Throughout the advertising industry, there is a continual fear that the traditional agency of record is going by the wayside. Indeed, as brands both pivot to more project-based work and develop their own internal teams or in-house agencies, there is legitimate concern about the future of the AOR.
Last year, Budweiser officially moved away from its AOR model, and more work created by in-house agencies (Google had ads in this year’s Super Bowl) is becoming more commonplace. Additionally, according to the Association of National Advertisers (ANA), 78 percent of its members reported having some form of an in-house agency in 2018, up from 58 percent in 2013 and 42 percent in 2008.
“Traditional agencies are becoming increasingly challenged as marketers move more work in-house while encouraging their external agencies to provide differentiated services and increased value,” said ANA CEO Bob Liodice in a statement last October. “We expect the current trends to continue, with accelerated client movement to in-house agencies.”
Yet recently, Kroger, the nation’s second retailer with more than $122 billion in annual sales, announced that it is seeking its first-ever creative agency of record. The company, based in Cincinnati and founded in 1883, sent out its first RFI about two weeks ago that includes, according to Mandy Rassi, Kroger’s head of brand building, a range of creative agencies.
“We’re considering larger firms and independents,” she said. “What we’re really trying to do is make sure that we’re casting a [wider] net to consider all of our options.”
What makes the Kroger brand an enticing opportunity for a creative agency is the sheer breadth of the brand itself. In addition to its own banner, Kroger owns more than a dozen well-established local and regional brands across the country including Ralph’s in California, Fred Meyer and QFC in the Pacific Northwest, King Soopers in the Rocky Mountain region, Mariano’s in Chicago and recently-acquired Harris Teeter in the Carolinas.
With an ad spend of over $78 million from January to September 2018 (among Kroger, Fred Meyer, King Soopers, Mariano’s and Ralphs according to Kantar Media), there is a level of complexity yet, according to Rassi, the agency chosen will have an opportunity to create a consistent, flexible platform that allows for local opportunities as well.
But, the biggest thing that Rassi, a 14-year veteran of Procter & Gamble in various global strategy and consumer insight roles, is looking for is an agency that can help bring a fresh perspective.
“[We are looking for an agency] that can come in and push us out of our comfort zone and help us transform this iconic brand in a way that’s true to our roots, but that is extremely relevant to customers in culture today,” she said.
Another big part of what will help an agency win the business is having success in working with brands that have a deep history and complexity has strengths across channels and can execute on the strategic vision. But, most importantly, the agency that wins will be able to tell Kroger’s story well.
“The creative has to make you feel something,” said Rassi. “This brand has a lot of heart, and we hope to find someone who, first and foremost, really gets the brand and is able to play that back to us in the strategy, but then also in the creative transformation in a way that actually connects with people on a human level. We don’t want to chase someone else or try to be something that we’re not.”
Critically, the notion of partnership is another significant consideration for Rassi and Kroger.
“We don’t want to get to a place where we have agencies managing agencies,” she said. “We want to be close to the work.”
Kroger will continue to leverage its internal teams and retain its existing agency partner relationships including The Community, which has been focused on the brand’s multicultural work since 2015, and 84.51, the retailer’s own consumer insights subsidiary which was spun out from Dunnhumby in 2014. Additionally, some of the brand’s new initiatives like its ambitious Zero Hunger | Zero Waste program to end hunger and eliminate waste across the company by 2025 and others with the likes of Microsoft to keep pace with Amazon and Walmart in cashierless store technology and autonomous grocery delivery will continue to evolve.
But, bucking the trend of going with one main agency versus project work, Rassi feels that there is no better time to select its first creative AOR in company history.
“[A creative AOR] is important because this is a big pivot point for us,” she said. “We’re viewing this as almost a relaunch of our brand.”