Add another frustration to ad agencies pitching major brands. When does a project in review require the costs of a long-term relationship, but with the limited income and security of a short-term assignment?
The question hit home with agency executives when Best Buy put out an RFP this spring for three separate assignments: a holiday promotion, a home theater campaign and an analysis of the company’s brand research.
One stipulation raised a red flag. The winning agency would have to appoint an employee who would be responsible for the Best Buy relationship and be held accountable for its success – an arrangement typical of agency-of-record relationships, but less typical, and some say burdensome, for one-time project assignments. Best Buy also insisted that it be given authority to approve of and remove agency employees working on its assignments.
"Best Buy has written AOR language into a project-based RFP," said a senior executive at a global creative agency who asked not to be named. "Clients are suddenly saying, ‘I want an account lead, but I want to pay for it on a project basis.’ But we bill accounts by time. We can’t structure an agency like that. They can’t have it both ways."
The stipulation is more than an isolated annoyance to agencies coping with the industry’s shifting economics. As brands increasingly abandon the AOR model, agencies structured to profit from long-term relationships are scrambling to adjust. Brands see the shift as a more efficient and nimble marketing approach in an always-on, post-campaign world. But agencies fear ending up on the losing side of a new power dynamic, forced to burn money and time chasing clients with one foot perpetually out the door.
For those agencies, Best Buy’s RFP language – If they are interpreting it correctly – signals a troubling development in the erosion of agency-client relations. Or at least a shift in the type of agency that clients are looking to work with.
"Best Buy is known for wanting vendors, not relationships," said Chris Shumaker, FCB North America CMO. "Its projects tend to be tactical, and suited for shops with specialties such as CRM, event marketing and shopper marketing," which are project-oriented. "Big agencies that want that business have to ask themselves what kind of agency they want to be."
It is a question they may be asking themselves often in the years to come as such requests become more frequent. Though he has not seen this particular language elsewhere, Andrew O'Dell, CEO of Pereira & O'Dell, said requests for something equivalent to a project account lead are becoming more common.
These days, "most clients expect one point of contact to ‘own the business,’ regardless of whether it is a project or AOR assignment," he said.
Such requirements will naturally benefit agencies that are "most adaptive and flexible, regardless of discipline or size," he noted.
But size, inevitably, comes into play. Such stipulations are "not an easy ask, especially for smaller agencies that don’t have a deep bench," said a senior executive from another large agency who asked to remain anonymous. "But they are common and not completely unreasonable." Clients often want to approve the people running their business, no matter what size, "because, in reality, people are what they are buying."
Best Buy did not respond to requests for comment. In April the company announced it was shifting from an agency-of-record agreement with longtime creative agency Crispin Porter & Bogusky to a project model in which shops, including CP&B, had to pitch for assignments.
Regardless of the strain it may put on agency resources, there will always be enough players to stage a shootout for big brand-name work – a winner of the Best Buy work will likely be named this month. And in a case like this – in which one of the assignments centers on brand research – the winner could walk away with a significant advantage for the next pitch. "That assignment gets you behind the curtain and can result in some meaty conversations about the brand," said Shumaker.
For the quarter ending May 2, Best Buy reported domestic sales inched up less than 1%. Industrywide, the consumer electronics category, which represents about 65% of Best Buy’s revenue, declined 5.3%, per NPD.