I spent most of my career working in marketing agencies, and though I can’t speak for all of them, I can confidently say that all the agencies (both large and small) I’ve worked at fell into similar traps, which if they don’t address – will lead to their ultimate demise;
Trap #1: The Pursuit of Pipeline
Agencies need clients to grow, and since closing new business often takes weeks if not months they need to constantly be building pipeline. And how do you build pipeline? You go out there and sell! In the capitalistic words of Alec Baldwin: “ABC – Always Be Closing… You close or you hit the bricks… You get them to sign on the line which is dotted…”
Okay, so what do agencies sell?
Agencies sell what they do, not what their clients need. And rarely, do all clients need the same things.
Trap #2: The Pursuit of Profit
Here’s a simple rhetoric: Agencies are businesses. Businesses are entities built for profit. The first step towards profit is revenue. Revenue comes from clients.
How do agencies price their services? The most common pricing models are:
- Percentage of spend
- Fixed (by project/deliverables)
- Any number of combinations of the above
Yet here are some of the problems with each of these:
- When agencies charge clients by the hour – they have a clear incentive to maximize billable hours
- When agencies charge clients a retainer – they have a clear incentive to minimize billable hours
- When agencies charge clients a percentage of ad spend – they have a clear incentive to increase ad spend
- When agencies charge a fixed price – they’re reducing certainty; unpredictable variables that can increase their necessary investment (time + money). Since the return (reveue) is fixed, this is a potential business risk.
Profitable agencies maximize client revenue because it’s within their best immediate business interest. But they should be maximizing the value delivered to their clients. They rarely do…
Trap #3: (Lack Thereof) Integration
Successful businesses understand that they’re not selling products – they’re selling solutions to problems.
And the only way to truly understand a problem is to talk and (mostly) listen/observe the people who are experiencing it. This is key to figuring out and refining the best possible solution (product) and value proposition (marketing + sales).
Wich leads me to the next point – The holy trinity of Marketing-Sales-Product. These three key business functions should have a symbiotic relationship. Growth minded organizations find ways to create constant feedback loops between the three to maximize learning adapt accordingly. After all, each of these functions owns a unique perspective:
- Sales teams talk to prospects every day – positioning them well to better understand their prospects’ pains and solutions
- Product teams observe how users interact with their solution – positioning them well to figure out how to build something better as well as understand what clients need (which is quite frankly often different from what they think they need)
- Marketing teams develop assets and build inbound/outbound conversion funnels. Good marketing teams run experiments and rely on data, not intuition – positioning them well to see the big picture, understand macro trends and where lay the potential for scalability.
If the above three business functions are inherently reliant and related – outside marketing agencies will always be siloed from the ins and outs of the other business components. Sure, they can spend more time talking to users/product/sales. They can spend weeks or months experiencing the product or hanging out in client offices…
But then who pays for all of that?
Can outsourced marketing be truly integrated
In short – my argument is that it cannot. For marketing to truly be an integrated compontent of a business it has to live in-house… That said, this doesn’t mean that all marketing should be in-house.
Agencies absolutely provide value – typically in the shape of expertise, an outside perspective and being a trusted partner that can handle a component of business growth.
When marketing agency incentives are not aligned with client business incentives, it opens the door to potential conflicts of interest, which basically spells no win-win; someone has to lose.
Conclusion: The pursuit of Win-Win
The solution? though most client/agency relationships start with a discussion around goals and expectations, they should also be discussing the right way to align incentives and build a plan that keeps client growth as everyone’s top priority.
Granted, this is often easier said than done…
In other words – similar to marriage it’s about finding the right match. I believe both clients and agencies should be more selective in choosing their respective partners. Like any good relationship it requires frequent communication, transparency and accountability between both parties. But as long as expectations are in check and everyone is working towards the same goal – sure it can work.