees if Man-Hour Billing Continues: A Case for Changing Agency Remuneration. The current model is a death spiral. Lower fees mean less talent. Less talent means worse work. Worse work means further fee pressure.
AI-related budgets are projected to grow 36% by 2025 17 Top AI Automation Agencies in 2025: Complete Service Comparison + Pricing Guide, but that spending is going toward internal tools and platforms, not agency services. The gap between what agencies charge and what clients perceive as value keeps widening.
AI is rapidly changing tasks workers undertake, talent companies need, and ways teams interact AI Is Moving Faster Than Your Workforce Strategy. Are You Ready?. The length of tasks AI can reliably complete doubled every seven months since 2019 and every four months since 2024, reaching roughly two hours. AI systems could potentially complete four days of work without supervision by 2027 The agentic organization: A new operating model for AI | McKinsey.
Meanwhile, the U.S. DTC market is projected to reach $186 billion by 2025 CPG and Retail Industry Trends and Outlook for 2025-2026, as brands figure out they can build direct relationships with customers and skip traditional agency models entirely. The insurgent CPG brands eating into legacy market share aren’t using traditional agencies — they’re building in-house teams or working with specialized partners on project basis.
The Real Opportunity
Agencies have access to something consultants don’t: decades of brand performance data across categories, channels, and markets. They understand creative effectiveness. They know media behavior. They have relationships with the actual people who make purchase decisions.
What they lack is permission to use that knowledge strategically rather than tactically.
Nimble, consumer-focused insurgents have shown that growth is possible, with companies like Kraft Heinz’s Philadelphia posting 4% year-over-year sales growth and Beiersdorf’s Nivea achieving 9% organic growth Consumer Products Report 2025: CPG Industry Outlook | Bain & Company. Someone figured out how to grow these brands. Why can’t the agencies?
The answer isn’t more efficient media buying or faster creative production. With volume recovery pushed to second half of 2024 due to budget-constrained consumers, CPGs are creatively using marketing, innovation and premiumization to improve margins How are CPG companies positioning for long-term success?. They need partners who understand the full growth equation, not just one piece of it.
BCG’s transformation methodology addresses both the what (operational improvements) and how (sustained behavioral change) with seasoned operators who have deep experience Business Transformation Consulting Services | BCG. Digital transformation agencies guide organizations through technology orchestration, data interpretation, and change facilitation Top Digital Transformation Agencies & Consulting Firms to Work With - October 2025 | G & Co..
This requires a different conversation with finance departments. Not “How do we reduce our agency spend?” but “What would 2% additional growth be worth to our market cap?” The numbers are staggering. For most Fortune 500 consumer brands, even 1% additional growth would justify significantly higher agency investment.
Starting Small
Nobody transforms their entire business model overnight. But agencies could start by identifying one client willing to experiment. Take the AI savings from programmatic optimization and banner production. Hire two senior strategists. Give them six months to identify growth barriers and recommend solutions.
Measure the outcomes honestly. If it works, expand. If it doesn’t, learn why and adjust.
The alternative is watching procurement chisel away at fees year after year while holding companies announce layoffs and office closures. AI recruiting tools are already cutting hiring costs by 30% Save 30 Percent on Hiring Cost with AI Agents in 2025 in other industries. The automation wave is coming for every white-collar profession, not just agencies.
The question isn’t whether AI will transform the agency model. It will. The question is whether agencies transform themselves into something more valuable or simply become more efficient at delivering declining margins.