As marketers, we know that the world of marketing and advertising has been undergoing radical changes. New technologies have made broadcast and print advertising less important, while at the same time created a wide variety of new channels to communicate with consumers. This change is starting to affect the way advertising agencies relate to their clients. Frito-Lay is just the latest large corporate brand to drop its exclusive relationship with an advertising agency in favor of hiring a wider variety of agencies on a project-by-project basis. On the flip side, Lyft recently created a social media splash by announcing a “wildcard” slot for small agencies to pitch to become the ride-sharing company’s agency-of-record (AOR).How will these marketing trends affect the future of the advertising industry?
Why Is the Agency-of-Record Falling from Favor?
When broadcast and print advertising were the only communication media available, companies typically picked one advertising agency, the AOR, to manage their ad campaigns. The AOR was an exclusive business partner with the corporate client. Today, many major brands, including Frito-Lay, Best Buy and PepsiCo, are dropping their AOR in favor of a project-based approach.
One factor that is contributing to AORs fall from favor is that they remain rooted in broadcast and print advertising. Corporate brands are not confident that AORs can handle digital marketing, which is where a vast majority of customer brand engagements are taking place. Additionally, online communication channels are so diverse that it is hard to master them all. Large brands are compelled to bring in different agencies to handle different online campaigns.
What Is the Alternative to an AOR?
The alternative to an exclusive relationship with an AOR is to hire agencies on a project-by-project basis. It makes sense to hire the most qualified agency to execute your project. If your AOR can not handle the digital channels you want to explore, then hire the top agency that can handle them. For example, not all digital marketing agencies are equally experienced in running online promotions.
A potential problem with the project approach is that there is no single agency in charge of brand identity. If each project does not represent and implement the key brand concept, there is a risk of diluting the brand message. Ultimately, a corporate brand may have to create an in-house AOR that has custody and ownership of the brand identity. Some companies are accomplishing this by forming internal brand councils who are responsible for approving anything associated with the brand. This in-house group is entrusted with overseeing the execution of various marketing and advertising projects by specialty agencies.
Are AORs Gone for Good?
AORs are not necessarily gone for good, but it’s clear their role may be evolving. As was shown by Lyft’s call for pitches from major agencies, some modern brands are still embracing the AOR. A traditional AOR may become the lead creative agency. The AOR develops the brand concept and decides the best channels to communicate its message. Another, more specialized agency, may be brought in to execute specific campaigns, especially in the digital space. The AOR is responsible for making sure that the new agency’s work preserves the company’s brand identity, but it does not develop the specific campaign. Instead, agencies who specialize in certain channels, or specific types of marketing, will develop each campaign in those channels.
The Evolution of the AOR
Some AORs are keeping pace with the rapid changes in the industry. Holding companies are amassing agencies with expertise in different disciplines and responding to RFPs using whichever agency best fits the clients’ needs. Online promotions are a perfect example of a marketing tactic where it makes sense to outsource to an agency with deep expertise, rather than entrust to a traditional AOR. Since we specialize in this space, we have a better handle on the current trends, new technologies, and, perhaps most importantly, the legal considerations that come with them.
The bottom line is, agencies with different skill sets are increasingly working together to execute multi-faceted marketing plans for their clients. Just as with most other things in the marketing and advertising world, AORs must evolve to meet the needs of today’s modern brands.