THOUGHT LEADERSHIP | Article

Changing Agency Relationships

April 23, 2020

Newton Loop

Once again, as partnerships evolve, the more things change, the more they stay the same. Or don’t.

 

A study of more than 100 company CMOs revealed that fewer than a quarter of them subscribed to a traditional, centralized Agency of Record (AOR) model. About another quarter of them, give or take, worked with multiple agencies. That left the other half working with some form of hybrid AOR model that incorporates more specialized agencies on a project basis, or working with multiple agencies from one of the larger agency holding companies.

 

Companies like Frito-Lay, Best-Buy, Pepsi and others have moved away from the traditional agency model to what many are calling a “best of breed” approach. We looked at this in our last article,  exploring ways companies create a de-facto DIY agency in-house and then tap external agencies for specialized services such as social media, digital, media planning/buying or analytics. More and more, such companies are bringing their strategic marketing in-house while contracting out the leveraging of those executions to select best of breed agencies.

 

This has resulted in what Alex Bogusky identified in a recent Forbes article as the Digital Agency of Record. “It’s a cyclical thing,” he says, “ as well as a side effect of the increased specialization with digital. The pendulum is swinging away from AOR but it will swing back when clients get sick of micromanaging every agency and every campaign. Digital AOR is where the new center is.”

 

Our own experience reflects this as we are charged to collaborate with our clients’ strategic marketing teams and then bring those strategies to life by applying our own experience and expertise to the challenges at hand. And very often as Digital AOR at minimum,  if not agency of record in the broader sense.

 

 

Back: Bundling With The AOR Model

More than ever, there is a need to manage the customer journey at many different waypoints. This requires us to customize and manage strategic marketing across a wide range of targeted channels, using an ever growing arsenal of tools, platforms and technologies that require coordination, integration and a cohesive vision and approach.

 

Such cohesion – and the mobilization of digital, social, media, content, BI and martech strategies – is perhaps most efficiently and effectively managed “under one roof.”

 

According to Ira Maher, Basement VP of Business Intelligence, “In an AOR relationship, we’re able to scale as needed to meet the challenges posed by a particular marketing situation. We’re then able to tap quickly into specific agency capabilities which have already been optimized to work well within our own agency environment as well as within parameters and efficiencies already established by long-term relationships with our clients.”

 

Our lead-gen efforts for Schlage are a prime example. An ever changing market, a storied and established brand, the convergence of new technologies and customer demands and the need for workable, scalable, real-world, always on solutions, made our AOR partnership an inevitability.

 

Partnership, scalability, familiarity and control – these are the hallmarks of having some manner of AOR or hybrid AOR relationship.

 

And Forth: Unbundling With Best Of Breed.

Digital spending surpassed traditional spending for the first time in 2019. By 2023, it is expected to account for fully ⅔ of all ad spending. The explosive growth of digital marketing is considered to be one of the biggest disruptors of the agency of record model.

 

This has led to many agencies re-thinking the way they work and many clients re-thinking the ways they work with their agency (or agencies).  According to the CMO study, those advertisers who do work with multiple agencies work with four to six of them.

 

Cost efficiency, the flexibility to work on a project-by-project basis, specialization (in such areas as social media, PR, media buying, digital integration, etc.) and tying these relationships into some manner of DIY,  in-house marketing initiative are the main reasons given for this decentralization or “unbundling.”

 

Says Maher: “We’re set up to work in this capacity as well, tailoring our services, our scope – and our relationships – to the specific needs of our clients. There is no “right or wrong” answer when it comes to agency relationships, just solutions that work for our clients, their marketing challenges and their needs.”

 

Our partnership with Transitions Optical, Inc. is an example of how we work as a cooperative agency resource partner. We collaborate with them on a host of digital and social initiatives, integrating with as many as three or four other agencies at a time in addition to Transitions’ core in-house team.

 

Overall cost savings, operational efficiencies and brand management as well as access to truly specialized expertise are among the key reasons advertisers give for maintaining unbundled, project-based, best of breed relationships.

 

 

In The Swing Of Things.

Partnership and collaboration are at the heart of any and all agency relationships. Our explorations of insourcing, performance pricing, cultural impact and, now, AOR relationships are designed to establish a benchmark for how we work better and smarter. They’re also intended to provide the impetus for new ideas, insights and collaboration as we look to meeting the marketing – and life – challenges we’re all facing.

 

Next up, an in-depth look at the customer journey and how all of this comes together with technology, resource partnerships and platforms to deliver the right message, to the right audience(s), at the right time.

 

Additional reading:

https://www.axelerant.com/resources/articles/what-agency-of-record-aor-means-today-why-it-matters

https://www.forbes.com/sites/willburns/2015/05/14/the-advertising-agency-of-record-model-isnt-dead-its-just-being-reinvented/#207ea5053e2a

https://www.mediapost.com/publications/article/339813/redefining-aor-from-agency-of-record-to-agency-of.html

https://www.forbes.com/sites/willburns/2015/05/14/the-advertising-agency-of-record-model-isnt-dead-its-just-being-reinvented/#5df1d333e2af

https://quantumstat.com/flash-report-agency-of-record-model-falls-victim-to-decentralization

Contributors:

George Evans
George Evans
DIRECTOR OF BRAND & CONTENT STRATEGY
Ira Maher
Ira Maher
VP BUSINESS INTELLIGENCE