Episode 134

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One of the most rewarding aspects of AMI is that we can give agency owners a sense of perspective. Owning and running an agency is lonely and isolated. You make decisions based on what you know and usually you only know your own reality. I love it when I can shine a light on how other agencies are doing something or a best practice or metric that gives owners confidence that you’re on track or even that you’re ahead of the curve.

Hubspot recently completed a survey of over 1,200 marketing agency decision makers and I was invited to comment on some of the findings. After reading the report, I knew the insights were something we needed to explore together on the podcast.

Tim Dearlove is the Growth Marketing Manager at Hubspot, which as you know is a market leading inbound marketing and sales suite of tools that is very agency centric and they invest a huge amount of time and effort to support agencies all over the globe. (Note: And the presenting sponsor of Build A Better Agency)

Some of the findings will touch on themes you live with every day – the fears and frustrations of any agency owner. There are some trends and practices we’ll call to your attention and some opportunities for you to take the lead over your competition.

We’ll also look at how you can stay ahead of your clients – and the importance of ongoing learning not just for you, but for the talent you hire as well.

It’s an episode full of big ideas and targeted actions you can take to make your agency better and your life a bit easier.

 

 

What you’ll learn about in this episode:

  • Retainers/long-term relationships: why they are great for your agency as well as your clients
  • Retainers that allow your agency to provide services on an ongoing basis while keeping control
  • Some of the mistakes agencies make by not clearly defining what the service is and tying the value directly to the offering
  • Going through the process and making sure the decision to work on a retainer basis is thought out and not just tacked on at the end
  • Why the paid discovery process is the ideal way to enter into a retainer agreement (and why it’s not always possible)
  • The three categories a retainer should have to provide value to the client: optimization, insurance, and strategy
  • How to talk to prospects so they understand the value of an ongoing relationship
  • Three great ways to clearly define and price your services
  • Why your clients will test the boundaries of your agreement if you don’t clearly define them
  • The importance of saying “no” and the right and wrong ways to do it
  • Why consistent, clear communication with ongoing clients is a great way to upsell services
  • Building systems and processes for great internal and external communication
  • Why you have to work on your processes in small increments or they will never get done

The Golden Nuggets:

“Staying smarter than your clients is a tricky thing.” – @tdearlove Click To Tweet “Good negotiation starts with confidence in your work.” – @tdearlove Click To Tweet “Having an expert negotiator is crucial. It’s job one for presenting proposals to clients.” – @tdearlove Click To Tweet “The biggest pain points for agency leaders are 1. The sales pipeline, and 2. Not having time to think strategically about the business.” – @tdearlove Click To Tweet “Agencies are great at casting a wide net. What they are not great at is specializing, finding the right clients and turning the wrong clients away.” – @tdearlove Click To Tweet “When it comes to unique positioning, be honest with yourself, and find outside perspective about what makes your agency unique.” – @tdearlove Click To Tweet “Invest in talent. You’re going to get less and less competitive the less you invest in your people. It’s a vicious cycle.” – @tdearlove Click To Tweet “Do NOT cast a wide net. Instead, ask the question, ‘How can I turn OFF some clients?’” – @tdearlove Click To Tweet “Our research shows 50% of agencies are NOT investing in career growth and long-term learning. You can’t find and keep good employees without investing in their knowledge base.” – @tdearlove Click To Tweet

 

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Ways to contact Tim Dearlove:

We’re proud to announce that Hubspot is now the presenting sponsor of the Build A Better Agency podcast! Many thanks to them for their support!

announcer:

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, please welcome your host, Drew McLellan.

Drew McLellan:

Hey, everybody. Welcome back to another episode of Build a Better Agency. This is going to be a fascinating conversation. So Tim Dearlove from HubSpot was one of the key team members in doing a huge research project, and talking to agencies about a lot of different topics around new business, around the challenges they have. We participated, we helped them with providing a few questions, and then some analysis on some of the things that came back in the research.

And so I asked Tim to come on the show, because I wanted to do a couple things. Number one, I wanted to expose you to the research. This research is mostly based in North America, and then they’re going to do a more worldwide, a more global view piece of research before the beginning of summer. So we’ll probably see the results of that by the end of summer, and Tim and I’ll talk a little bit about that, I’m hoping.

But what I wanted to do with this conversation is, A, I wanted to have him unpack the research for you, and sort of pull out some of the more salient points that are relevant for you. Obviously, in the show notes, we’ll have a link to the research and all of the data, so you can soak in all of it to your heart’s content.

But I also wanted to talk to him about some of the implications. So the research is really more here are the facts of what we learned, but I wanted to dig into a little bit more of the implications. And as you know, HubSpot works with a lot of agencies. And so I wanted to sort of step also away from the research, and for both Tim and I, to reflect on what we thought the data meant and how it was most relevant to you.

So I’m anticipating that this conversation is going to hop all around a little bit because the research was pretty wide in its focus. So I’m going to try and cherry pick some of the things that I think are most critical, but it may feel a little bit like we’re hopping around topic wise. But, overall, what I’m hoping will happen is, I’m hoping that the conversation will give you, A, a little piece of mind that you’re not out there alone. That a lot of the things you are experiencing, many other agencies are experiencing.

Then, B, where I really want to dive in a little deeper with Tim is, what do we do about all of this? And how do we move forward with some of this insight? And how do we differentiate ourselves in terms of not being quagmired in some of the problems that some of the other agencies are going to identify in the research that they’re challenged with, that I know lots of us are challenged with as well? So how do we step out of that and away from that?

So I’m really excited to have this conversation. Tim is very knowledgeable, talks to agencies every day, just like I do. So without further ado, let’s just jump right it in.

All right, so without further ado, Tim, welcome to the podcast.

Tim Dearlove:

Thanks for having me very exciting.

Drew McLellan:

So give everybody a little bit of a sense of the survey, who you surveyed? How many people? Give us some of the stats around the survey, before we dig into the findings.

Tim Dearlove:

Sure thing. So this survey was opened at the end of 2017 and into 2018. We ended up getting over 1900 responses for the whole global survey. Some of the data we’re going to talk about today will focus on just a certain segment of those 1900, so we’re going to look at the US, Australia, Ireland, the UK, we’re going to look at that segment. But we had 1900 people start the survey, and around 1200 people that finished the survey.

In terms of a breakdown, most of the folks who filled the survey out were CEOs, vice presidents, directors, and above. And then we had a smaller amount of agency employees, people like managers, team leaders fill the survey out as well. All different countries, again, we’re going to talk today, mainly, looking at that smaller segment. But when we look at the whole of all of the responses, we had responses from tons of different countries, a bunch of different geographical regions.

Drew McLellan:

And everybody, the commonality of all those countries is that they’re English speaking, but you guys are also doing a study for countries where English is not the primary language, right?

Tim Dearlove:

Yeah. The first research report we filed was in English only and focus on countries where English is the predominant language. We’re going to have another report come out in May that’s going to be translated into Spanish, French, and German. And that’s going to look at more of the survey responders. We have a lot more data from Latin America and from Western Europe that will, hopefully, make the report a little bit more helpful. We’ll do some cuts to show here’s how your regions stacks up to another region. But the first report we did was looking at English speaking countries only.

Drew McLellan:

Yeah. Okay. So for our conversation today, we’re going to focus on those countries. And then, when you get the more global one, maybe, we’ll have you come back and we’ll talk about the… because I’m sure there’ll be some interesting differences.

Tim Dearlove:

Yeah. Yeah. So far things line up pretty closely, but there are some interesting differences. Especially when you start to do those cuts between regions, and then you start to see some really interesting data around how different regions are answering some of these questions.

Drew McLellan:

So one of the things that I think is most valuable about research like this is, I think, and we talk about this at AMI all the time that, it’s a little lonely to run an agency, you don’t always know if what you are experiencing is what other people are experiencing. And I think one of the values that research like this provides is that, even if the news is not great, it’s reassuring to know that it’s not your news alone. So your challenges aren’t the only challenges.

So for me, I think one of the insightful things about this research, and you and I were talking about it before we hit the record button, was the idea that, what your data shows is exactly what agencies are talking about every day, when I’m hanging out with them. So there is a lot of validity to what everybody told you in this survey. And one of the interesting things is, and we’ve talked about this before, this is not a new trend, but one of the more interesting things that came out of the study was this idea that agencies are really not in the driver’s seat, when it comes to their relationship with clients anymore, are they?

Tim Dearlove:

Yeah. That’s one of the larger themes that is, to your point, something that I think you could talk to any agency owner off the street, and they would probably nod their head and say, “Yeah, we’ve noticed that.” But the data really highlights that in a couple different ways, and sometimes you need to connect the dots between different answers and it starts to come to light.

But since I’ve been working with agencies, which has been, as I mentioned around six years now, either consulting with them or in my newer role, marketing to them and trying to do a little bit more of this research, that’s been very evident. And it’s very evident within our own HubSpot community as well. But even as soon as I go outside of the community, that’s sort of been the general feeling. And we could get into specific data points that I think highlight this point, but that is very evident in the research report that, if it wasn’t already clear, agencies are sort of always trying to play catch up to clients demands.

Drew McLellan:

Talk to us a little bit about some of the data points that you think are particularly significant around that.

Tim Dearlove:

Well, sometimes, when you’re doing analysis of this research, you’re looking for controversial things. You’re looking for like, oh, this question had 50% and 50%, but I actually think some of the more telling data in this report that just the lack of control that agencies have, are some of the overwhelming responses.

So some of them were related to how agencies price and then deliver their services. So we asked a question on, do you customize your pricing to fit into your client’s demands? And the overwhelming response was, yes. And then we asked a question, do you customize your services to meet the demands of your clients? And that was overwhelmingly, yes, as well.

On one hand, that makes quite a bit of sense, because you’re in a creative industry, you’re a creative agency. The last thing you want to do is offer the same package, the same pricing, the same services to each individual client that you’re trying to sell. But on the other hand, I sort of take a different look at that, which is, clients, or agencies, excuse me, constantly need to customize what they’re doing for each individual client. And I think each individual client believes that they should be treated like a special one-off situation.

I think that puts a lot of pressure, and I think that actually affects a lot of other things that we see in this research report in terms of profitability, cash flow responses from clients, getting work done on time, the use of freelancers. I think those two questions are really telling, in terms of, they make sense on the outset, but I think it shows some underlying issues in terms of the dynamics between clients and agencies.

Drew McLellan:

Well, I think one of the challenges is, one of the ways clients demonstrate their control is that they’re very reticent to share budgets. So when they ask an agency to do something and the agency says, “Well, what is your budget?” And the client says, “Well, just show me what you think we should do.”

Tim Dearlove:

Yeah. It’s all chicken or egg, yeah.

Drew McLellan:

It puts the agency in a really uncomfortable position, because they have to basically guess. And so, one of the mistakes I see agencies make around that is they go in with a proposal, with a single price, and the client goes, “$50,000? I don’t have $50,000. I only have 35.” And then the agency makes a huge mistake, and lots of agencies do this, where they go, “Okay, we can do it for 35.” And so, what you’ve now taught that client is that there is no integrity in your pricing and that you would’ve gladly taken $15,000 more than apparently it’s worth, because you’re willing to do it for 35 rather than 50.

And so, one of the things we talk about is going in with a set of three options, which immediately says to the client, “Look, you can spend 20,000 to 50,000, and here’s the range of things you get for that money. And we can add or subtract things to get to whatever dollar point you want to. But there is integrity in the pricing, because I won’t give you the $50,000 package for $20,000. You can have the $20,000 package.”

But that takes more work and that’s harder to think through. And so again, I think the client sort of jerking the strings of the agency, and the agency is struggling to keep up and to respond quickly, but also in a way that protects and benefits their agency.

Tim Dearlove:

Absolutely. And there’s something that’s not mentioned in this report, which is the power the client has, in terms of saying, “Well, I can just work with another agency.” So we didn’t cover that in this report, but I think all trends show that there’s more investment in established agencies, adopting digital and focusing on the online aspects of working with clients. And then there are just more agencies starting. There’s more new agencies coming in into the world.

So the supply and demand, I think, is slightly off as well, in terms of, you’re competing against a really large pool of other agencies. And we can get into agency specialization and all of that later.

But I completely agree. And actually, there’s another point in there that’s really interesting, which is, you said, “Okay, we go in with a $50,000 ask, and then we immediately recede once the client pushes back.” Something I’ve been fairly passionate about is, whoever is in charge at the agency of dealing with that, putting proposal together, and then talking to the client, that person should be taking a Harvard extension class on negotiation or some sort of negotiation class.

Because we see that all of the time with our agency, which is, they’re amazing at so many things, if you are not a great negotiator, and I know this from firsthand experience, I’m a terrible negotiator and I’ll just pay whatever price is asked of me. It drives my wife insane, but-

Drew McLellan:

The car dealer loves to see you coming.

Tim Dearlove:

Oh yeah. Oh yeah. Whatever price it is, just I want to end this transaction as quickly as possible. But agencies, I really think that’s valuable. If you’re a small agency, invest in just a negotiation workshop, invest in figuring out what your anchors are. Your point about sort of splitting up pricing into three different options, that’s a very normal negotiation tactic. That all can have great repercussions on your agency. And that’s something that is within your power to do is invest in some personal training. Because I think that process makes agency owners incredibly uncomfortable, and it doesn’t need to be conflict, there’s some tactics you can use to get better at that.

Drew McLellan:

Yeah. Yeah. Most agency owners I think are uncomfortable with the money discussion. And so I think-

Tim Dearlove:

Yeah, absolutely.

Drew McLellan:

… to your point, they just want to get it over with, and they want the business, they want the cash, they want to keep all their people employed. And so in their mind, I’d rather do it for 35 than not do it at all. But what they don’t think about is the precedent that they’re setting and the psychology between them and the client. And, also, the other thing that I worry about when an agency sort of rolls over very quickly on pricing is, what it says to the client is, “I’m desperate for your work.”

And I think there is something very powerful about playing a little hard to get, and being able to say, “Well, if you only have 35, I can take away these three things and we can do that. But if that doesn’t work for you, then we perhaps we’re not the right agency for you.” There’s amazing power in that. And I’ve talked to lot of agency owners, who, the more they say no, the more the client chases after them, right?

Tim Dearlove:

Right. For[crosstalk 00:00:14:42]-

Drew McLellan:

Yeah. I just talked to an agency owner the other day who had gotten an RFP request, and they’re super busy, and they didn’t have time to respond. So she picked up the phone, and called the client or the prospect, and said, “Hey, we just don’t have time to do this. This is a really elaborate RFP.” And the person was like, “Well, you’re kind of the perfect fit and we really want you, so could you write a letter or could…” So all of a sudden the client is chasing them, rather… But we don’t play hard to get very often. And that, also, I think is a negotiation tactic and skill that agency owners really need to get better at.

Tim Dearlove:

Yeah. It’s always on the back foot, always defensive. I think there’s an element of shortsightedness there as well. Agencies, especially the ones that I with, are always dealing with the immediate. I immediately need to fill in revenue. I immediately need to hire someone new. But I think that’s a super valuable point about having confidence in your work. I completely understand why a lot of our agencies that we both talk to feel that general level of insecurity, and it causes-

Drew McLellan:

Sure.

Tim Dearlove:

… them to do things like, slave over RFPs and slash their pricing. But there is a general sense of, if you had a little bit more confidence, if you were willing to say no a little bit more, that’s going to have positive repercussions for you. Again, it’s thinking about things in the long term and not the short term. And that’s really very difficult to do. It’s not an easy role to be in.

Drew McLellan:

Right. Right. Well, and I think, again, agency owners are worried about the next payroll. That’s what they’re concerned about. And I’m not suggesting that every agency is losing a client away from having to let a bunch of people go, but cash flow is a challenge for a lot of agencies. And so, they do end up making what, I agree with you, are better short-term decisions than they are long-term decisions.

The other thing you said that I thought was interesting is that there’s this influx of agencies. And right now there seems to be more agencies than clients. And I think one of the challenges with that is the barriers to entry to become an agency are pretty much own a computer, and so-

Tim Dearlove:

Yep. And create a website. Yep.

Drew McLellan:

Yeah. Right. Anybody can say they’re an agency. So I think one of the other things agencies can do to differentiate themselves, is to really market themselves the way they would market a client, talk about their longevity, have testimonials and case studies.

And I know these are things that you guys at HubSpot are preaching all the time, too. And I hear the cobbler children have no shoes every single day. And you know what, you have no choice anymore. The competition is so vast. And frankly, there are a lot of really good agencies out there. So there’re good, and there are a lot of them. And if you cannot invest in your own agency’s marketing, you are going to have to keep differentiating yourself by being cheaper. And that is not, as you said, a long-term strategy that is going to serve the agency.

And they all want the silver bullet, how can… Well, whatever, there is no silver bullet. You just have to do the hard work of promoting your agency and marketing it and having a point of view. And we’ll get into all of that a little bit later. But agencies have to just accept the fact that referrals and friends and family aren’t enough to build and grow own agency anymore.

Tim Dearlove:

Yeah. I’d love to talk a little bit more about creative ways agencies can start to market themselves, because I think there’s a general idea of you have to hire a full-time sales and marketing person, and they need to start blogging every single day. And I just don’t have the time for that. I actually think there are more creative ways that agencies can approach that issue.

But you are right on a couple levels there. There’s no easy solution. Everything is hard. It’s why, if you’re willing to do the hard work, that usually will mean that you can rise to the top. But that hard work needs to be applied in the right way. And I think a lot of agencies that do good work, that work really hard, sometimes invest in some dead end type of work, like maybe, slaving over a single proposal that’s going to be $50,000, and then you’re going to slash it to $35,000. That agency might be really good, but they’re just investing their attention into the wrong details.

I’d, also, just mentioned, before we maybe get into some of those creative marketing tactics, I have some stories from our own community that I think are helpful there, but right at the beginning, you mentioned cash flow. And just a quick plug for the research