How the AOR Cycle is Killing Creativity

Cannes Lions

In the marketing world, creativity is hard earned for both the agencies hard-headed enough to create the work and the clients brave enough to buy it. That’s why Cannes Lions is such a big deal for agencies and marketers. It’s a celebration of creativity. But creativity is getting harder to come by and four key industry changes have exposed one of the most common practices in our industry — the Agency of Record (AoR) relationship – as the primary barrier to delivering more creativity.

Marketing Has Changed More in the Last Five Years Than in the Previous 50 Years

The AoR relationship where one agency handles all of a brands needs is effectively dead. Brands have to work today with a wide range of specialists, which requires flexibility in relationships and the ability to bring in new partners quickly and efficiently to respond to changes in the marketplace. Brands are hamstrung by an extensive pitch process that limits the ability to move fast and work with multiple partners, as well as the incredible difficulty of finding all of the relevant agencies who are excellent at doing exactly what they need, when they need it.

Bad Pitch Math

The economics of AoR engagements, especially when we factor in new business costs, has only become more difficult and this reduces the ability of agencies to focus on developing the creative work that truly matters. The costs associated with pitching typically ends up as overhead that the agency has to fund somehow. So when you pay an agency, you are helping to fund all of the lost pitches the agency has participated in that year. This creates a scenario where agencies have to hold on to the business for multiple years to make it profitable, which keeps agencies focused on maintaining relationships instead of being creative.

Inflexible Relationships

Pitches are so time consuming and expensive to run for agencies and brands that both sides try not to do them — yet it remains the predominant method for choosing a new partner. The pitch process works against everyone’s ability to be flexible and nimble. The high investment made upfront in the pitch process means that everyone is stuck with each other for a long period time. There’s an initial burst of creative work and then a lot of time spent developing relationships to make the partnership function.

The Valley of Despair

The Valley of Despair

The problem with the AoR relationship is that the way we get into that relationship typically requires a big expensive pitch. That time and cost mean everyone is reluctant to be flexible once inside the relationship, and agencies and clients prioritize the “relationship” over the work. This chart from a study last year from Razorfish and Contagious shows how Cannes Lions win rates peak in year two of a relationship and then dip between years three and 11. The study argues that this is evidence of the value of long term agency-client relationships, but it also shows how brands and agencies prioritize relationships over creative work. This should not be the choice everyone is forced to make.

Conclusion

Structural changes in the industry need to prioritize creativity and business results over a rigid pitch process that is inefficient, engenders lock-in, and is expensive. Moving away from a traditional AOR relationship into more project based work, doing away with the expensive and time consuming pitch process, and onboarding new agencies quickly and efficiently can result in more of the creativity that everyone wants.

Gabrielle Tenaglia is GM, marketing sector at Globality.

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