Agency Account Reviews Are Increasing

Pandemic-spurred business transformations, among other factors, have led brands to seek new creative services — affecting external and in-house agencies alike

By Chris Warren

Jing Jing Tsong/theispot.com

In early September, SC Johnson consolidated its global creative account with WPP, moving away from an arrangement that previously split the work between WPP and Omnicom. That came on the heels of Bud Light hiring Anomaly to be the creative agency of record for the company's beer account. Earlier this year, KFC selected MullenLowe to be its new creative agency of record and parted ways with Wieden+Kennedy.

These are just a few in what has been a steady flow of high-profile agency account reviews, as dramatic and ongoing changes in consumer behavior have led to a surge in the number of companies switching their creative services agencies.

Indeed, top brands ranging from Unilever to Coca-Cola to Meta have gone through account reviews, representing billions of dollars in the past 18 months or so.

According to a survey of 300 marketers and agency executives released by Setup, which matches marketers with agencies, about one-third of U.S. brands in 2021 said they were contemplating changing their ad agency within the next six months, the latest such statistics that are available. (The 2022 survey is scheduled to be released later this year.)

There are several factors driving the surge in ad account reviews, starting with the disruption caused by the pandemic. For instance, when many marketing and agency executives began working from home due to COVID-19 lockdowns — and shifted most if not all their interactions to online platforms — brand managers were jolted into beefing up their digital capabilities and changing the metrics used to evaluate potential agency partners. The growing need among brands and organizations for diversity, equity, and inclusion (DEI) and new talent has also led to more churn.

"What has changed dramatically is both the skillsets that clients are looking for from their agencies as well as the criteria they use to select what agencies might be right for them," says Tom Browning, president of JLB + Partners, an ad agency search firm. "The explosion of digital channels, the increased difficulty of reaching their target audience, and the importance of data and analytics for evaluating performance and informing marketing plans are now essential services for nearly all agency engagements."

Limitations of In-House Agencies

Joe Koufman, founder and CEO of Setup, says that many of the brands his firm works with initially responded to the pandemic by vowing to build in-house agencies to handle all of their marketing needs. A survey of 265 primarily Fortune 500 companies by the In-House Agency Forum (IHAF) found that 80 percent of companies brought more of their advertising and marketing communications work in-house in 2020 and 2021.

However, as more companies launched in-house ad agencies, brand managers started to notice their limitations.

"Some have realized they don't have the capacity to serve their internal client and now have to find agency support to augment the internal team," Koufman says. "The kinds of people who work at an agency want to work on auto today and CPG (consumer packaged goods) tomorrow and travel the next. They don't want to do the same thing every day for three years."

Koufman works with one of the largest hotel chains in the world, which built a large internal team to provide marketing for all of its brands only to have brand managers grow frustrated and come back asking for the agency's help.

One frustration for the brand, which Koufman declined to name, was with the quality of the work produced in-house. Another was with the amount of time required to get marketing and communications projects finished. "The challenge is that there are bottlenecks when brand directors are trying to accomplish marketing programs and campaigns because of limited resources within the company to help," Koufman says. "Now the company is considering going back to hiring external agencies to serve the brand directors' needs better."

Emily Foster, director of the In-House Agency Forum, says that her organization has always advocated for collaboration between internal staff and external agencies. "Our assertion is that when in-house and external agencies work together in close collaboration, the combination of talent, capacity, and capability they have can result in unique value for the businesses they serve," Foster says.

Both Sides Alter Their Selection Strategy

Even though the pace of account reviews has quickened, it's important for brands to understand that the power dynamic has also changed. While brands may be interested in finding a new agency, not all agencies are clamoring to land new clients. And even if they do participate in pitching for new business, agencies are increasingly reluctant to respond to every last question.

While the actual mechanics and fundamentals of account reviews haven't changed much, the economic environment has altered the process, says Joanne Davis of Joanne Davis Consulting Inc., whose clients have included Dunkin', ExxonMobil, and TD Bank.

"A shrinking economy and inflation drive clients to want more, faster. Although we advise marketers to try harder with your current agency, after several attempts, the marketer runs out of patience," says Davis, who is also an instructor with the ANA Marketing Training & Development Center. "What has changed is that in a talent-shortage world, agencies are more empowered and more selective in accepting opportunities."

In the United Kingdom, the need to improve the process to connect advertisers and agencies resulted in the 2021 launch of the Pitch Positive Pledge. The initiative is driven by a belief that frequent, complex, and stressful pitches waste the time and resources of advertisers and agencies. The pledge, which was signed by the likes of Google and Ogilvy, asks advertisers to commit to a range of actions, including putting in writing why they are initiating a pitch, a description of the scope of the work, and a proposed timeline for a decision. Agencies also commit in writing that they have the ability and capacity to do the work.

Streamlining the RFP Process

For better or worse, the request for proposal (RFP) process weighs heavily on how brands pick their agencies.

ANA member Ferrara Candy Company, the maker of candy and cookies like Keebler and Famous Amos, has observed the frustration agencies have with the RFP process firsthand. "Agencies don't want to spend time on detailed RFP requests and see the time and effort to respond as a lot of time wasted," says Ata Khan, director of indirect procurement at Ferrara.

Ferrara is working to streamline its RFP process to make it easier for agencies to engage with the brand. For example, Ferrara has minimized the number of general questions agencies have to answer and focused instead on questions relevant to the specific task. In addition, Ferrara has accelerated its internal review process to deliver rapid feedback and answers to RFP respondents.

Khan is also trying to grow the diversity of the company's suppliers. "Our consumers are diverse and the intent is for our supplier base to be similar to our consumer base," Khan says. "We are far from that now."

Another challenge for Ferrara when it comes to account reviews is that many small-sized or minority- or women-owned agencies just aren't as visible as large agencies. Ferrara is working with organizations such as Chicago's Minority and Women-Owned Business Certification Program to try and remedy the situation.

"They are a funnel for RFPs. We can tell them our requirements and they will give us two or three options," Khan says. "That helps with the vetting process and can make these connections happen faster." (The ANA also has resources for finding diverse suppliers.)

Khan stresses that including diversity as part of the agency RFP process helps to improve Ferrara's ability to connect with customers and grow its business.

"A lot of diverse agencies are good, and we want to work with them," he says. "But it's also because we have brands like [the candy] Now and Later that has been embraced by the African-American community and we want to work with agencies with expertise in the community."

 


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