Agencies remaking themselves as AOR model changes

Back in the day…actually not so long ago, clients would choose an agency, dub them agency of record, sign a contract, pay a monthly retainer and the partnership would last for years. Everything was “hunky-dory” to use a term from back when things in the advertising business were, well, “hunky-dory.”

Both sides trusted the other would hold up their end of the bargain. The agency would live up to its promise to deliver campaigns that worked and the client would reward that dedication and success with business commitment to the agency.

Then a few things happened. CMOs begin changing jobs every 12 to 18 months. Hoping to make a mark at their new company and impress their bosses, they’d promptly fire the agency, hold a review and choose a new agency.

Agencies unbundled splitting off services which begat media agencies, creative agencies, interactive shops and, today, social media agencies. Each offshoot had specialized skills to offer brands and brands liked what they saw. Specialization became the name of the game and the mentality that no single agency could possibly handle every client need became prevalent.

To a certain degree, this was true. With the advent of the internet, the myriad opportunities it added to the plate and the speed at which business was now able to move, a fickle, “shiny new object” mentality set in. Couple that with the aforementioned 18 month CMO tenures and, perhaps even more paradigm-shifting, the rise in importance of procurement and its balance sheet-heavy mentality, and a lowest bidder model versus a trusted relationship became the standard.

Of these monumental changes in the agency-client relationship, CAHG Project Leader Mona Heggem said, “We just celebrated our 50th anniversary, which is a huge milestone for an agency to achieve. We’ve had long-standing clients – one for 50 years, another for 30 years, another for 22 years. We’ve always worked under the AOR model, but now we are seeing that procurement is taking the lead on finding agencies. We have to pitch for every single job now. We’re investing so much more in our new business efforts because we have to pitch for everything; the clients are no longer going with the AOR model because procurement is running the show. We’re pitching up against 18 agencies to keep business that we would have normally gotten from the AOR model.”

Now, some might argue 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 never allows for the two entities, agency and client, to form the kind of deep relationship that fosters trust, dedication and loyalty. The kind of relationship committed humans have with one another. The kind of relationship in which one can complete the other’s sentences.

OK, so businesses aren’t people, but there is certainly something to be said for a relationship in which both sides innately understand each other’s needs before they are expressed. Alas, cyclical as things are, it’s unlikely we’ll ever return to the glory days of the AOR landscape – at least in a world where agencies are perceived as vendors versus true business partners.

So what can an ad agency do to foster a deeper relationship with its clients and, perhaps, end the fickle cycle of continuous churn? One such agency (and we’re sure there are many others) thinks it has the answer.

Boston-based Winsper has recast itself within the management consultant space and is touting a focus on enterprise marketing ROI. Winsper Founder and CEO Jeff Winsper says marketing organizations “must use the language of the boardroom.” To Winsper, campaign ROI in a vacuum is, for the most part, irrelevant. What is important are hard business metrics such as sales, revenue, inventory turnover and geographic sales volume. This Enterprise Marketing ROI offering, as Winsper calls it, aims to directly tie advertising spend to financial performance on an aggregate basis.

In Winsper’s mind, “soft KPIs” such as leads, likes, retweets, direct mail response rate, CTR, pins, reach, frequency, CPMs, GRPs, awareness, recognition, preference and other marketing KPIs are meaningless if not tied to “hard KPIs.” It’s simply not the language of the C-Suite. The C-Suite speaks the language of the hard KPI, factors directly tied to the financial well-being of the company.

Winsper’s goal is to position itself as a company that can examine a business’s many data stores such as enterprise resource planning, sales automation, customer relationship management, marketing automation and point of sale, pull it all together and provide the insight a brand needs to run its marketing department like a business.

In this way, the agency becomes more of a business consultant. An entity that can directly map a spend to the bottom line. For Winsper, their success doesn’t depend on whether or not a campaign worked or not. It depends on the ability to answer a question that is always there and will never go away: what effect did my marketing budget have on revenue?

This, of course, has been the unattainable Golden Egg. However, with the rise of Big Data and affordable business intelligence tools to make sense of the data, tying marketing ROI to business ROI has become much easier than ever before.

Post by Steve Hall

Steve Hall is a marketing professional, publisher, writer, community manager, photographer and all-around lover of advertising. Steve has held management positions in media and account service at Leo Burnett, Starcom/Mediavest and others, working on such accounts as Reebok, Marriott, and Marshmallow Fluff.