Category exclusivity was developed decades ago and embraced in the Mad Men era when clients viewed agencies as indispensable business partners. Although business has evolved to reflect the changing dynamics of the marketplace, clients continue to cling to the notion of exclusivity.

Today, client-agency relationships are marked by shorter contracts and re-pitching the business as clients focus on cost savings over continuity and value. And as work shifts from retainer to project-based, there’s no longer a justification for category exclusivity when a long-term commitment is not offered.

One of the most exciting aspects of the advertising and marketing communications industry is the dynamic nature of creativity and innovation. Limiting an agency’s focus to one product category or client can restrict the creative potential of agencies and stifle competition and innovation.

Other client service sectors, including legal, auditing and accounting, have broken out of category exclusivity and thrive on expertise and a bench of diverse talent to provide greater depth for clients.

Challenges and consequences

The core asset for any agency is its people, and supporting their development is important for the health of the organization. But when there is a lack of flexibility with category exclusivity, they are not given broader opportunities to expand their expertise. Category exclusivity hampers staff recruitment, retention and development.

There also needs to be consideration for how this outdated dynamic impacts DE&I efforts of agencies and the broader industry to ensure greater inclusivity and belonging. And in terms of career development, top employees don’t want to be limited to working on one client, especially given the ramifications if the client leaves.

It’s challenging for an agency to pitch for new business without expertise in a category or leaders who have strong experience in the sector. Ironically, clients seek agencies with category expertise but don’t truly value that knowledge. It’s a bit of a catch-22—agencies need experience to compete but are expected to not have “conflicts” in the category.

Some larger marketers push for exclusivity at the holding company level, further hampering agencies. Yet, other large organizations, including in the consulting, finance and auditing fields, routinely manage perceived conflict, using their category expertise as a selling point.

Expanding expertise

In the same way, as technology allows the industry to move beyond marketing and advertising and take on broader client assignments, there must be a shift in the way business is conducted.

Many agency companies now offer an array of services, with consultancies including Accenture Song and Deloitte Digital providing confidentiality and discretion—but generally not category exclusivity. Agencies have also expanded their business by acquiring companies, including data and analytics firms that never offered category exclusivity. Updating contracts makes it difficult to expand and extend the restriction. 

Here are six ways agencies can address exclusivity with clients to reinforce confidentiality:

1. Establish house accounts in different states or cities within a state if the agency has the scale.
2. Create physical separation if the agency has multiple floors in a building or multiple buildings/offices within a city.
3. Create a separate and secure work area if separation by floors isn't possible.
4. Establish separate agency teams depending on the size of the account.
5. Manage client data access by establishing separate server/cloud accounts.
6. Create separation of entities within the agency (e.g., bespoke name and resources).

Promoting a more open and diverse landscape can drive growth and success for all stakeholders. This seems to be a lingering emotional issue for companies that want agencies to prove their loyalty and commitment through an outdated contractual obligation. It’s time to replace category exclusivity with a focus on leveraging talent and specific policies to assure confidentiality. After all, two category clients are a conflict, but three or more equals expertise—as seen in the health care category. It begs the question: What’s next for your agency in 2023?