Episode 246

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Most agencies have yet to harness the power of data automation tools, and the numbers reveal a concerning reality. 60% of all agencies believe that they make at least 6 costly digital marketing mistakes on a client’s account every week. 33% of agencies have eaten between $5-$10,000 to fix a single campaign mistake. And it doesn’t get better with size. The number of mistakes nearly doubles when a digital agency scales from $1 million to $5 million in fees. And that’s not the most horrifying news that came out of a recent study conducted by Morphio.

If there’s one thing most agencies have plenty of—it is data. If there’s one thing agencies struggle with—it’s data. That’s what intrigues me about data automation tools like Morphio. They define themselves as a check engine light for your digital campaigns. I invited founder (and agency owner) Eric Vardon onto the show to talk to us about this very real challenge. Out of his agency’s necessity, Eric’s team has been developing data automation tools baked with AI and machine learning. Eric’s products are helping agencies plug their leaks and become more profitable using data and automation, and he offers his tools at an affordable price point.

In this episode of Build a Better Agency, Eric shares his journey as a tech entrepreneur and agency owner. He walks us through the lessons he’s learned about refining agency processes, improving team efficiency, and expanding the agency-client relationship using data automation tools. He breaks down the common mistakes agencies make in that arena and explains how we can improve our own systems and processes. Find out how Morphio is working with other small to mid-sized agencies to bring them invaluable AI and machine learning capabilities that don’t break the bank.

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.

Data Automation Tools

What You Will Learn in This Episode:

  • How data and reporting have shaped the way clients interact with agencies
  • How Morphio’s data automation tools help agencies plug leaks in the bucket
  • When and how Eric decided to offer his automation tool to other agencies
  • How to leverage AI so you can focus on creativity and client strategy
  • Why you need a check engine light for your agency’s performance and efficiency
  • How you can use Morphio to make your agency more profitable
  • How Morphio has changed reporting, and where it’s headed next
  • Why data monitoring can help you make more informed decisions as an agency leader

The Golden Nuggets:

“What if we could put math behind marketing? If we could do that, clients would be addicted to the results, and it would remove the subjectivity from our process of advertising.” @helpyourhumans Click To Tweet “Humans are best at creativity. We’re best at strategy and understanding data. But there’s going to be significantly more data for us to review. We have to look at tools and automation that are going to help us.” @helpyourhumans Click To Tweet “Data automation tools can actually tell us how to modify, how to change, and how to optimize. Not only do they provide us with protection, they provide our team members with more hours to focus on other projects.” @helpyourhumans Click To Tweet “Once we told our tool what to focus on, it was smart enough to flag any information that fell outside of the norm. Then, our team knew exactly what to prioritize and what to change. Saving hours across 80 clients every day is why we built Morphio.”… Click To Tweet “Clients become so excited by the data at their fingertips that they start to see the value of your agency in a very different way.” @helpyourhumans Click To Tweet

Ways to contact Eric Vardon:

Announcer:

Welcome to the Agency Management Institute community, where you’ll learn how to grow and scale your business, attract and retain the best talent, make more money and keep more of what you make. The Build a Better Agency Podcast, presented by White Label IQ, is packed with insights on how small to midsize agencies survive and thrive in today’s market. Bringing his 25 plus years of experience, as both an agency owner and agency consultant, please welcome your host Drew McLellan.

Drew McLellan:

Hey everybody, Drew McLellan here with another episode of Build a Better Agency. Thank you so much for making the time to join us, I know you’ve got a lot on your plate right now, so I am grateful for your time and attention. Hopefully as you’re listening to this you are on the move, you’re out walking the dog or walking a golf course, but getting some fresh air and giving yourself room, and space, to think about your business in more of a macro way rather than the micro way we’ve all been thinking lately, just in terms of putting out fire, after fire, after fire. I think this episode is really going to get you to think big picture, but I also think it’s going to deliver a tactical opportunity for you, that I believe many of you will find valuable. So I think it’s going to be good on several levels.

Before I tell you a little bit about our guest just a couple quick reminders. As you know we give away a free seat at workshop, one of our live or our in demand workshops, every month and all you have to do is leave a rating, a review, for the podcast. So wherever you go to download the podcast head over there, and leave us a rating and review, and then take a screenshot of it because a lot of times your screen names, SunLover203, does not tell me who you are or where your agency is. So take a screenshot, send it to me by email to [email protected], and we will put you in the drawing. If you’ve already done it don’t worry about it, you are in the drawing and we will leave you there until you win. So sooner or later, hopefully, it will be your lucky month. So that would be great if you would do that.

Also want to make sure you know that we have moved the Build a Better Agency Summit. It was supposed to be in May and obviously with all this COVID stuff going on that didn’t seem like a great plan, so we’ve moved it to November 11th and 12th with the AMI Family Day being the 10th. So if you’re a member of AMI you can come and join us for that half day, and dinner. But for everybody else the full conference is the 11th and 12th of November, same speakers, same sponsors, same opportunity to learn.

Obviously we’re going to be talking a lot about how we explode our businesses into 2021, how we take advantage of whatever we’re going through now and how we’ve repositioned ourselves, the new relationships we have with clients, and how we’re going to leverage all of that in 2021. So it’s not only going to be a lot of learning and a lot of connecting, which by then I think we’ll all be super hungry for, but it’s also going to be a celebration. We are going to celebrate that we survived this, that our businesses are on solid footing. And for many of you it may be a celebration of a reinvention or a pivot. But we’re going to come together, we’re going to celebrate, we’re going to learn, we’re going to be pretty awesome.

So tickets are on sale now. I know for many of you this may not be the time to buy a ticket, so don’t feel any pressure. But if you are in a position where you can buy a ticket, and you know that you want to partake, honestly it would be awesome for me if you would buy a ticket now. As you might imagine things are a little lean in our world as well, but we’re holding the party no matter what happens, so I hope you decide to join us.

All right, let me tell you a little bit about our guest. So Eric Vardon is really a tech entrepreneur. He has been an agency owner, he still owns a portion of the agency he started many years ago, and that agency is called Arcane. It was a digital market and advertising firm, and he grew it from zero dollars of revenue up to about $15 million in six years. But at the end of the day Eric found that really what he loved was he loved creating product and so out of necessity, within his agency, they created something that served them well and now they are offering it to other agencies. And it’s all baked with AI and machine learning. So a lot of you have wanted for a long time to tap into the power of AI and machine learning but a lot of the tools out there just are not really very affordable for small to midsized agencies.

So we’re going to hear Eric’s story; we’re going to hear a little bit about the tool; but more importantly we’re going to hear about what he’s learned, in terms of digital advertising spend, the mistakes agencies make, because of his own experience inside his agency and now that they’re working with other agencies with the tool that I’m sure he’s going to tell us all about. So let’s jump right into the conversation and I’ve got a lot of questions for Eric, so let’s get started. Eric welcome to the podcast.

Eric Vardon:

Awesome Drew, thanks for having me, appreciate it.

Drew McLellan:

So you have an interesting origin story. You’re sort of a recovery agency owner, although I know you still own a piece of it. So tell everybody the backstory to all of this.

Eric Vardon:

Yeah, well I won’t get into the long version but the short version of it is I wanted to build websites. So mid ’90s I took it upon myself, went to school, and took graphic design, which still had … I was processing film and a whole bunch of other interesting things, so I had a fairly traditional background but really wanted to build websites. And so mid ’90s got my degree, and came out and figured out pretty quickly there wasn’t a lot of people building interactive websites, and at the time it was a lot of Macromedia Flash then. And if you remember the really loud noisy websites that everybody built with a whole bunch of skip intros, so that was me. And I was fortunate enough, with a few friends at school, to build a small interactive shop. And we actually did a lot of the execution and production for the big agencies around North America, Saatchi & Saatchi and the Fjords of the world. And so it was a really great in-home agency with a bunch of contractors, and we were just young and building cool things.

And loved the business but really wanted to do more, so had a difference of opinion, where I thought the industry was going and I wanted to focus on more full-service. So I separated from my partners on that and sold my shares. And fast forward and started a company called Arcane in 2010, on the heels of the last downturn when clients were looking for more accountability and more results. And my business partner, co-founder, John and myself said, “What if we could put math behind market and guarantee a return? And show that their investment into market actually was just that, an investment into ROI. And if we could do that they would be addicted to results and hopefully it would remove the subjectivity from our process of advertising.” And that’s ultimately what we did for many, many years and grew quite rapidly. So that’s the short version.

Drew McLellan:

In doing that with your agency though you, in the beginning, did it like everybody else, right? You did it by hand with Excel spreadsheets and what kind of results were you measuring? Was it mostly digital advertising?

Eric Vardon:

So it was a mix of digital and traditional though, so one of our founding partners, Tony, was a traditional media agency guy for many, many years. And so we actually took a majority of his portfolio, that was 100% traditional, and just started to get their feet wet into the digital market side. So we’d slice off a small percentage, starting with 5% or 10% of their traditional media budget, and said, “Well because we’re handling, over here, your flier program, your direct mail or your outdoor, et cetera, let’s just test and see what happens with the digital side.” And we would actually marry the two together.

So to answer your question, Drew, yes it was starting with Google AdWords or Facebook at the time, or whatever the case may be, but we were also starting to measure the effectiveness of their flier programs and their flier drops that are outdoor, on the traditional footprint. So it was, again, in 2008, ’09, ’10 putting URLs and trying to correlate what the traffic spikes were doing at what times. We actually got really dirty into the data, in terms of when media buys were being purchased, and correlating that to spikes in web traffic and sessions, correlating that to lead gen. And we started to really report on cost per acquisitions, across both digital and traditional, and that was really the sweet spot that we hit.

Drew McLellan:

And was there someone on the team that had that analytical background or did you guys have to just sort of self teach? Because, as you know, when you go to school for graphic design math is not a big part of that, right?

Eric Vardon:

That is true. No. Today we split that into our offensive defense strategy, which I’m happy to chat about. So we have four partners in the founding part of Arcane, Bryan is on the other side. So Bryan and I were really on offense and focused on sales, and acquisition, and strategy. And, of course, we would all bleed in. But Tony and John were more on the analytics, the data. John on the development side and managing acquisition, and the reporting, and those kinds of things. And so we did have a nice mix of talent. And so, yes, there was certainly parts of us that were more focused on the analytics side but it was that culmination together, those four corners, that really brought together really interesting growth.

And when you’re sitting across … At that point a lot of our clients were either the leaders or the business owners themselves, to talk solely about what the return is, and the data, and what’s happening to the sales force and the leads that are coming in, and the quality, it wasn’t about the creative; it wasn’t about which tactics we were using; it’s, “Is this working?” “Yes it is.” “What’s happening and can we do more of it?” All of our clients became completely obsessed with the results and it was a fascinating time, in the early 2010 timeframe.

Drew McLellan:

But at that point in time I think, if I remember from our earlier conversation, you guys were also banging your head against some of the things that every agency bangs their head against, mistakes, costly mistakes, things like that, right?

Eric Vardon:

Absolutely. I mean, it became prevalent very quickly as we … Sort of be careful or be cautious for what you wish for because it does come true. And we were compounding with new sales and opportunities at the same time. Our current client base was becoming obsessed with digital and spending more, both on traditional and digital, so we had this compound effect, all while you’re trying to scale and grow the business. So there was leakage in the bucket everywhere, from team members not having enough time, there was no HR, there was no process development. I mean, really it was we started with John and myself, and a couple partners, in basements like the traditional story. Fast forward four or five years later we have 100 people in four offices and doing acquisitions, and just trying to keep up with, then, new data and new tactics. Yeah, there was spillage absolutely everywhere and it became quite unruly to manage, all while trying to grow. We’re seeing our revenue and our top line but our bottom line was actually going in the other direction and that was never something that we intended to happen.

Drew McLellan:

So you’re growing at the top line, your profit margins are shrinking because for all of the reasons you just said, no process, costly mistakes, team members scrambling too fast. So how did you fix it?

Eric Vardon:

Yeah, so we took … As we do with our other clients it’s, “Okay, let’s do some analysis on what’s working, continue to do that. And let’s do some analysis and data dive on what is making our team upset, and where these mistakes are coming from, and where’s the leaky bucket, ultimately, in our margin?” And so we put our own hats on and actually started to build processes, to bring in HR, to bring in a finance team, so that we could actually focus on the business itself. And we found quite quickly that, in terms of the mistakes, and the growth, and the things that were happening, is it was the complexity was a big one. Again, we’re seeing more clients, the complexity and the business acumen that they needed was taking away from us. But our team was growing at the same time, obviously we’re managing more media dollars and more volume at the same time. And so at the same time it was a lot of the reporting.

So we became, at a point in time, after about three or four years into our growth, we were just analyzing data. And we found that our team was not only making the mistakes but they didn’t have enough time to actually execute and change creative, look at the strategy, the content, all of the pieces that we used to really spend a lot of time on, and iterating and changing. That’s where our growth came in. So it wasn’t one thing that would incrementally improve our bottom line, it was really small pieces or small percentages across every part of our business. And I think the main thing that I learned early on, from starting an agency, was I always figured that you had to throw new clients and/or people to generate revenue or profit.

And we said, “Where is the automation for an SMB agency like us, that we can afford, that is going to help us scale and automate our business?” And there really wasn’t a lot. There was many that are the enterprise level but we just couldn’t afford them and so we started to really build our own software, and look at ways to automate our own business, and it was a really interesting learning time for sure.

Drew McLellan:

Yeah, so let’s talk about that a little bit because I think you’re right, I think there’s two ways agencies make money. One is new clients and the other is actually keeping more of the money that they’ve already made. And I think when an agency is small it is all about getting more clients. And at a certain point in time, and I would argue that it’s probably when an agency hits about 25 or so people, all of a sudden now the mistakes and the inefficiencies start putting holes in the bucket. And no matter how much more on the top the client pours in, if it just keeps running out at the same ratio on the bottom, it’s just sort of hamster in the wheel, right?

Eric Vardon:

Yeah, I think the biggest light bulb that we had is working with a consultant, came in and he said something that is often overused, I guess, but for us it was something that was new to hear. It was, he’s like, “You guys need a check engine light.” And I’m like, “Okay, I like cars, I understand it.” He’s like, “You guys are still managing this business in a very old fashioned” … He’s like, “Most of your team” … And he’s looked through our data and he’s working with us, he said, “Look at where all your hours are going, they’re analyzing data all day long.”

He’s like, “Let me guess, when you started the business you were focused on how to optimize to change a strategy, to further enhance what your clients and customers are looking for. Am I right?” And we’re like, “Absolutely.” He’s like, “Well look at your team.” He’s like, “You have to build in ways that the information is coming to them, that the data variances are coming to them. And if you do so you’ll actually probably end up freeing 30, 40, or even 50, or more, percentage of your time. Because now they’re down to actually no time, which the compound effect is they’re too busy, they get stressed, they’re not spending time with clients, they’re not spending time with each other.” And that was a really big eye opener, to your point.

Drew McLellan:

Well I think that gets to the whole idea … When it talk to agencies one of the pain points, that is sort of consistent across the board, is reporting. And I think it’s a combination of, A, how much time it takes but, B, that it’s also always looking in the rear-view mirror, right? So it is what happened last month, and by the time we’re done analyzing it and making changes based on it, we’ve lost 30 days. Or more, right?

Eric Vardon:

Yep. Yeah. And I think for high performance agencies, and this is now because of where we’re at in this world, is it’s going to go from the pendulums. Remember what happened in 2008 and ’09?

Drew McLellan:

Yep.

Eric Vardon:

Clients started to look for accountability. It’s going to go completely flatlined the other way and ROI is an absolute must, it’s flown around a lot and you hear it, but it’s going to become absolutely everything. So not only will digital spend continue to increase but you’re right, the accountability for sure.

I think from a reporting perspective my biggest differentiator in that whole new way to work, and you hit the nail on the head, is it’s like bananas, right? Data just goes bad so fast. And to another point, in terms of our data, was we would spend, on average, 20 hours a month reporting for one client. And I think at our peak we had about 80 different clients. So you can imagine not only are the team exhausted because by the time they finish a report they actually have to start on next month’s report, they send it to a client, account manager reviews it, the client actually looks at it three or four days later, the data’s already bad. It means on both sides nobody’s seeing value.

So to me it’s the mind shift of, “We must have live data at our access.” It’s a very different mind shift and a way to actually have conversations with our clients to say, “I’m going to put the emphasis, and the onus, on you to look at this data and know it. And when I’m going to sit in a room with you once a week, or once a month, or whatever the cadence is, you want me to sit there and talk about strategies and ways to optimize. ‘Tell me what happened that was good and bad, tell me how we pivoted and changed, and effected it. And then let me know what we’re going to do next.’” That’s the value of the agency relationship, not spending my hard earned dollars to the agency to spend and make frustrating reports that nobody’s going to look at.

That’s the new way to work that I think will probably be the biggest shift for us. But we went through it and dragged the team through the mud, and we came out of it the other side. And the refreshing part is that the clients become so excited to have this data at their fingertips that they look at value of the agency in a very, very different way.

Drew McLellan:

Yeah, because now it’s actionable, right? Now it’s like, “Here’s what happened yesterday or last week, I can pivot today and put more gasoline on that fire, put less gasoline on that fire because that doesn’t seem to be kindling right now.” So it is much more actionable.

Eric Vardon:

It’s actionable and I think the next phase will be … Especially with the automation and AI, and this now comfortability … There’s already this shortage of skilled and there’s going to be a change with that, which it will be interesting to see as we come out of the situation that we’re in right now, but automation still will be … Humans are best at creativity, we’re best at the strategy side, we’re best at understanding and correlating the data but there’s going to be way more data for us to actually review. So, again, it’s just the shift of the time and the hours that we have. We must look at automation and tools that are going to help us, but they’re going to start to actually tell us how to modify, how to change, and how to optimize. And I think that will be then that next phase, which is hopefully going to provide more protection but also more time and effort for the team members that we’re paying a lot to keep on our payroll, for sure.

Drew McLellan:

So for you guys the solution, and it makes sense given your background in web