Episode 43

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Paul Roetzer is founder and CEO of PR 20/20, a Cleveland-based inbound marketing agency and HubSpot’s first Agency Partner. He is author of “The Marketing Performance Blueprint” (Wiley, 2014) and “The Marketing Agency Blueprint” (Wiley, 2012); creator of Marketing Agency Insider and Marketing Score; a regular contributor to leading marketing industry blogs; and a frequent speaker on content marketing, inbound marketing, performance and strategy.

 

 

What you’ll learn about in this episode:

  • Why Paul started PR 20/20
  • Standardizing pricing to prevent scope creep
  • Paul’s point system for pricing
  • How to create a content strategy that works today
  • Top of the funnel content vs. bottom of the funnel content
  • Using the point system for professional development
  • Where to find the great content writers that you will need to hire
  • How PR 20/20 decides if a client is a good fit
  • The Marketing Score
  • Automated Insights
  • Steps agencies can take right now
  • How to keep employees around and enthusiastic

 

The Golden Nugget:

“Unrealistic expectations and financial instability are prospect red flags.” – @paulroetzer Click To Tweet

 

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Announcer:

If you’re going to take the risk of running an agency, shouldn’t you get the benefits, too? Welcome to Build a Better Agency where we show you how to build an agency that can scale and grow with better clients, invested employees; and best of all, more money to the bottom line. Bringing his 25-plus years of expertise as both an agency owner and agency consultant to you, please welcome your host, Drew McLellan.

Drew McLellan:

Hey, everybody. Welcome back to another episode of Build a Better Agency. Today we are going to talk about a topic that I know is paramount on many of your minds, and that’s the whole issue of… a couple issues, actually… content marketing, creating content inside your agency, and knowing when to pivot with your agency. Today’s guest is not going to be a stranger to any of you, I suspect. Paul Roetze is the Founder and CEO of PR 20/20, a Cleveland-based inbound marketing agency, and HubSpot’s first agency partner. He’s written two really awesome books. In 2012, he wrote The Marketing Agency Blueprint; which if you have known me for any point in time, you have seen me recommend in workshops and conversations I’ve had with agency owners. He also just recently in 2014 came out with The Marketing Performance Blueprint, which is the perfect companion to his first book. He also has created the Marketing Agency Insider, which has lots of great content for agency owners and leaders, and Marketing Score. He is a regular contributor to leading marketing industry blogs, a frequent speaker on content marketing, inbound marketing, performance and strategy.

Paul, welcome to the podcast.

Paul Roetzer:

Thanks so much for having me.

Drew McLellan:

You have done what a lot of agencies really wrestle with is you have reinvented yourself a couple times. Take us back to before your agency was doing inbound. Were you a traditional ad agency as we think of it?

Paul Roetzer:

Yeah. The quick origin story for anybody who hasn’t heard of our background is I started at a traditional agency; mostly PR, some crisis communication, strategic planning, brand marketing. So I came right out of college into that agency… it was a small shop, about six people… and I spent about five-and-a-half years there. And the last year-and-a-half I was there, I started really asking a lot of questions about why the business model worked the way it did, why we used billable hours, how come we didn’t report on actual performance metrics, all of these things that I came to learn that’s how the agency world had been built, and so I started nights and weekends trying to build a different approach to it. And so what I ended up creating was PR 20/20, which the premise of it was standardized services and set pricing, and there was 19 service categories that were all very traditional in terms of their scope, so it was like PR and advertising and direct mail and events. I started that in November of ’05. I left the small firm I was at and started my own.

And then it was in fall of 2007 when I learned about HubSpot, and we contacted them, ended up signing up as a customer, and then I pretty quickly realized the potential that existed in inbound, which at that time was really big on SEO and social and email and analytics, and all the things that traditional agencies weren’t really doing. And so in early 2008, we started bundling, taking that standardized services set pricing model, and applying it to specific services that HubSpot customers needed. And so we built so service packages with set fees that were designed for people that were using HubSpot software, and that became the origin of HubSpot’s partner program today.

Drew McLellan:

When you were reinventing the agency model and you were coming up with this list of 19 or 20 standardized services, one of the things I hear agency owners talk about all the time is the struggle to standardize pricing because every project is different. How did you wrestle that one to the ground?

Paul Roetzer:

That was before I started the business, before I actually left and did my own thing. I spent I think at one point I calculated about 600 hours creating the standard service guide, and it had 19 categories, 105 services, and then three pricing levels for each service, so it was this monster spreadsheet. And my theory was if I could standardize the scope, then I could standardize the price.

Drew McLellan:

Right.

Paul Roetzer:

For example, if I’m going to do a sell sheet: one original copy, three rounds of revisions, and includes one interview. I would just build-out the scope of each thing, and so that became the foundation of everything we’ve done for 10-and-a-half years was take a project, take a service; if you can standardize the scope, you can apply a standard price to it, and that’s… It started in the early days as we used just a fixed fee, and then we evolved into word count, and we would still use hour blocks, and now today we’re on a point pricing model.

Drew McLellan:

Where did that fall down, or did it? Because again, I can hear agency owners in my head going, “Well, no one ever has… only wants one,” or they have more than three revisions. How did you handle all of the client-centric realities around that?

Paul Roetzer:

Yeah. That’s a huge challenge, and it’s probably still something we deal a little bit with today. But scope creep is a massive problem for agencies.

Drew McLellan:

Absolutely.

Paul Roetzer:

Yeah. And it’s exactly what you’re saying. Web is a huge [crosstalk 00:05:37].

Drew McLellan:

That’s right.

Paul Roetzer:

You get one version of the homepage, and two versions of the interior page, and next thing you know you’re doing seven interior pages. And so for us, because we were so transparent in how the pricing worked and what exactly you were getting, then when it exceeded that it was a pretty easy conversation to have. And what we found though was even when we had these fixed cost to it, so say $500 for a logo design, you would still get outside of the scope, and the biggest problem became… Because a lot of our services still had hours related to what we were charging, and that was the origin of the points was, “You get X-amount of points. And whatever gets done within those points, then that’s fine. If you want anything other than this, then we add to it.”

Again, for 10-plus years, it’s been all about total transparency into what we charge and what they get. And because we’re so transparent, we can have conversations, when scope creep comes into play, a lot more easily because the client… There’s no mystery to what we’re doing. I think the problem a lot of firms run into with scope creep is they to go back to the client and say, “It’s going to be another three hours to do that.” The client’s immediate response, “Well, why didn’t you just work more efficiently, and then you wouldn’t need the three more hours?”

Drew McLellan:

Right.

Paul Roetzer:

“I just want the output I thought I was going to get, and this isn’t it yet.” That’s the problem is hours are so variable in terms of the value you get out of them, and it’s largely based on the person who’s doing the work, so the producer efficiency has a huge effect on the value you get.

Drew McLellan:

Tell the listeners a little bit about your points-based system.

Paul Roetzer:

Yeah. The concept… and this is something I’ve been working for years. The first book you had mentioned, The Marketing Agency Blueprint, the first chapter is, “Eliminate Bill Blowers,” so it’s no secret that I think there’s a better way to do pricing. The challenge was, when I wrote the first book, I didn’t have a better way. A lot of the first book was what I thought was theoretically possible, and so we focused on value-based pricing, and we gave seven factors to consider when determining your value pricing, but we did not present a, “Here is how you should price your services model.” It was after the book came out that I was really, really fixated on trying to find a more profitable solution for us that was also more value-based for the client.

We do a lot of work in B2B tech, and so we spend a lot of time around software developers, and I was at the time studying a lot around agile development. And I loved the idea of story points, but I thought story points were abstract, but I liked this idea of a fixed unit of value. It’s not a dollar because a dollar feels like an expense. When you tell someone it’s $50, it’s like, “Okay, I have to spend $50. This goes into that expense column.” But when you change the perception mentally of a point, a point feels like an incremental progress towards something. And so if we focus on, “Okay, you get 50 points for your $5000,” or whatever the numbers are, then they think more about those points going towards a goal, and the points…

What we do is every project has a point value. And so if you take a lead generation campaign and there’s an e-book, a landing page, a three-part email workflow, a Google AdWords program: each of those has a point value, and so then the client looks and says, “Okay, so I’m getting these seven things for 40 points. Great,” and then they come to you and say, “Hey, can we do a sell sheet in addition to it for our sales team? Yeah, great. That’s another five points. Okay, cool.” It’s all about the perception of value to them. And as each of those campaigns you’re running has a goal associated with it, then those points truly are leading you toward achievement of a goal, and you no longer think about what you’re doing as an expense.

Drew McLellan:

And for you, is a point a fixed value, so it’s not like a point for one… Because at some point in time you still have to figure out what your agency costs are to deliver a point of work, right?

Paul Roetzer:

Correct. Internally we still track every minute we spend on things. But my theory has always been the client shouldn’t pay for the agencies inefficiencies. We go in knowing what we think we would make per hour, so we still have a target hourly revenue, hourly revenue target, and we have a value of what we think we should make on every point. But let’s say we write five blog posts for five different clients, and there’s a different professional writing each of them, the client’s going to get charged three per points in every single instance. One client may have an associate consultant who takes seven hours to write the first draft. Another one may have a senior consultant who writes it in one hour. At the end of the day, the client’s still got the blog post that they wanted, and the quality is exactly the same once it leaves the agency’s walls, but why should one client pay $1000 and one client pay $200 for the same end product? So what the point value does is it fixes that point value for a blog post.

So we have a standard guide and every blog post for every client that’s under 600 words is three points. Doesn’t matter how long it takes. And so our job is to figure out, “How can we be efficient?” Now, if over time data tells us that three points is not enough, that we’re not hitting our hourly revenue target,” then we change the point value, we increase it so it goes to a five, or whatever it may be. We use data to inform evolution of the point values, but they are standardized across clients.

Drew McLellan:

And a point is worth a set dollar amount regardless of who the client is. Right? I’m going to buy a bucket of points from you at every quarter or month or however that works? Is that the way you do it with clients?

Paul Roetzer:

Yeah. Right now it’s set up where it’s tiered. A client spending $3000 a month pays, I don’t know, $160 a point, where a client spending $8000 or $13,000 a month may pay $140 or $150 a point. We’re in part of the iteration of the point model so we’re probably going to flatten that, like it may go to where everyone pays $150. But if you look at our pricing page, it’s structured like a SaaS model where the clients spending more money get more value-add as part of it.

Drew McLellan:

And what would make you change that model? Why are you considering an evolution of that?

Paul Roetzer:

Because we started it in January 2014, we started evolving it and putting new on it, and then we eventually rolled it out to every client in our portfolio. By the end of 2015, I think every single client in the agency was on the point model, and so now we have two years of data; and then, like anything else, you look at it and you learn. My biggest thing is… It’s hard because again, if you take a blog post and you say everyone pays three points: well, if you’re a small business and you have 1000 visitors a month to your website and you write a blog post, no one’s going to read it and no one’s going to find it. The value is like… It’s a long-term value, like you need to do it [inaudible 00:12:51]. Whereas if you have a client who has 100,000 visitors a month to the site and 50,000 subscribers to their blog, every blog post is a chance to move the needle, so the value to the client is actually based on their existing reach, in some cases.

There’s all these variables that I knew when we built it, but I needed to see the data to help evolve it. But the main reason for the flattening is, right now the way it’s structured, is the clients with the least amount of money, and usually the least amount of existing traffic and reach, pay the most per point, so they get the least value out of each point. Whereas the clients who have tons of traffic and reach, who get the most value for each project we do, they pay the least. It’s rewarding people who spend more money, but in some ways it’s penalizing the people who don’t have the money to spend, if that makes sense.

Drew McLellan:

Yeah. No, it does.

Paul Roetzer:

So that’s something I want to change.

Drew McLellan:

Does your model… Is there a cap on the client size, or is there a certain kind of client that it does and doesn’t work for? Have you found, over the course of the last few years, “This is a great model for clients between this budget and this budget. But boy, if they’re over X, they don’t like this model”? Or have you found it a one size fits all for everybody?

Paul Roetzer:

Yeah. I’ve yet to find anyone who doesn’t like it. More often, we find people who love it because of the transparency in this simplicity. What I’ll say is when you get into enterprises, so in my world that would be billion-dollar-plus companies that have far more politics internally, far more procedures: to tell them we are not going to charge them on an hourly rate and you’re going to use points, there is an education process that needs to occur to calm them down and make them understand that it’s actually for the best, because everything in those organizations is so structured and has to go through procurement. And so when you try and explain your point system instead of hours it’s like, “Well, wait a second. That doesn’t make any sense. That’s not how we do it,” so that’s the only challenge, but we’ve broken through that barrier without any problems over time. But that was the only issue I originally saw was even though hours everyone seems to understand are inefficient for the client, and usually not the greatest value, it’s just what they’re used to paying, so anything different is that first hesitation, and then they realize the value of it.

Drew McLellan:

For you, your agency has changed dramatically over the last eight, nine, 10 years. One of the challenges I think for a lot of agencies, I think most agencies recognize that creating content, whatever that looks like for their clientele and for the deliverables and the industries they serve, creating content is now part of agency life, but a lot of agencies haven’t cracked the code on how to do that efficiently or well, so how did you learn? You went from a very traditional agency doing I’m sure custom everything, and now you’re creating a ton of content. How did you build that machine?

Paul Roetzer:

Yeah. And it’s funny because we’re in the process now of evolving our own editorial strategy and the kind of content we produce. Because when we started doing this in 2007-2008, if you rewind, the iPhone didn’t exist yet; so mobile, people reading things on mobile devices, wasn’t a huge thing. Facebook had only been publicly available for about a year-and-a-half to people outside of college campuses. Twitter was just being created. The strategies… And again, we’re only talking about eight, nine years ago.

Drew McLellan:

It’s like the Wild Wild West.

Paul Roetzer:

Yeah. And so just having a blog differentiated you back then. And now if you think about the agency markets, what are we going to write about? There’s only so many topics we can all write about, and we’re all writing about these same things. And so I think in the early days for us it was just write about the trends and what’s happening, and write about some thought leadership things for us, but we weren’t really tying it to our sales process, we weren’t thinking about bottom of the funnel when we were writing stuff. It was just all top of the funnel stuff: get people to the site, and now your pages are going up, and your subscriber count was going up. Great.

And I think in the last three to five years there’s been a little bit more focus. Now, a lot of these agencies have caught on, and everybody has a blog of some sort now. I think there just needs to be a more strategic focus to the kind of content you do talk about; and that’s where some organizations, some agencies that go with these vertical market focus, it can be great for them because they can write about specific areas, specific industries that other agencies aren’t really writing about, but they can take those broader lessons and best practices and apply them to a specific type of organization. In our case, we’re starting to think more about bottom of the funnel. When I have a sales call, someone reaches out to us, and I think through, “What are the challenges they’re going through? What are the technology issues they’re having? What are the issues they’re having with their talent? Why aren’t they meeting their performance goals?” and focusing our content more around that person versus the wider net you may cast for top-of-the-funnel content.

HubSpot is a great example. They do tons of just that top of the funnel, just get people in; and then they allow their machine, their nurturing machine, to really do its thing and bring people through the funnel. Most agencies don’t have the time to pump out that kind of content. You’re lucky to get one or two posts a week up. So for us it was, in the early days, it was me and a couple of the other people, and then over time I just shifted the responsibility. So we now have one of our senior consultants, one of the ladies here, is also now our Director of Marketing, and she has another consultant that works closely with her on the editorial strategy for the blog, the publishing, creating the editorial calendar, editing the content created by employees.

But the bigger thing we do is, within people’s performance reviews every year when they do an annual review, there’s three main things they’re graded on, and everything’s quantified, there’s literally ratings for these. There’s their client services performance, which is made up of their producer and manager skills and traits, like these three areas; but then we give them and we require them to meet thresholds or points for marketing and for professional development, and for marketing it’s, “How many blog posts did you write for the agency blog?” And so we have an expectation at each level of how many they should write, and their annual performances in part. Now, the [inaudible 00:19:18] is about 5% today, but about 5% of the total performance rating they get for the year is how well they contributed to the agency marketing.

Drew McLellan:

Inside of that, what kind of ongoing education are you doing internally so that they have the fodder, if you will, to create that kind of content that serves your prospects and your clients?

Paul Roetzer:

It’s a mix. Tracy Lewis, who you’ve dealt with before for our Marketing Agency Insider site, she’s our Director of Talent, and she actually guides the pro dev system internally, and so employees have different requirements. We actually use the point system for professional development as well. For example, if you read a book and write a review, you get eight points. If you attend a conference it’s eight points. If you do a book club it’s three. Whatever it is, there’s point values associated with each of these things. And associate consultants, for example, have to meet 120 points a year, and so we track that. In Google Sheets, we built a dashboard that keeps track of how many professional development points employees have done, and we require specific things like Google Analytics certification, and inbound marketing certification, and so we put them through these learnings.

And then the other thing we do is we’ve gotten very good in the last year at client services workshops. Once a month, we have these morning huddles; and at the end, it’s the third Wednesday of every month, we spend about 45 minutes on a client workshop, and usually we’ll have three different account managers present a campaign that they ran recently, so it’s like, “Here’s what we did. Here’s why it mattered. Here’s how it worked. Here’s the challenges we ran into. Here’s the performance details.” We’re huge on knowledge sharing and really trying to develop, and then the Director of Marketing and her support person working closely with the team to try and guide them on topics that could be very valuable for the blog.

Drew McLellan:

Yeah. Sounds like you’re incredibly intentional about it, which I think a lot of agencies struggle with.

Paul Roetzer:

Yeah, for sure. And it’s really every agency knows this; we just all can’t do it. It’s what you teach the client. You would never tell the client, “Just have a blog and don’t have an editorial strategy or a content calendar.” And you would never let them, when you know there’s an agency to help them sell more product or service, you would never guide them to just write about top-of-the-funnel stuff. You would teach them, “Okay, we have to talk to your sales team and find out the biggest questions they get, and the challenges they hear from their prospects, and let’s create content around that stuff.” It’s what we know to teach people, but most agencies just don’t do it.

Drew McLellan:

Well, quite honestly I think it’s a lot harder work.

Paul Roetzer:

Yeah.

Drew McLellan:

It’s easy to do the lazy top-of-the-funnel stuff.

Paul Roetzer:

No doubt.

Drew McLellan:

And in an environment where you’re rewarded for taking care of clients, but you’re not necessarily held accountable. And by the way, oftentimes it’s the owner is not being held accountable for doing their fair share of it, of doing the agency marketing. If that’s the thing that often gets shoved off to the side, or you do it at the last minute, which again leads you to the lazy solution, I think.

Paul Roetzer:

Oh, yeah. If I’m not writing a book… I don’t even know how many blog posts I’ve written in the last year for our agency blog, but my guess is it’s less than five. I just don’t have time to write unless I’m like, “Okay, the next three months all I’m doing is writing,” and then I lock myself in an office and I write for three months. But other than that: yeah, I’m with it. Like I get it. It’s hard.

Drew McLellan:

Yeah. It’s really hard.

I’m going to take a quick break here, and then I want to talk about how you create content for clients, because that’s a challenge for a lot of agencies as well. But first, let’s take a quick pause.

Okay. We’re back with Paul and I want to dig right into… Many agencies really struggle with content creation: they struggle with doing it profitably; they struggle with doing it well. What are some best practices that you have discovered and implemented inside your shop to create as much content as you guys create for clients?

Paul Roetzer:

That’s a tricky one. And unfortunately there’s, no pun intended, there’s no blueprint really to doing this for every agency. For us right now, 99% of the content we create for clients is done in-house, so it’s our writers. It’s the people running the accounts, they’re also the ones writing it. We don’t use marketplaces. We rarely have used freelancers, although we’ve looked more at that recently. For us in that model, keeping in mind the goal is internal writin