Are AORs going the way of the dinosaur?

Why get married to your ad agency when all you really want are a few memorable dates?...

Why get married to your ad agency when all you really want are a few memorable dates?

That’s the question Sony of Canada might well have been asking last month when it awarded a project assignment for its consumer electronics division to Toronto-based Zig.

In January, the Willowdale, Ont.-based firm broke with Toronto-based MacLaren McCann, its AOR on consumer audio-visual and information-technology products, and decided – for the time being, at least – to produce its communications on a project-by-project basis, says John McCarter, general manager of advertising and corporate affairs at Sony.

While the contract with Zig was awarded because Sony needed a quick turnaround on a multimedia project and did not want to conduct an agency search to get it done, McCarter says there will likely be more one-off assignments to come.

‘The opportunity, for us, is to get to know an agency and their people and vice versa without a formal AOR designation,’ McCarter says.

Sony’s decision is evidence, many agency executives say, of a trend within the ad business. A growing number of clients, they say, are doling out individual assignments, and many are opting out of the time-honoured agency-of-record (AOR) model altogether.

It’s a shift that some believe could grow to dominate the industry, ultimately changing the way agencies hire, and doing away with stringent conflict-of-interest guidelines.

One such believer is Chris Staples, founding partner of Vancouver-based Rethink Communications. Only four of his agency’s clients are signed on a retainer basis. The rest, including Stockhouse.ca, Canada.com and Maclean’s, have all come on board as project assignments.

‘It always struck me as vaguely stupid that agencies would be on retainer for clients that they only did work for once or twice a year,’ says Staples. ‘What are they getting?’

‘Obviously, some of these big clients that have 100 ads a year need an agency that’s going to be there. But there are a lot of other clients that don’t advertise that way.’

The reasons cited for this paradigm shift are as varied as the assignments clients require. But one thing is certain – shrinking ad budgets on the client side and high staff turnover on the agency side have caused many clients to rely less on their agencies and more on themselves to shepherd their brands.

One beneficiary of project work is Gee, Jeffery & Partners Advertising in Toronto. The agency was recently awarded an assignment from Rogers AT&T Wireless for a new youth product line because, according to a Rogers AT&T spokesperson, the wireless service wanted a look and feel well removed from work being done by its AOR, Toronto-based MacLaren McCann.

While Rogers AT&T has not abandoned the AOR model, Gee, Jeffery president and CEO Peter Jeffery says he has noticed an increase recently in clients who have.

‘Clients are looking for specialized skill sets,’ he says. ‘There are fewer generalists and more specialists even within their own organizations. And they’re replicating that within their agency servicing structure.’

In some cases, the switch to project work relates directly to the shortage of experienced talent within agencies. Because of the high rate of turnover and a lack of training in many agencies, clients have been increasingly building up their own marketing departments to assure their brand message remains consistent, says Andy Macaulay, founding partner of Zig.

This, he points out, is in sharp contrast to the way things were done in the 1960s and 1970s when agencies tended to act as entire marketing departments for clients. Nowadays, he says, many clients are asking, ‘If I own the long-term stewardship role, why do I need to have a long-term agency that in some senses duplicates that?’

Another factor, Macaulay says, is the pace at which the business world is moving.

‘Clients are being confronted more quickly with changing situations and want to maintain flexibility to throw the right resource at a problem,’ he says, ‘without necessarily being locked into long-term relationships.’

While speed isn’t the issue for London Drugs, the 52-store Vancouver-based chain is considering a project-based relationship for another reason entirely – through no fault of its own, it keeps losing its AOR. Last month, Vancouver-based Bryant, Fulton & Shee resigned the account following its merger with Toronto’s TBWA/ Chiat/Day, which is on a retainer with Shoppers Drug Mart. Five years before, conflict issues also resulted in London Drugs parting with Young & Rubicam.

Needless to say, having to conduct an agency search and bring the winning firm up to speed on the drug store business can be a frustrating and time-consuming process, says Wynne Powell, president of London Drugs. Particularly when you were happy with the work your old agency was doing.

So, he says, the company is contemplating a change in approach. ‘We think we may be less at risk if we split the tasks up with three or four specialists,’ says Powell. ‘If we happen to lose one, we don’t lose the whole body, just part of it.

‘Conversely, if one is not pulling its weight, you can just change the one rather than having to throw everything out in the process.’

Ultimately, if the company does decide to go this route, Powell will be looking to add resources and staff to the chain’s in-house marketing department, he says.

The project model works very well for a number of industries – think construction and commercial production – where businesses with a core of expertise come together for a specific project, and, at the end of the job, go their separate ways.

This is much how things are run at Riddochdickinson, a small Toronto-based agency that has been working exclusively on project assignments since it was launched 14 months ago by Brad Riddoch and Patrick Dickinson.

‘There is a lot of freelance out there and strategic alliances we can draw upon,’ says Riddoch, whose clients include Maple Lodge Farms and Toronto radio station Classical 96.3 FM.

On the downside, however, he says it’s hard to make a long-term commitment to employees when you’re working on a project basis.

Additionally, the shift to project work raises the conflict-of-interest question. Under an AOR relationship, clients can be assured that any proprietary information stays that way. But who’s to stop an agency from accepting business from a competitor when there’s no formal relationship in place?

And what of those agencies that have spent small fortunes on creating fully integrated operations that can offer everything under the sun to clients who require full-service work? Will they one day find themselves on the outside looking in?

Not likely, says Domenic Caruso, president and COO at MacLaren McCann. Large agencies already have separate creative, media, design and interactive business units. This allows them to parade out the elephants one at a time or as one happy family – whatever the client needs.

Besides, he says, there are some unique advantages to retainer relationships. ‘[Agency] people have an understanding of the [client's] business; they have an understanding of the client’s processes. In the end, that makes life easier for clients so they can concentrate on more important things like the big marketing initiatives that they want to develop, rather than the management of the marketing communication process.’