Episode 334

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The last few years have thrown a lot at us — both professionally and personally. While we’ve done our best to navigate all of that unpredictability, many have struggled to not only react to these changes but adapt. As agencies continue to reframe and take stock of where we’re at in this “new normal,” I can’t think of a better time to dive into some impressive research just released in RSW/US’s 2022 New Year Outlook report.

RSW/US talked to marketers, CMOs, business owners, agencies, and the people who are seeking out their services to get a diverse and balanced read on how these groups see the world right now — and what they anticipate for what lies ahead. In this episode of Build a Better Agency our guest, Lee McKnight, shares some of the most surprising and invaluable insights uncovered during those conversations. Then together, we break them down into key takeaways and actionable next steps that agencies can take to adapt and thrive in this climate of constant change.

Lee is no stranger to the podcast, nor is he a stranger to building and maintaining solid agency relationships — even in times like these, when the landscapes of client communication, lead generation, and sales elevation seem to be shifting indefinitely.

As Vice President of Sales at RSW/US, Lee drives sales efforts to bring ad agencies and marketing services firms on board with RSW, creates content around successful new business tactics, and takes part in RSW/US marketing objectives, including social media channels, blog content, webinars, video and speaking engagements.

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.

Agency Relationships

What You Will Learn in This Episode:

  • Key takeaways from the RSW/US 2022 New Year Outlook survey, and what they mean for agencies
  • Surprising insights from marketers on spending, specialization, and shifting sales landscapes
  • Why so many marketers are pulling back on their non-marketing activities — and what that means for agencies
  • What agencies can do to elevate their sales process when face-to-face networking isn’t on the table
  • The not-so-hidden benefits of being a specialization agency
  • How agency relationships work differently in the virtual space — and how to adapt
  • Why it is crucial for agencies to alternate their content and sales platforms
  • How to build strong client relationships long before the initial pitch
“Even though we’re seeing more and more shops pulling back or reducing their personnel, we know that in-house setups are not going away anytime soon. Agencies need to learn how to play nice and coexist.” @LeeMcKnightJr Click To Tweet “While there is nothing wrong with generalist setups, agencies shouldn’t underestimate the value and growing demand for specialization. No client is going to believe that you are experts in everything, because no one is.” @LeeMcKnightJr Click To Tweet “One of the most important things agencies can do to elevate their sales process is to alternate their platforms. That, and they actually need to use them all.” @LeeMcKnightJr Click To Tweet “The lead-up to your pitch is just as, if not even more, important than the actual pitch. Make sure that you’re providing true value in their space before ever asking them to enter yours.” @LeeMcKnightJr Click To Tweet “Don’t be afraid to show potential clients your work. Even during your pitch, you can highlight your expertise and show prospects how you can solve their problem by showing them how you’ve already solved problems for your clients.” @LeeMcKnightJr Click To Tweet

Ways to contact Lee McKnight:

Resources:

Speaker 1:

It doesn’t matter what kind of an agency you run. Traditional, digital, media-buying, web-dev, PR, whatever your focus you still need to run a profitable business. The Build a Better Agency podcast presented by Light Label IQ will show you how to make more money and keep more of what you make. Let us help you build an agency that is sustainable, scalable, and if you want down the road, sellable. Bringing his 25+ years of experience as both an agency owner and agency consultant, please welcome your host Drew McLellan.

Drew McLellan:

Hey everybody, Drew McLellan here from Agency Management Institute. Welcome back to another episode of Build a Better Agency. Glad to have you here. We’re back in our normal cycle now where we have some guests with us most of the episodes. Thanks for tolerating my January, I just want to talk to you all by myself, kind of wild hair. Hopefully that was helpful to you, but anyway let me tell you a little bit about what we’ve got going on today. Before I tell you about our guest I do want to remind you that the Build a Better Agency summit is coming up May 24th and 25th. If you are an AMI member, so you’re a gold associate member, a virtual peer group member, a live peer group member, you are eligible to attend the AMI family day on the 23rd. That is an afternoon of panel discussions and then we’re all going to go out for dinner together, but you’re all invited to Tuesday and Wednesday, which are the main days of the conference.

We’ve got amazing speakers who are going to talk about topics like how do you re-invigorate your agency in terms of the way we think, big ideas, innovation. How do you build a community around your agency to support and grow your shop? How do you overcome imposter syndrome? How do you build wealth outside of your business? What should you be thinking about in terms of building up your agency’s value in case you ever want to sell it? All kinds of different topics. We’re going to have keynote presentations, we’re going to have breakout sessions, and we’re going to be back with what was one of the most popular things we did last year which were the round table. Imagine you and 8-10 other agency owners sitting around the table with an expert on taxes or cash flow or media buying in 2022, or leadership development or succession planning. You get to pick the topics and there’s going to be a subject matter expert sitting at every one of those tables ready to answer all of your questions and connect with you.

We would love to have you. The conference is in Chicago. We’re super excited about it. We’re going to do some fun things too. On Tuesday night we’re going to go back to the Flight Club and we’re going to combine alcohol, appetizers, and darts. What could go wrong? We’re just going to have a great time learning from each other, connecting with one another, making new friends, making new connections, making new partnerships. While all of that bubbled up last year and I expect it to bubble up again this year too, so we would love to have you.

All right, so let me tell you a little bit about our guest. Lee McKnight is no stranger to most of you. He’s no stranger to the podcast. He is one of the leaders at RSU US. As you know, they work alongside small to mid-sized agencies to help them with their business development program, but they do a lot of research and they do a lot of thought leadership that is really, really good, and so if you’re not following them you need to. The reason I asked Lee to come back right now is one of the pieces of research they do every year is they go out and do a really extensive research project where they talk to both marketers, CMOs, business owners, people who are buying marketing services and agencies, and they ask them some really fascinating questions.

One of the things I love about this report is not only do you hear what the CMOs are thinking and you hear what the agencies are thinking and anticipating, but you can compare and contrast how they each see the world, which is really insightful. As soon as the report came out I knew I wanted to get Lee back on for us to dig through some of the data and insights that they had, and so that’s what we’re going to do today. Without further ado, let’s welcome Lee McKnight to the show and I have a lot of questions so I want to get right to it. Lee welcome back to the show, thanks for coming back.

Lee McKnight:

Yeah thanks for having me Drew. It’s great to be back.

Drew McLellan:

One of the things that you guys do is that you do a fair amount of research.

Lee McKnight:

Yeah.

Drew McLellan:

Your latest study just came out, and I thought the information and the insights for agencies were really fascinating, so hence you’re back again to share with us what you learned. Give everybody a sense of the magnitude of the actual study, who’d you talk to, when did you talk to them, and then I have a ton of questions.

Lee McKnight:

Sure, yeah, yeah, and again, thanks. We have been doing this report, and it is the 2022 New Year Outlook Report, that’s the official swanky title.

Drew McLellan:

Yeah, I love it.

Lee McKnight:

We’ve been doing it probably since, not probably but since 2010. We’ve got some nice historical data every year that we can put against the newer data, right. Why this report typically gets some good play, and ideally is helpful for agencies, especially small, mid-sized firms out there, is we are serving marketers and agencies for this one, and it’s the only one that we do that for, right. Of the agencies we went out to, I’d say 85% are small and mid-sized firms, and that’s typically who, because much like yourself, that’s who we work with typically. Marketers it was a little more all over the map but still come in with mid-tier type of companies, some larger ones as well, against both our databases. That’s some of that background. We fielded the survey in December of ’21, so that’s the back drop in terms of, and as you said, just realized it about three weeks ago, two and a half weeks ago.

Drew McLellan:

Yeah right, yeah, so because you have the historical data and because we have been through the craziest time, I think, in any of our personal or professional lives-

Lee McKnight:

Agreed.

Drew McLellan:

… what were the surprises?

Lee McKnight:

Yeah. There were several. I’m happy to report, and course we’ll see how it all plays out, so much of this is prediction-based. You know what? I’ll start with the maybe negative first, because all the rest is pretty optimistic.

Drew McLellan:

Okay, all right.

Lee McKnight:

Yeah, one that was interesting, and it could end up being a positive thing for agencies, but we asked, one of the questions was, of both agencies and marketers, okay for agencies, “What do you think your clients in terms of non-marketing spending, investments in the business, what do you think that’s going to look like?” Then asked marketers a question about themselves. Only 21% of marketers said they would somewhat or significantly increase spending on non-marketing activities as we’re rolling into the new year. When we say that non-marketing meaning things like personnel, tech, could be R&D, could be product development, but last year in this survey it was 49%, the year before it was 77%, so a huge drop. What does that mean? Well, for us we thought it could be a negative for agencies. If they are slowly down product development, for example, and things like that, does that mean we’re going to see things drop off, because-

Drew McLellan:

Right. What trickles down to us?

Lee McKnight:

Exactly. We had talked about, just like before we came on, last year certainly a lot of what we saw with agencies coming out of that first year of COVID was, not for all, but a lot of organic growth from existing clients, fantastic. Going into this year, does this stat I just mentioned play into maybe some pull-back from those clients that you have now and some of that organic growth? On the flip side, and does that also mean well could they then be relying more on some of their in-house type agencies for example?

Drew McLellan:

Right.

Lee McKnight:

For us, we’ll take the glass half full where okay, maybe that’s a lot of opportunity for you though, right, because if they’re pulling back on some of these, is that another place for your agency to fill in because they’ve now pulled back on some of these different areas?

Drew McLellan:

Right, right, yeah. Well I think one of the pendulums that swings is, and we’re going to talk about in-house agencies in a second, but one of the pendulums that swings in our world of course is how big a department does a client have in house? Pre-COVID, boy everything was pushing towards in house. Agencies were reporting and we were seeing in our research how often agencies were losing work to in house agencies, or grabbing to co-exist. Then I think COVID hit and what we’re seeing is companies aren’t abandoning their in house shops, but they certainly have thinned the herd there, because that was an expense item on their ledger. I think agencies, the pendulum has swung now where the in house agencies are smaller, less robust, less able to handle the volume of work that they used to handle, which is a great opportunity for agencies but one of the things that I took away from your report was in house agencies are not going away and we need to learn how to play nice.

Lee McKnight:

Yeah. Since we went there, I was interested to hear from your own research, and I know all the agencies that you’re talking to on a consistent basis. When we got our report and we saw that in house agencies were actually on, were waning, and you’re right, they’re not going anywhere for sure, in December that same month AdWeek had put out, and I mentioned this in a post, that in house agencies were actually increasing. I thought, “Well that’s an interesting dichotomy,” and I pointed, and I think everyone watching, listening, excuse me, knows that those kind of stats are probably coming from the much larger firms, and the larger companies. I think the small and mid-sized firms, what we see and what our report also pointed out, it was 63% of marketers said that they expect the amount of work managed in house will decrease somewhat to significantly, it won’t change at all in ’22.

Last year the number was 36% in this survey. That’s a big decrease. That’s a positive for agencies, right, in that sense, more work coming your way, but you’re exactly right though. That’s not a new thing. Agencies have had to co-exist with these folks for awhile, but that was one of the optimistic, absolutely, that’s fantastic because we saw the same thing with that pendulum pre-COVID of, “Man there’s a lot of work sticking in house,” and that’s rough. It’ll be interesting to see how it plays out.

Drew McLellan:

It will be, but one of the things that I think sometimes we lose the optic of around the in house shop is a lot of times they’re hiring the outside agency for what we think of as the higher ticket items, the strategy, the ideation, all of that, and then the in house agency does a lot of the production work that honestly we have a hard time getting paid well for anyway.

Lee McKnight:

Good point.

Drew McLellan:

I think if you go into the in house agency relationship with that mindset of, “We are the outside counsel, and yeah you’re going to do the paperwork but we’re the ones who are going to help you set strategy, we’re the ones who are that outside perspective that you need to really create new ideas and new opportunities.” That’s where you can charge a better premium revenue, or rate, than the, “We’re resizing an ad 12 times.”

Lee McKnight:

Right? Yeah no, fair point. That’ll be one, and as I’m talking to agencies the same way you are, that is pointing out so far. Now we’re not super deep into the new year, but we’re getting some of that feedback, again from small to mid-sized agencies that, “Yeah we’re seeing some of that work leave in house.” We talked about this too, part of that is COVID, and part of that is just hiring. The hiring issue is rough all around. I think obviously both those factors are playing in to decrease that.

Drew McLellan:

Right, no doubt, yeah.

Lee McKnight:

Yeah. What else? Sorry, go ahead.

Drew McLellan:

No go ahead. What were some good surprises?

Lee McKnight:

Good surprise. Another one was just marketing spending was interesting because 73% of agencies and 68% of marketers, and by the way they are never this aligned, ever in the survey, not a shock to hear, right? The one time when they are, it’s probably the stat where we really want to see it, and that is they believe that marketing spending will increase somewhat to significantly this year. Now 68% of marketers in our survey this year, last year that was 41%, so talking about loving seeing that. Now again, we’ll see how it plays out, but those kind of predictions, and again in house plays into it too. That’s all good news as far as at least the stat in and of itself.

Drew McLellan:

Well and what I love about that is what it suggests, perhaps this is my own interpretation, but I think in 2021 we were still coming off of all of the, “I have no idea what’s going to happen next with COVID,” yada, yada, yada. Some people wore a little more cards to the vest, whereas now I think people are like, “Okay I sort of get how this is going to play out. We’re going to have some variations and blah, blah, blah, but business has to go on. Work has to go on. We’re getting back on planes, so it’s time for us to get back into marketing our products and services. We have to focus on sales this year.”

Lee McKnight:

Yeah, for sure. Yeah and I can’t imagine, knock on wood, my desk here, we’re not going to see that play out. There’s probably two other big stats that were optimistic and/or interesting, and this is one I really wanted to get your take on. Specialization, which I know is something that you consistently talk about, and I know we do too to an extent. I’ll get pushback sometimes, “Look we’re generalists and we’re doing fine. I’m tired of hearing about we need to be…” Hey-

Drew McLellan:

“And by the way, the only way I survived COVID was because I was a generalist. If I had been a travel agency, I’d be out of business.” That’s now the new nuance of that justification, yeah.

Lee McKnight:

Oh yeah, for sure. With this report what was interesting is, and I’ll go back three years. We asked the question of, to marketers, “Are you more likely to look for a specialist agency than a full-service agency?” Three years ago 52% of marketers said, “Yeah, specialization.” 60% last year. This year it’s 68%. It’s continually going up, that they’re more likely to look for a specialist agency versus a full-service agency. I’m not surprised, and while there’s nothing I can say when I’m talking to an agency that is a generalist where, “Look we’re doing well.” I can’t argue with that if they are, but I’d say at the same time, I like to point out that specialist doesn’t mean that you are a farm agency, for example, or that’s all you do, but I still tell them, and I firmly believe, because we see it and hear it from prospects and marketers, that they do want to see that you’re an expert in that sense, and that you have a specialization of some kind. It doesn’t have to be laser-focused.

Drew McLellan:

They don’t believe that you can be an expert in everything, because you can’t.

Lee McKnight:

Exactly. Thank you.

Drew McLellan:

Yeah, yeah.

Lee McKnight:

Preach it.

Drew McLellan:

In our most recent survey what we saw was the exact same thing, an increase. It was interesting because the larger the client budget, the more specialization mattered to them. If you want smaller clients with smaller budgets, which I think does align with a lot of the generalists, they tend to serve the local butcher, baker, and candlestick maker, people within two or three hours geographically of where they are, because who’s going to drive by 12 generalists to get to another generalists? But what we saw in our research was A, the clients were more likely to work with an agency more than 200 miles away from them if they’re a specialist, and B, the bigger the budget, the more important specialization was for them.

Lee McKnight:

Okay.

Drew McLellan:

Yeah.

Lee McKnight:

Interesting, interesting. Yeah that’s a nice compliment to that stat.

Drew McLellan:

Mm-hmm (affirmative).

Lee McKnight:

Yeah and I think, I don’t want to make too much of that. I think agencies generally understand that, but I always think it’s interesting when we bring it up because it gets some hackles on some of those.

Drew McLellan:

Absolutely, absolutely. I get it. It’s a little counter intuitive.

Lee McKnight:

Yeah.

Drew McLellan:

Instead of talking to 20 people who all have big bags of money, now I’m only going to talk to two people who have big bags of money. I mean I understand the math.

Lee McKnight:

Sure.

Drew McLellan:

But what I’ve seen, and I know what you’ve seen too in your work, the sales cycle is shorter, the relationship is deeper, and the budgets are healthier when they’re specialists.

Lee McKnight:

Yeah, fair point.

Drew McLellan:

Again, your business, your agency, you get to do what you want and if being a generalist and serving a broader array of clients keeps things interesting for you, or you love being apart of your local community and that matters, more power to you. There’s nothing wrong with it. You get to decide. You just need to know the facts of what you’re deciding.

Lee McKnight:

Yeah, yeah I love that. There’s the quote for sure. Another one that was a little startling but I think at the end of the day agencies now, several years into this, I would like to think have adapted, but just in terms of the in-person conferences and trade shows, that a pretty steep drop with marketers year over year from the past two years. Last year we asked if they attended in person and what we saw was marketers last year, 65% saying they attended one to five of those.

Drew McLellan:

Of a live event?

Lee McKnight:

Yes, of a live event, a live event, in 2020. In ’21, dropping from 65% to 32%, which is not a huge shock, right? Let’s think about this. Yeah of course, because oh my god, we were back and forth-

Drew McLellan:

[crosstalk 00:18:17] getting on planes.

Lee McKnight:

Exactly. I think one of the things in the first year of COVID, you saw some of those agencies from a new business standpoint who were depending on the networking, the in person, the shows, and it was a pretty big slap to that face. That stat doesn’t, I’m not as concerned because I think agencies have adapted and I would be shocked if we didn’t see throughout the rest of this year, I hope, knock on wood, those kind of numbers increase, but I think that’s definitely agencies understanding that as far as business development goes, you’ve got to have strong in house selling folks, or we know the networking, we can’t depend on that like we used to. I think they generally, well they have to know that now, right?

Drew McLellan:

I want to dig into that. I want to take a break and I want to come back and I want to hear from you what you are seeing that is being successful for agencies who aren’t hopping on planes, and aren’t doing the in-person networking and door knocking that they did pre-COVID. Let’s take a quick break and then let’s talk about how you’re seeing agencies successfully pivot that. Then I want to get back to some data, but let’s take a quick break and we’ll be right back.

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