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Rethinking the Agency-of-Record Model

April 15, 2014

Is The AOR model obsolete?

Last year Omnicom created a “Team Pepsi” model called Galaxy that includes TBWA, which handled North American advertising, BBDO, which handled overseas work, and 180LA. But the brand ended up looking to other shops, many of them outside Omnicom, for high-profile campaigns.

“We no longer have on a lot of our brands an AOR or lead creative agency,” a PepsiCo PEP +0.15% spokeswoman told Ad Age. “We’re pulling from a roster of agencies for different projects, as we look for the right creative ideas.”

Pepsi is not alone. For a few years now there have been predictions about the future of marketing’s Agency of Record model – the age-old, exclusive partnership between a marketer and its agency. Now that relationship model is under fire. AOR tenures are disappearing, marketers are enlisting agencies outside of their roster, and many marketers simply don’t have a traditional roster at all.

Not so long ago, clients would choose an agency, designate them agency of record, sign a contract, pay a monthly retainer, and the partnership would last for years.

Agency of Record arrangements dominated the ad industry, primarily because agencies knew the traditional platforms of broadcast and print well. While having an agency of record continues to be common, client attitude toward it has changed. AORs didn’t manage to convince clients that they could handle the speed and complexity of the new interactive and social platforms as well. Now, marketers are increasingly seeing instances where moving forward without an agency of record was not only possible, but also beneficial.

Agencies willingly participated in fraying the AOR relationship by unbundling media operations. Their inability, or unwillingness to integrate marketing communication led to fragmentation. Specialization became the name of the game and the belief that no single agency could possibly handle all client needs became prevalent.

Perhaps an even greater paradigm shifting was the rise in importance of Procurement and a cost efficiency model. In many companies the full service AOR model is being challenged as Procurement is taking the lead on finding agencies

Now, some might argue that the continuous fight to determine the best agency for any given job at any given time is a good thing. After all, why wouldn’t a brand want the best work for every campaign? Others might argue that continuous change can be harmful as it doesn’t allow for forming the kind of deep relationship that fosters trust which is necessary for risk taking.

The agency of record model may never again be the industry norm for client/agency relationships, but I doubt that it will disappear completely. The idea of an agency of record is still valid, but it depends upon the industry, the client’s marketing needs and the product itself.

However, it’s unlikely we will ever return to the glory days of the AOR – at least in a world where agencies are no longer perceived as true business partners, but as vendors.

Source

"Rethinking the Agency-of-Record Model." Avidan Strategies, 2014.

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