The average price for marketing consulting services has been rising at an estimated annualized rate of 3.1% from 2014 to 2017. Successfully navigating a rapidly changing media landscape has become increasingly important for companies and, in response, marketing consulting services have become vital for many firms to gain a competitive edge. Thus, strengthening demand for this market’s services has largely driven price growth.
With a rapidly growing base of internet users, companies have been expanding their online presence. In the process, companies have been relying on marketing consulting firms to grow customer bases, whether through brand planning, user experience data analysis or other types of marketing consulting services. Additionally, as consumer spending has risen, companies have been allocating more of their budget for advertising, often employing marketing consulting firms in the process. Surging demand has been the core driver of price increases, which has weakened buyer power.
While average wages for marketing consulting firms have increased only marginally, wages as a share of revenue have been rising at a faster rate during the period. As companies have expanded the scope of their services and brought on more consultants, suppliers’ costs have grown. In turn, increasing costs have forced suppliers to impose higher service prices on buyers, further contributing to diminished buyer power.
However, prices have been kept in check by an increasing number of vendors entering the market, which encourages price-based competition. The fragmented nature of the market ensures that no one supplier can raise prices significantly without jeopardizing its market share, thereby placing downward pressure on overall prices. Low price volatility allows buyers to accurately anticipate costs without the risk of rapid shifts in price. Even so, in light of forecast future price growth, buyers are encouraged to engage in contracts sooner than later to lock in current prices.
In the three years to 2020, the price of marketing consulting services is forecast to rise at an annualized rate of 3.2%. Although a number of factors will continue to shape services prices, rising demand is expected to remain a primary driver of price growth during the next three years.
Through 2020, corporate profit and total advertising expenditure are expected to grow due to favorable economic conditions and a rise in consumer spending. More precisely, total advertising expenditure is growing at a faster rate than corporate profit, demonstrating the increasing emphasis companies are placing on marketing departments. Overall, as companies look to ensure that these advertising dollars are spent efficiently, demand for marketing consulting services will grow alongside it. Furthermore, internet traffic volume is projected to continue growing significantly. As consumers spend more time online, companies will seek marketing consulting services to better target internet users, particularly relying on data-driven analysis of online user experiences. Unfortunately for buyers, this combination of increased demand will push prices higher and damage buyer power.
Additionally, though growth will be minimal, both wages as a share of revenue and the price of data management and storage are expected to rise. With wages being one of the largest cost for suppliers, this growth will make it more expensive to provide marketing consulting services. As costs rise, suppliers will raise prices in order to protect their profit margins, especially in light of rising demand.
Fortunately for buyers, market share concentration is anticipated to remain low as new suppliers continue to enter the market, bolstering price-based competition. Heavy competition will translate into low overall price volatility for buyers, allowing buyers to be able to accurately budget for purchases. Nevertheless, in light of expected price growth, buyers are encouraged to procure services sooner than later.