Charting the Industry: On the Endangered Species List—The AOR


The PR agency of record relationship appears to be going the way of the dinosaur, says the Communication and Public Relations Generally Accepted Practices (GAP VII), published by the USC Annenberg Strategic Communication and Public Relations Center.

Over the last 10 years, client organizations’ use of a single outside PR agency of record has consistently decreased. In 2002, more than 50% of public corporations reported an AOR relationship.

This number has decreased continuously and has now shrunk to just over 15% (see the chart). At the same time, the number of agencies used by corporations on a project basis continues to increase, finds the study.

The reason for this gradual extinction? Steve Cody of Peppercom sees two dynamics at play: First, the near complete erosion of trust and loyalty in corporate America.

“Employees no longer trust employers, and clients no longer trust agencies,” says Cody. And second, ever-increasing pressure on the CCO/CMO to deliver bottom-line results fast. “So, desperate to please his master, the CCO or CMO changes agencies as frequently as he does his clothes,” he says.

For Helene Solomon of Solomon McCown & Company, part of this trend has been caused by the tough economy. “Clients have a right to be selective and cautious, especially at a time when their needs outstrip the resources at their disposal,” says Solomon. “This is the new normal.”

This is why Solomon McCown views project-based engagements as a point of entry to demonstrate the ability to serve as smart, strategic partners to clients. “By proving ourselves in the context of our clients’ business goals, we’ve parlayed many projects into longtime, preferred provider relationships,” says Solomon.

Tough times have also changed client planning from traditional 12- or 18-month time frames to six months, stifling the longer-term agency-client bond, says Todd Hansen, principal at O’Malley Hansen Communications.

PR BUDGETS GROWING

The good news for agencies is that PR budgets are generally on the upswing, according to the Annenberg study. When asked about budget expectations for next year, more than 50% of the 620 senior communicators who responded expect no change, while about 25% anticipate budget growth.

Social media may also have something to do with the decline of agency-of-record relationships, says Solomon. “When social media first began to emerge as a viable tactic, some clients were persuaded that they needed to rely on specialist outfits to develop and manage it,” she says. This began to chip away at the agency-of-record tradition.

Indeed, the Annenberg study finds that 70% of PR/communications departments report budgetary responsibility for social media monitoring and 66% for social media participation. This reflects a 17% and 13% growth, respectively, over two years ago.

There’s a third factor in the decline of the AOR that Hansen cites, which is a harbinger of good things to come: There are a lot of high-quality of agencies in the marketplace right now. “This has created a true buyer’s market for those shopping for agency support, and clients are taking advantage of it,” says Hansen.

And it also creates an opportunity for agencies to show their stuff to clients, possibly leading to a long-term deal. PRN

CONTACT:

Steve Cody, scody@peppercom.com; Helene Solomon, hsolomon@solomonmccown.com; Todd Hansen, todd.hansen@omalleyhansen.com.




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About Scott Van Camp

Scott Van Camp is editor of PR News, an executive-level, reader-supported publication that helps enhance the business impact of PR. Scott has a rich background in both journalism and PR/marketing. He has more than 15 years of experience as a writer/editor at various consumer and trade publications. Scott was with VNU Business Publications for five years, including stints as managing editor at IQ News and Technology Marketing magazines and senior editor at Brandweek. In the PR/marketing sphere, he has served as corporate communications manager at MarketBridge, a marketing and sales consultancy, and as editorial director for the Chief Marketing Officer (CMO) Council. While at the Council, Scott led several high-profile marketing research projects. He has also operated his own communications and media consulting firm, SVC Communications.



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