Small marketing agencies are becoming more popular with enterprise businesses following a decline in the use of the Agency of Record model.
The Economist Intelligence Unit survey of 307 multinational companies with annual turnovers of over $1 billion in the US, UK and Europe – commissioned by Globality – found despite 58% of respondents stating they currently rely on AOR when working with marketing firms, 66% expect to switch to a small or medium agency in the next year and a further 34% expect to be working with individual consultants.
Professional service providers were proven to be the most popular businesses to hire, and over three-quarters (78%) said they believed companies with specialised services would be more valuable to them. This has led to 66% of respondents saying they expect SME service providers to have an important role in their business within the next five years.
Yuval Atsmon, SVP of advisory services at Globality, said: “The old Agency of Record model is being challenged. That’s not to say that these Agencies of Record are not important, many business leaders continue to use one, but smaller agencies are taking on a bigger piece of the pie.”
Costing came across as the biggest challenge for respondents when working with external agencies, with 56% admitting it was difficult, and this was also a primary motivation to switching to a smaller agency.
“Given that costs are the single biggest challenge cited by business leaders when working with external providers, there is potential for savvy boutique agencies to offer better value for money and more bespoke services,” continued Atsmon. “However, sourcing, vetting and evaluating agency capabilities continues to be a challenge when hiring new providers. Executives need easier ways to source and vet agencies and technology such as artificial intelligence matching is one way they can do that.”