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Cost is far and away the leading challenge faced by enterprises when working with external marketing agencies, and it may be leading them to look at smaller outfits, according to a study [download page] from Globality, conducted by the Economist Intelligence Unit (EIU).

The study is based on a survey of 307 corporate executives from companies headquartered in the US, UK and Europe. Respondents have responsibility for managing relationships with external service providers, and their companies have a minimum of $1 billion in annual revenues.

Despite the large coffers presumably at their disposal, a majority (56%) of respondents said that cost is one of their main challenges with external agencies. That aligns with new research from Provoke Insights, which found that cost is the leading reason why clients put agencies up for review.

In the Globality report, (lower) cost was also cited as the leading reason why companies would choose an SME over a large agency. And a sizable proportion of respondents seem to be headed in that direction.

Although two-thirds of respondents either have an agency of record (AOR) or plan to appoint one, many also say that they’ll be using smaller agencies and individual consultants for specialized projects. In fact, two-thirds expect to use a small or medium-sized agency in the next year instead of their AOR for marketing projects, and one-third say they’ll work with individual consultants.

For some, this will be a growing trend: 4 in 10 strongly agree that firms with specialized skills will be more valuable to them than full-service providers in the next 5 years. And 3 in 10 strongly agree that small to mid-sized agencies will play an important role for them in 5 years.

Meanwhile, there are other challenges to working with agencies that go beyond cost. The other top roadblocks cited in the report are:

  • Evaluating agency capabilities (34%);
  • Negotiating contracts (28%);
  • Sourcing agencies (25%); and
  • Lack of familiarity with the client’s business (23%).

It’s encouraging to see that lack of familiarity is the least-cited challenge, as separate research indicates that a true understanding of the company’s goals and objectives is one of the most important factors for agencies to display in order to stand out in the pitch process.

The full report from Globality can be downloaded here.

About the Data: The report describes its methodology as follows:

“This report was written by The Economist Intelligence Unit. In October-November 2017 we conducted a survey of 307 corporate executives from companies headquartered in the US, UK and continental Europe. All respondents were director-level or above. They were responsible for managing relationships with external professional service providers, and their companies had a minimum of US$1bn in annual revenue.”

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