With digital advertising tech developing faster than companies can procure it, many are turning to start-ups to work more flexibly with changing trends. The specialist knowledge and technologies they provide are allowing marketing departments to keep their finger on top of digital advertising.
Worldwide Business Research surveyed 104 heads of marketing procurement to find out more about this shift towards collaborating with start-ups. Here’s what they found:
The majority of respondents have started to work with start-ups already, although the issue is a divisive one. Only 7% are working on procuring marketing services from start-ups, while 36% are still unsold on the benefits of ditching some of their big agencies.
The case against start-ups
Integrating systems with start-ups can be a cumbersome process, and backing up and sharing data with small companies poses a threat to data security. Further to this logistical integration, integrating cultures between start-ups which lack the necessary level of management is also a common cause of problems.
Respondents reported that they often perceived start-ups as having a poor work culture. Heads of procurement lack the trust to invest, and instability is also a major factor in the decision to stick with big agencies.
The flexibility of start-ups, which is an attractive feature for some, can become a double edged sword for others, as products which start-ups offer are often still under development. Subsequently they need to be updated continuously, leading to disruption or loss of data.
Many heads of marketing procurement have qualms about whether start-ups truly offer cost-saving or value-adding services which are available from agencies. Hidden costs associated with start-ups drive up the price, while larger companies are able to offer more significant savings. The cost of innovation is high risk, and Procurement can never be certain it will pay off. While larger companies can absorb this cost and reap the benefits of trialling multiple innovations at once, smaller brands must be more cautious.
The case for start-ups
One major advantage of working with smaller companies is that marketers can circumvent the layers of bureaucracy when resolving issues. Being so small, they’re in a good position to have clear and open lines of communication. Resolving issues can be much quicker and easier.
Unilever are a good example of this. Since they got rid of half their 3,000 agencies in 2017, slashing spend on agencies by 17%, they’ve been building collaborative spaces in Ireland and Singapore. These allow marketing to work alongside up to 50 start-ups, and they’re coming for the US, Europe and Asia next.
Their plan is to dedicate more time and money to start-ups providing influencer marketing technology and user-generated-content platforms. Consequently, Unilever are producing 30% fewer ads. Clearly the company are opting for a review which prioritises quality over quantity, and they’re willing to put in the time and money to make it pay off.
Besides the flexibility of working with smaller companies, start-ups are also attractive to marketing procurement for their innovative approaches. With so many marketing technologies around, advertisers need to stay ahead of the curve if they’re going to gain the competitive edge.
A great example of this came from healthcare giants Procter and Gamble (P&G) last year. P&G announced a Dragon’s Den style pitch event at the digital conference Dmexco in Germany, where 20 start-ups would state their case, and four would be in with a chance of a 20,000 euro investment.
Sophie Blum, P&G’s VP of marketing for Europe and IME explained, "We are looking forward to engaging with the brightest minds to shape the future of brand building and accelerate growth through an open innovation ecosystem."
Working with start-ups is going to be a hot topic at ProcureCon Marketing. Make sure to download the agenda to check out all of the great activities, speakers, and sessions planned for this year.
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