Episode 90:

Drew McLellan is the Top Dog at Agency Management Institute. For the past 21 years, he has also owned and operated his own agency. Drew’s unique vantage point as being both an active agency owner and working with 250+ small- to mid-size agencies throughout the year, give him a unique perspective on running an agency today.

AMI works with agency owners by:

  • Leading agency owner peer groups
  • Offering workshops for owners and their leadership teams
  • Offering AE bootcamps
  • Conducting individual agency owner coaching
  • Doing on-site consulting
  • Offering online courses in agency new business and account service

Because he works with those 250+ agencies every year — he has the unique opportunity to see the patterns and the habits (both good and bad) that happen over and over again. He has also written two books and been featured in The New York Times, Entrepreneur Magazine, and Fortune Small Business. The Wall Street Journal called his blog “One of 10 blogs every entrepreneur should read.”

 

 

What you’ll learn about in this episode:

  • Augmented reality and virtual reality: what you need to know about this technology that is coming fast
  • Influencer marketing: connecting your client’s brand with their audience through social influencers who have built an audience around a specific topic
  • Ratings & Reviews: How agencies can turn a profit by solving this problem for existing clients (and how to use it as a door-opener for prospects)
  • Why agencies are developing relationships with more people inside companies than just CMOs
  • Why you need to play nice with the other agencies that you share a client with
  • If you’re not being offered exclusivity, do you need to offer it in return?
  • Selling what you know and what you think instead of “stuff”
  • ROI: why it’s not an optional conversation
  • Why you need to be transparent on your fees
  • Bragworthy benefits like a student loan repayment program

 

The Golden Nugget:

“Don’t be so quick to give exclusivity away to clients unless you get something in return.” – @DrewMcLellan Click To Tweet

 

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Ways to contact Drew McLellan:

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Speaker 1: If you’re going to take the risk of running an agency, shouldn’t you get the benefits too? Welcome to Agency Management Institute’s Build a Better Agency Podcast, presented by HubSpot. We’ll 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 experience as both an agency owner and agency consultant to you, please welcome your host, Drew McLellan.

 

Speaker 2: Hey, there, everybody. Drew McLellan here with another episode of Build a Better Agency. This is a one of my solo-casts. So rather than having a guest with me today, this is just going to be you and I chatting, obviously, me doing more chatting than you, about something that I want to make sure you are thinking about or that you are sharing with your team. About four or five weeks ago in episode 85, I talked about nine trends that I was seeing rippling through or coming at agencies like yours and mine. And in this solo-cast, I want to wrap up that list with the back 10 of my list of 19. So if you haven’t listened to episode 85, I would highly recommend that you do that. There’s nothing magical about the order. So if you haven’t listened to it, there’s no reason to stop this episode and go back and listen to 85 first. But maybe after you’re done with this one, if you find it valuable, you will be inclined to go back and check out the first nine trends that I talked about last month.

 

  All right, so trend number 10 is one that I suspect many of you are keeping your eye on, but my experience has been that most of you have not dabbled in yet. So augmented reality and virtual reality are definitely the next new frontiers for us and that we need to be very fluent in very quickly. Many of my AMI agencies have already done projects either for themselves or for clients in the AR and VR space. And it’s going over very well. It’s new enough. It’s cutting edge enough. So it’s super sexy at a trade show or in other applications. But if you have not done one of these projects yet, and you do any video work or any association or trade show work, or your clients are on the B2B side and perhaps sell something that’s difficult to be in front of a large bulldozer or a house tour, things like that. I just highly suggest that you start to play in the AR and VR space.

 

  So find a project, whether it’s for you, or a pro-bono project, or a client who’s willing to be your first guinea pig, but this is something that you really need to learn and you need to learn quickly. The good news is there are a lot of good partners out there who will help you shoot and edit, so that you have the best quality for your AR and VR. And as you know, the goggles are getting ridiculously cheap and much more commonplace. And so as that technology gets into more people’s hands, this will become more mainstream. Many agencies are actually purchasing some of the cardboard viewers, sometimes labeling those or putting your client’s logo on those as part of a promo or a giveaway, and then also building out the content for that. So if your audience doesn’t have the goggles or the viewers, in many cases, agencies are working with clients to provide those. So that’s not something that I would suggest you dilly-dally on. I think that’s something you need to really be paying attention to.

 

  So if you’ve been in the agency business for a while, you probably remember back in 2008, when social media was the rage. Remember when we were all struggling to figure out how to do community management and how to help clients understand that they needed to have a presence on Facebook and Twitter and some of the other emerging platforms? Well, this next trend is basically what that was then. And the trend that I’m talking about is influencer marketing. So what social media was back in ’07 and ’08, influencer marketing is today. And most of you are very familiar with that term and what it means, but in case you’re not, it’s basically connecting your client’s brand with their audience through social influencers, through, typically, amateurs who have built a platform or an audience around a specific topic.

 

  So it might be a foodie who’s got a great video blog, or it might be a B2B specialist in your client’s area of expertise that has a great podcast, but these are people who are not media outlets in the traditional sense, but they are absolutely media outlets. And getting them to sample your client’s products or services or write about them and talk about them is becoming a huge part of many agencies’ business. You certainly can source the social influences yourself, or there are aggregators out there, tools on the web where you can search for and negotiate through a third party with the social influencers. One of the things I want to caution you about is unlike traditional media buying where everybody knows the game and knows the rules, in this world, it’s a little bit more like the Wild Wild West. Everybody is making up their own rules. And in some cases, there aren’t rules.

 

  So make sure that you document well the deal that you’re cutting with these social influencers and be very, very specific in the deliverables that you expect. This is different than a pure PR play. These are people you are going to pay for the exposure that they give your clients brand, or product, or service on their platform. So this is not a PR play. This is a paid-media play. And, obviously, by the FTC rules, they’re going to have to disclose that they got paid or compensated in some way. Even if it was just free product, they’re obligated to do that. So make sure that you are covering yourself legally by having the contract insist that they follow all of the FTC rules in any other rules that your client may have, so that you don’t get caught on the back end of that.

 

  But lots of agencies are finding that there’s great profit in doing that and, quite honestly, that it’s very effective. Consumers are already enamored with these media producers, with these subject-matter experts, they already have a following. And so it’s easy to leverage their popularity and their confidence and trustworthiness that they have built in their audience. So don’t miss out on that opportunity. Another place that agencies are really making a lot of progress is in the whole space of ratings and reviews. So many businesses are struggling to even monitor, let alone respond to, the ratings and reviews they already get. Other businesses want more ratings and reviews some businesses, and I’m sure you’ve come into contact with clients like this, are afraid of ratings and reviews. So they sort of ostrich it by not paying any attention to them, but especially with some of the new algorithms that Google has come out with, which is now giving more credence to reviews, especially reviews put right on Google in terms of search results.

 

  This is not an area where businesses can ignore this. And so many agencies have put together a package where they are helping their clients track the ratings and reviews, respond to all the ratings and reviews. And, in many cases, generate more ratings and reviews from happy clients or customers. So this is a place where many agencies are selling this as a product. So they’re packaging it as a stand-alone product or service that they are offering to their existing clients. And it’s also a great door opener depending on the categories in which you serve clients. It’s a great door opener for new business as well. So don’t disregard that. And, by the way, make sure that you’re paying attention to your own ratings and reviews, whether it’s on Glassdoor or Google or other places, this is also something that you need to be paying attention to as a business owner. So it’s not just for our clients, but it can be a profitable problem that you can solve for your clients.

 

  One of the trends that I love seeing. I think it’s super smart and it’s something that I have been talking about for a while, but it seems like agencies are really wrapping their arms around it is I’m seeing a lot of agencies develop relationships beyond the traditional marketing department or the CMO. So, traditionally, agencies have done most of the work inside their clients through the marketing department. So even if they were doing work for another department, the work itself came to them through a CMO or a marketing department. But what I’m seeing now is as companies get more siloed, as different budgets are divvied up by department. And as the marketing departments inside companies are getting leaner, and so they can’t pay as much attention to all of their internal audiences. What I’m seeing as many agencies developing relationships with the sales department or the HR department, or some other department inside the organization.

 

  And this is smart for a couple of reasons. Number one, as we all know, the lifespan of a CMO is pretty limited. So every time there’s a CMO change, every agency is at risk of the new CMO bringing in an agency of their own liking. So by having multiple relationships inside an organization, you’re a little stickier if the CMO comes and goes, but also there’s pockets of money in all of those departments. And the more relationships that you can create inside the organization, the more solid your footing is inside that organization. And the more likely it is that you’re going to get an opportunity to sit at the C-Suite or at the planning stages of at least some of these departments. So it’s good revenue. It’s different pockets of money. So if your marketing department client has run out of funds, there are other funds inside the organization, as you know. So many agencies are taking advantage of that by creating relationships that go beyond just the traditional marketing department.

 

  Another trend that I think is a little longer in the tooth. I think we’ve been seeing this for a while. And we certainly saw evidence of it in the CMO research that we did in 2015, where we talked to 500 plus CMOs and ask them about their agency relationship. So this trend is a little more mature, but I still see it evolving. And some agencies are facing it more than others. The reality is for many agencies, you are not the only agency in the mix. And so there are other foxes in the henhouse, if you will. And unless you are really a specialist agency, meaning that you have a depth in a niche, which makes you such a subject matter expert, that the client can’t imagine a generalist agency holding up their end of the bargain compared to what you do. If you are more of a generalist, or if you do a little bit of everything, odds are, at least with some of your bigger clients with bigger budgets, you are having to share them with other agencies.

 

  And I will tell you that time and time again, in conversations I have with CMOs, they get very tired of the grousing that agencies do. And often it’s a passive-aggressive grossing. It’s not a very pointed complaint, but it’s a passive aggressive throwing the other agency under the bus behavior. And what CMOs are telling us is the agency that’s going to stick around is the one that learns how to play nice with others. So if you find yourself in this situation where you are sharing a client, you’ve got to find a way to find the balance between protecting your own turf, but also not talking badly about the other agency and ideally working well with the other agency. I’ve got a lot of agencies and networks that have found ways to swallow their pride and really come together with other agencies that are serving the same client and actually delivering a great combo product or set of services by working together. And, in fact, those relationships have led to other partnerships and other referrals from other agencies who perhaps don’t do something that you do.

 

  So be careful about throwing the other agency under the bus, but don’t be surprised if there are other agencies in the mix. All right. I’ve got a couple more trends that I want to talk to you about, but first let’s take a quick break and then I will come right back and we’ll wrap up with the last five trends.

 

  If you’ve been enjoying the podcast and you find that you’re nodding your head and taking some notes and maybe even taking some action based on some of the things we talk about, you might be interested in doing a deeper dive. One of the options you have is the AMI remote coaching. So that’s a monthly phone call with homework in between. We start off by setting some goals and prioritizing those goals. And we just work together to get through them. It’s a little bit of coaching. It’s a little bit of best-practice teaching and sharing. It’s a little bit of cheerleading sometimes. On occasion, you’re going to feel our boot on your rear end. Whatever it takes to help you make sure that you hit the goals that you set. If you would like more information about that, check out agencymanagementinstitute.com/coaching. Okay, let’s get back to the show.

 

  All right. Welcome back. As you know, this is my solo-cast and we are talking about trends that agencies are facing this year. And some of them are emerging trends and others have been around for a little while, but are still really shaking things up in a lot of the agencies that we work with. So another trend that I think is a little more mature in its existence is the whole idea of agency of record relationships. And today, quite honestly, they’re almost extinct. So even if you have a contract with a client, and even if it’s a large client, it’s really oftentimes more of a set of projects or deliverables against a certain dollar amount, but there’s nowhere in the contract that says that that client is bound to give you all of their work. And that’s what an agency of record contractor relationship is really about is that they offer you exclusivity in exchange for offering them exclusivity.

 

  So, for example, if you had a big car dealership as a client and you were the agency of record, part of the deal is if they had any money, they would spend it with you rather than other agencies. And, in exchange, you would not work with any other car dealers that they would deem as competition. So one of the things that is an interesting offshoot of this trend is that while many, many clients refuse to sign AOR contracts or even consider them, agencies are still offering that exclusivity to their clients on the other end. And so I think one of the wake up moments around this trend is if you are not being offered exclusivity, do you need to offer it in return? And I think it’s a very case-by-case thing. I don’t think this is a black-and-white thing where you absolutely should never offer exclusivity, because sometimes that means you’re going to lose business.

 

  But I also think that we offer it as a default. And in some ways, sometimes we offer it when the client doesn’t even ask. We just assume that because we are working in XYZ industry, it’s only right or ethical to only serve one client in that space. And, as you know, there are many agencies that all they do is serve clients in a specific space. So there is a way to handle that with integrity and respecting everybody’s confidentiality. So don’t be so quick to give that away, unless they’re going to give you something in return as well. What some agencies will do in absence of the AOR relationship tied to exclusivity is make it be a dollar amount that every client that spends over X, and for each of you, that X will be a different amount. But every client that spends over X gets category exclusivity within a certain geography. So consider that as an alternative.

 

  Another trend that I am seeing is, and this one, I don’t think we’re anywhere near where we need to be on this. So I think this has been a need and a pivot that agencies have needed to make for a long time, but I don’t think we’re anywhere near where we need to be. And that’s the whole idea of when we sell to prospects, we still sell too much about the stuff we make. So we sell things, websites, promotional, packages, trade show strategies, whatever it may be. And we don’t sell enough of what we know and how we think. And, quite honestly, as you all probably know the number one agency in the world right now is Accenture with over 4,000 employees. And you know what? They hardly make a thing. What they really sell is their thinking and their strategy and their planning.

 

  And they’re, by the way, charging three to $400 an hour for what we do for maybe a buck-25 or $150 an hour. So we’ve got to start talking about the fact that what we bring to the party, what can’t be commoditized is what we know about the industry and the way we think about marketing and business, because I don’t care how good you are at any of the stuff you make, somebody else out there makes it and somebody else out there makes it for less money. And so we’re constantly being pushed and pulled on price around the things that we make. But I guarantee you you will have less pressure on price and you will have more of a seat at the table around planning when you start talking about the fact that what you sell is your strategy, and your thinking, and your expertise, and your contacts in the industry, and all of those things that cannot be commoditized.

 

  So this is something we have to get better at. And I’m seeing other businesses, like the big consulting firms, kind of kicking agencies down the curb by doing this better than we do. So this is, I guess, an aspirational trend. I want to see agencies get a whole lot better at this. And I will tell you, the agencies that I know that do talk about themselves this way, much more in a consultative model than a stuff model, are the agencies who are showing double-digit profitability that would make anybody envious. So I know it’s working, we just have to change not only the way we talk, but the way we think about ourselves.

 

  So another trend that is really starting to emerge is this understanding that agencies now have that ROI is not an optional conversation to have with clients. That our clients are demanding the ability to tie results to what we do. And even five years ago, if you said to a client, “Well, we would love to be able to tie results to the marketing strategies we have, in the things that we’re doing for you. How does your CRM system track this? Or how does your sales system track that?” A lot of times clients would come back to the agency and say, “Well, you know what, we don’t have sophisticated enough software,” or, “We don’t have the tools to track that.” And agencies in the past recent history would accept that as a “Okay, well, it would be great to be able to do it, but I guess we can’t.” And now what I’m seeing is, and I’m really happy about this, agencies are not accepting that as an answer. They’re getting very creative and a little assertive in helping clients figure out how to track leads to the sale.

 

  So even if the client doesn’t have the software and the client is not going to invest in the software, or they still take paper orders, or whatever it may be, there’s always a way to track the sale. So for example, I had an agency that was working with a client who said basically, “We have five different sales outlets and every one of them, the way they record the sale is on a piece of paper, which we then file in the home office.” And rather than allowing that to be so daunting that the agency just said, “Okay, well, I guess we can’t track the sale.” What the agency said was “Great. We would like the last year of those pieces of paper and we’re going to digitize them. We’re going to enter all of that data in. And then every month, we want all of the new papers and we’re going to start building out a database of prospects and customers. And then we’re going to be able to track whether or not the stuff that we’re doing is driving trial and sale.”

 

  And I’ve had lots of examples of this that I could tell you about that agencies are getting very creative about figuring out is it accurate to every single sale? Probably not. But is it darn close? Yes. Is it a lot better than saying, “Oops, I guess we can’t track”? Absolutely. So if you are not tying results to the work you’re doing for clients, you know what that means. The minute the client’s sales drop and you have no data to be able to show that what you’re doing is or isn’t working, or they’re driving people to trial, but they’re not buying, which means it may be a pricing problem or a product problem. If you do not have that data, you’re going to get blamed and fired. And so if you would like to keep your clients for the long run, you absolutely have to figure out how to tie results to your efforts and don’t take no or we can’t as an answer.

 

  One of the trends, which I think is, I guess, in some ways, alarming, but not really surprising is many of you are familiar with the ANA report that came out probably about a year and a half ago now, that basically called the big agencies, the holding company-sized agencies. It called them out for some really shady media practices, money under the table. Some of the holding companies owned media outlets and were placing buys, basically, in their own media outlets without disclosing to the client that basically they were double dipping. They were getting paid to plan the media, and then they were making all the money on the media. Other agencies were taking prizes, or rewards, or trips from the media outlets without ever disclosing those to the clients. So there was a whole bunch of stuff that went on. There was a lot of stuff around digital media buying and the lack of transparency around the markup and how much of the client’s money was actually going to the media and how much of it was being dispensed to all the partners who had their fingers in the pot of placing the buy.

 

  Anyway, the net result of this is that clients, and rightfully so, are paying a lot more attention. And this is trickling down now to the small and mid-sized agency space. It started in the big box agencies, but now it’s trickling down to agencies our size as well. And what I’m going to tell you is that the outcome of this trend, or what we need to do from this trend, is we need to be transparent about our fees. I’m not suggesting that you shouldn’t mark up out-of-pocket expenses. I’m not suggesting you shouldn’t take a commission on media, but what I am suggesting is that you need to do it with full transparency. So in contracts, in conversations, however you normally do that, make sure that you are covering your agency’s rear end by being very clear about all of the ways that you are making money from the client.

 

  So whether it’s fees, or markups, or commissions or anything else that you have going on, there’s nothing wrong with any of it, as long as you disclose it to the client on the front end, so they are not surprised by it, or you don’t get caught doing something that. Even if you think they should know, because it’s the industry standard, remember that this isn’t their industry, so they don’t have to know. You have to make sure that you are very forthright about it, and that you are very clear about it. And my recommendation is that it is in your proposals, or scopes of work, or your contracts. Whatever documents you have with a client that outline what you’re going to do for them and what it costs, make sure that you are very clear about the markups and the commissions, so that you don’t get caught in this fray of concern over transparency. Even if you aren’t doing anything wrong, I would over-communicate, if anything, so that you make sure that your clients know that you are above board and ethical.

 

  And then this last trend I find fascinating. So Forbes called this the trailblazing benefit of 2017, and it is a student loan reimbursement. It is, basically, a bonus program that pays back or pays off a portion of your employee’s student loans. If you have ever chatted with some of your younger employees, you know that they are burdened by some pretty significant student loans. And in fact, many of your middle management, people in their forties, are still paying back those student loans and it weighs on them. And what’s interesting is kids today, air quotes over kids. Kids today, 30 year old and younger, are much more eager and willing to talk about their financial situation publicly, whether it’s on social media or other places. So it’s not like their family and friends don’t know that they are saddled with the big student loan debt. But also interesting is one of the things that is happening in the workplace is that there’s this thing called brag-worthy benefits.

 

  And one of the things that is very sticky for particularly younger employees, but I would say this is true of employees of all ages are benefits that your agency offers them that are boast worthy or something they can talk about on social media. So I’m in my fifties, it would’ve never occurred to me to talk about a debt that I had, like a student loan and how I was paying it off. But today’s generation is much more comfortable around that. So anyway, this student loan reimbursement benefit, which is, basically, just repackaging a bonus program, is getting a lot of attention and really starting to gain traction. According to the Forbes article that I read that was written at the tail end of 2016, this is an up-and-coming benefit right now only 4 or 5% of all U.S.-based companies are offering this as a benefit. So this is something you could get on the cutting edge of if you want to consider doing it. So far, as best I can tell, there is no way to make this tax deductible to your employees.

 

  In other words, they’re going to pay just like they would for any bonus. They’re going to pay income tax on this, even though money is going to their student loan and it’s deductible to you, just like any other bonus would be. But it’s really the packaging of it and the way you serve it up that is interesting and brag worthy to your employees. And many of you, as we have talked about in the last trends podcast, episode 85, many of you are struggling to find and keep your great employees. So this may be something that you want to consider as you look at how to create a great workplace and make sure your employees know that you appreciate them. And, by the way, because it is brag worthy, it may attract other employees or prospective employees to you. So that’s it. That’s the 19 trends that I have been talking about that are facing agencies or challenging agencies right now.

 

  I’m hoping that I’ve given some of you some food for thought around this, or maybe validation of things that you’re already seeing in your marketplace. And, hopefully, I’ve given you some ideas of how you can leverage these trends and take advantage of them, so that you don’t get caught too far behind. And that you can have a great 2017 and take advantage of riding the wave of some of these trends. So that’s it for today. As always I’m around. If I can be helpful [email protected] I am grateful that you keep listening to the podcast. Thanks for all of your emails and your notes. I read them all. I also read all the ratings and reviews. So I’m super grateful for those as well. I will be back next week with another guest who is going to help you build up your agency to be everything you want it to be. And in the meantime, have a great week and I’m around if you need me. Thanks.

 

Speaker 1: That’s all for this episode of AMI’s Build a Better Agency, brought to you by HubSpot. Be sure to visit agencymanagementinstitute.com to learn more about our workshops, online courses, and other ways we serve small to mid-size agencies. Don’t miss an episode as we help you build the agency you’ve always dreamed of owning.