Episode 145

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When you’re busy running an agency, it can be hard to take a step back to see broader trends. What is currently happening and what is on the horizon regarding client relationships? What tactics and deliverables are hot and making agencies money? This is the second part of a discussion I started last month about the we’re tracking at AMI.

One of the best aspects of our work with agency owners from all over the world is that it affords me perspective. In episode 140, Top 2018 Agency Trends Part 1, I talked about trends that were related to money and the changing structures of our teams. And in this episode, I’m going to talk about the trends that I did not have a chance to get to in that episode.



What you’ll learn about in this episode:

  • How retail-facing companies are transitioning those skill sets into B2B space
  • Why big consumer brands are decreasing their marketing spend and what it might mean down the road for small to mid-sized agencies
  • The continuing rise of video and how to avoid the urge to over-produce video content
  • Why clients are coming back to integrated agencies after splitting their marketing dollars among smaller agencies focused on narrow tasks
  • What tactics and deliverables are earning agencies solid revenue in 2018
  • The rise of influencer marketing
  • The fascinating ways in which voice is changing search and how to stay on top of the trend
  • The love/hate relationship we all have with chatbots and what that might mean for their future

Drew McLellan is the CEO at Agency Management Institute. He has also owned and operated his own agency since 1995 and is still actively running the agency today. Drew’s unique vantage point as being both an agency owner and working with 250+ small- to mid-size agencies throughout the year gives 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 — Drew 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, Forbes, Entrepreneur Magazine, and Fortune Small Business. The Wall Street Journal called his blog “One of 10 blogs every entrepreneur should read.”

The Golden Nuggets:

“Clients are beginning to pull work in-house focused on real time or near real time. I’m seeing clients staff for social media and ratings/review management in-house.” - @DrewMcLellan Click To Tweet “It pays to develop cordial working relationships with other agencies that compliment your work instead of throwing each other under the bus.” - @DrewMcLellan Click To Tweet “Video keeps getting bigger and it keeps getting cheaper. But that does not mean it isn’t incredibly profitable for agencies.” - @DrewMcLellan Click To Tweet “Five years ago, nobody had an Alexa in their kitchen. Now, voice-activated devices are everywhere in our world. This is a huge, and yet almost unnoticed cultural shift that has huge implications for agencies.” - @DrewMcLellan Click To Tweet “When it comes to producing video content, the thing that gets in the way of this very profitable work is our own sense that it is not good enough.” - @DrewMcLellan Click To Tweet “Voice activated devices are changing the way we communicate and the way we search for information. This change is going to be as significant as mobile was.” - @DrewMcLellan Click To Tweet “A year from now, I am going to know a lot of agencies that are doing a lot of work in voice-optimized content because I think it's going to come like a freight train.” - @DrewMcLellan Click To Tweet “Agencies underestimate influencer marketing when putting together budgets for clients. Agencies need to price more accurately & take into account the nuances of working with influencers who for the most part, are amateurs.” - @DrewMcLellan Click To Tweet


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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!

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, please welcome your host, Drew McLellan.


Drew McLellan: Hey, everybody Drew McLellan here with another episode of Build a Better Agency. This week’s episode is a solo cast. So as you know, if you are a regular listener, what that means is no guest today, just you and me chatting about something that I think is on your mind or should be on your mind, and is probably something that I’ve been chatting with other agency owners about frequently.


  This is actually Episode 145. And it is the part two, so in Episode 140, my last solo cast, I talked about some trends that I’m seeing across all of the agencies that we serve, and in the last episode, if you missed it, so again, Episode 140, I talked about trends that were related to money and to our employees or our teams, and the structures of our teams and how that’s changing.


  And in this episode, I’m going to talk about the trends that I did not have a chance to get to in that last one. So this will be talking about trends that I’m seeing around clients, and also around the tactics and deliverables that agencies are being asked about, and are finding particularly profitable. So before I get into the trends, just a couple quick things, if you’re listening to this live, which means that it is mid July right now, or maybe you’re listening to it a couple weeks after it airs, still the summer of 2018.


  Just a reminder that we have a couple of workshops coming up, we have the AE Bootcamp in September, which is towards the tail end of September, and is in Chicago, we have the best management practices of successful agency owners also the tail end of September in Chicago. We have Money Matters, which is two days of talking about nothing but financial issues, money pricing, financial metrics that tell you at a quick glance, if your agency is healthy, or not. How agencies are looking at ratios to know if they should be, if they’re staffed appropriately, all those kinds of metrics for two days. It’s more fun than it sounds, I promise.


  But anyway, that’s in the first week of December, and that is in Orlando, Florida, on Disney property. And then we’ve got some amazing workshops coming up in January, we have two workshops, back to back, a Tuesday, Wednesday, and then a Thursday, Friday, two different topics. But with the same presenters, so many of you are familiar with Steve and Robin Boehler from the Mercer Island group. Both of them have been guests on podcasts of the past, we have done workshops with them before. So we’re doing four days of workshops with them. So two-day workshops, and there’s some discounts if you want to attend all four days, so you might want to check that out.


  That’s mid January, it’s the 15th-16th and then the 17th-18th. And those are also in Orlando, and then Robert Rose, who is well known for being very involved in the Content Marketing Institute, and has written several great books. He’s going to do a workshop towards the tail end of January. And he and I are going to be talking about the agency of the future and how you need to evolve to stay relevant, I can’t wait to do that one. That’s a brand new one for us, also in Orlando, on Disney properties.


  So check those out, if those are of interest to you. They’re all written about on the website. And you can register for all of them there. But also, if you have any questions, feel free to fire me an email and I’m happy to answer those for you. All right, so today, what I want to talk about is I want to talk about the trends that I didn’t get to in the last solo cast.


  So specifically, I want to look at some trends from the clients sort of centric point of view, and also the tactics that agencies are doing well with and some tactics that I think are really new on the horizon, but important for us to know about and be preparing for, because I think they’re going to be in high demand. So on the client side, one of the trends that I’m seeing just a reminder, we work with 200 or 50 so agencies all over the globe now thanks to the podcast, some other things, our virtual peer networks and things like that.


  So this is us watching what’s happening and noticing patterns and trends, and then pulling those together for you to give you a heads up on what’s going on. So one of the trends on the client side that I’m noticing is that, particularly the larger clients, clients north of a million dollars are beginning to pull more work in-house. And I think this is the iceberg at the tip of the iceberg of a trend that I think we’re going to be seeing for the next couple of years, which is a client struggling to decide what work they can do in-house versus what work they want to source out to their agency partners.


  So one of the things that I’m seeing in the clients that are pulling work in-house is they tend to be pulling work in-house that is real time or near what I call near real-time tactics. So things that require real time reactions like social media, community management, or sorry, if you hear that noise, it’s my cat [Nagini] joining in on the conversation.


  But anyway, they’re pulling in work that is either real-time or near real-time. So social media, in some cases, ratings and reviews if the agency can’t figure out how to respond to those quickly enough. But if clients are not pulling work in-house, and by the way, I think this is a big enough trend that as you know, we do proprietary research every summer, where we go out into the field… Whoops there goes the cat walking right by sorry, if you’re not watching the video, you just missed that and you think I’m losing my mind. But if you’re watching the video version of this, you just saw my cat Nagini walk right in front of the camera and that’s his tail flicking off to my left there.


  But anyway, so hard to stay focused. Anyway, they’re pulling work in and if they’re not, they’re cutting budgets. And so that’s why this summer, when we go out into the field, that’s what we’re talking to CMOs about is we’re specifically doing a research project around how do clients decide what work they keep in-house or they pull back in-house from agencies? How do they decide what work gets farmed out to either their agency of record or a specialty agency? What are some of the criteria and the decision making points internally that they have to deal with in terms of getting permission or having budget authorization to send that work out versus keeping it inside?


  So I think that’s going to be fascinating. I know that trend is there. But I don’t know necessarily why the trend is there. So I think we’ll get some really great insights this summer from the research and then we’ll be releasing that research this fall. And all of you, of course, will be invited to hear more about that and to download the free summary report, and to attend a webinar where we talk about the results and what we think they mean.


  So stay tuned for all of that. But anyways, I was saying if clients are not pulling work in-house, then what they are doing is they are cutting their budgets back and we’re seeing this in particular, around big consumer brands right now. So P&G announced that they were cutting their budget by about 41%. And Unilever said that they are cutting their advertising and marketing budget by about 59%.


  So the good news is that a lot of my smaller agencies, mid sized and small agencies aren’t seeing too much of this yet. But if it’s happening at a bigger scale than what it suggests to me is that those of you that have clients south of a million dollars in terms of budget, which many of you do, just know that this is a trend that is starting to swell up, and it very well may get down to clients your size.


  So be mindful of that, start watching for signs that clients are a little slower to give you work or slower to approve things, or are being more aggressive about pushing back on budget, all of those things would suggest that this trend may be trickling down to you as well. But right now, most of the smaller shops that we deal with, really are not seeing this yet. They’re sort of flying under the radar. But I think it’s just because it’s the very beginning of the trend. So I’m hoping that we continue to fly under the radar.


  But I fear that, that is not going to be the case. So keep an eye out for that. One of the other trends in terms of client decision making and how clients are sourcing agencies that I find really fascinating is, for those of you who are full service agencies or integrated agencies, the good news for you is one of the trends that I’m seeing is that integrated is sexy again.


  So many of us have been around long enough that we saw right after the recession or during the recession that a lot of clients started dissecting their budget and handing it out to lots of different agencies, and a lot of specialty agencies. So they might have a PR shop and an SEO shop and a PPC shop. And they might have some sort of a lead gen shop, but there was really not a lot of room, it seemed in a client’s budget for one agency to handle the entire thing.


  And what we’re seeing now is that there’s been a pretty aggressive shift in the last, I’d say 12 months, and I think it’s still kind of building up steam. So I think it’s still coming even more so. But in the last 12 months or so, I’ve noticed common thread of clients, basically throwing their hands up in the air and saying, “I’ve spent my entire day managing all of these agency relationships, and it’s exhausting, and I need some help.”


  And so what they’re doing is they’re turning to the agencies that they had sort of shunned five or eight years ago and saying, “Okay, come on back into the fold, you integrated agency or you sexy beast of an integrated agency, we want you back.” Now, in some cases, the agency, the integrated agency, or the full service agency is getting all of the work back. That’s not the trend I’m seeing most though, what I’m seeing is that what the clients are really doing, is they’re saying, “You know what, I don’t have the bandwidth, or the patience maybe to manage all of these agency relationships. So I want a lead agency, who in essence, is going to be responsible for managing all the other agencies, or at least being a part owner of that management with me.” So I want somebody else in the trenches helping me manage all these relationships, if I’m not going to give all of the work to one agency.


  One way for you to combat this is if you are an integrated agency, the more you can come to your clients with strategic alliances with some of those specialty agencies, especially agencies that you’ve worked with before that you know, that you trust. Again, maybe they’re inside an alliance with you, they’re either an AMA agency, if you’re one of our folks, or they belong to another peer network that you belong to, there’s lots of those around as well or somehow you have a collegial relationship with them, and you don’t have to worry about the fox being in the hen house.


  If you can show up to your client and say, “Look, here’s what we do. But if you want specialists in this category, or that category, we’ve got them already. We’ve vetted them, we’ve worked with them before, we work well together.” That’s the other complaint that a lot of clients had as they divvied up the agency work amongst multiple agencies, they spent a lot of time babysitting the agencies because they were constantly throwing each other under the bus and trying to pull work from off of one agency’s plate onto their own plate.


  And so agency alliance that suggests there’s not going to be sort of that back fighting and sort of that tossing each other under the bus, that’s appealing to clients right now, because they have a shorter attention span or tolerance for that kind of behavior, they’ve endured it for the last several years, and they’re sort of over it.


  So you integrated agencies that stuck it out that did not fold under the pressure or the idea that you needed to specialize in a deliverable. The good news is the pendulum has swung back to you and you’re in Vogue again. So congratulations.


  Another thing on the client side, another trend that I think is going to feel like kind of a dud to many of you, as we’re watching. Retailers like Toys “R” Us and Sears collapse all around us is that in terms of client categories, brick and mortar retail is a pretty risky place to be right now for agencies. Many agencies are shying away from especially generalists like a Sears or a JCPenney’s kind of a retail. If your client is a specialist, if they have some very narrow niche around them, but they happen to be brick and mortar, you have a better chance of that going well for you.


  But the big box generalists are really struggling right now. And so a lot of agencies are sort of tiptoeing away for them. Obviously, on the eCommerce side, everything is going gangbusters and that still is a great source of revenue for many agencies. As an aside, many agencies are working with their clients, helping them create eCommerce opportunities on Amazon and other places like that. So whether they already have an eCommerce presence or you’re helping them create one, there’s nothing shaky about that space, but the brick and mortar retail space is is much more tenuous right now.


  And I think it’s going to stay that way for a while, many agencies that have been kind of consumer facing or retail facing are really taking some of those experiences that they have, and trying to translate those into B2B plays. So it may be that they look at the retail experience as creating a sense of place and driving people to a specific place. And now they’re translating that to more a B2B or more specialty location, kind of a experience. But many agencies are rightfully so a little gun shy when it comes to brick and mortar retail.


  So that wraps up the client trends that we’re seeing. Now, one of the interesting things that we’re always watching is where do agencies make money? What kind of work are agencies doing that’s particularly profitable for them? What kind of work are agencies being asked to do more often? So I want to talk about some of those, the tactics and deliverables that seem to be trending.


  One of the tactics that is trending and if you heard my podcast about the trends that I was seeing last year, in 2017, this is a repeat trend. But if anything, it’s getting bigger and louder, is video, video keeps getting bigger, and it keeps getting cheaper. And so many agencies, a year ago many agencies were still kind of licking their wounds and sort of frustrated at the quality level and budget level that clients were willing to dedicate to video, especially video, I’m not talking about big brand videos, I’m not talking about hire a crew and shoot for three-day kind of videos, those videos still exist, those projects exist, they’re certainly fewer and farther between than they used to be, but they still exist.


  But what I’m really talking about are social videos. So clients wanting sort of what I have termed running-gun videos where an agency is not hiring an outside production company. But instead an agency is dropping a few $1,000 for a decent camera, and maybe a little light pack and a good microphone, and maybe some other tools of the trade. But most agencies are in and out for under $10,000. And they really have everything they need to shoot and edit and produce and publish these kind of videos.


  So you know, this is literally a video shoot that is done in a day or maybe two days where you’re shooting in the morning, you’re coming back to the office, you’re editing in the afternoon, and you are pushing that content out either that night or the next day. For many agencies, this is a way that they’ve been able to look at a creative department that maybe was a little bloated, maybe there’s not as much demand for traditional creative in your shop. But these are skills that many of your creative folks, particularly a traditional art directors can very quickly adapt to so they have a great eye, so they’re a good shooter. And they understand lighting and all of that because they’ve been, are directing photoshoots for years.


  And many of them are getting very proficient at the editing software that most agencies have in-house or can get in-house relatively cheaply. So because they’re already good storytellers and because they have a great eye, they’re sort of the perfect answer for who should be doing this work. And it’s also typically a department where you might be over staffed by a person or part of a person. So this is a great way to bring billable work to that department.


  Many agencies are packaging this so it’s they’re selling a set of videos, a certain number of videos with a certain amount of reroll shooting and they’re baking in some computer graphics and things like that. But they’re keeping it very simple. And they’re able to make a fair amount of money because it’s pure AGI there are hardly any if any out of pocket costs.


  So for many agencies, this is actually turning into really profitable work. The thing that gets in the way of this very profitable work, quite honestly, is our own sense of, it’s not good enough for us to be producing, and we have to overproduce it and we have to make a Mona Lisa out of every video. And I think that’s the caveat when you’re looking for who on your team is the right person to sort of train up to do this work if you’re not already doing it. It has to be somebody with a sensibility and an understanding that they’re going to be in and out of these projects and they have to stay within budget because otherwise a profitable project can become unprofitable in a hurry.


  I will tell you that I do not think that this trend is going anywhere, I think if anything, any agency that cannot produce video pretty soon is going to be in a world of hurt. So if you have not embraced this sort of running-gun down and dirty video, it is time, because otherwise somebody is going to be taking that money out of your pocket and putting it into another agency’s pocket.


  The key to this really is the authenticity. So when you go to YouTube, and you start looking at the statistics of what videos or video series get the most views and get the most comments and interactions, they’re not the super produced videos, they’re not the beautiful, sort of what we would be proud of kind of videos, they are a guy with a camera in his house, shooting tech reviews while he’s drinking vodka and I’m afraid of drunk tech review, as you might imagine.


  But those are the kind of videos and series where people are really gravitating to them because it feels real. And that’s the thing that we’ve got to be able to deliver for our clients. And we have to be really careful that we don’t over produce what we’re doing, even if we’re staying within budget, because the minute it looks super produced, that authenticity gets lost. And sort of the rawness of the video, which I know as professionals and creative people we don’t love, but that’s what the marketplace loves right now. It’s what is believable and it’s what’s valuable to them, and it’s credible and we’ve got to be able to deliver that for our clients.


  So that’s the video trend. And with that, it seems like a really great time to take a brief pause, and then we will get right back to the show. If you’ve been listening to the podcast for a while odds are you’ve heard me mention the AMI peer networks or the agency owner network. And what that is really is, it’s like a Vistage group or an EO group, only everybody around the table owns an agency in a non-competitive market.


  It’s a membership model, they come together twice a year for two days, two days in the spring and two days in the fall. And they work together to share best practices, they show each other their full financials. So there’s a lot of accountability. We bring speakers in and we spent a lot of time problem solving around the issues that agency owners are facing. If you’d like to learn more about it, go to agencymanagementinstitute.com\network.


  Okay, let’s get back to the show. Another trend that I’ve been watching for a couple years and it’s really becoming very mainstream now is influencer marketing. So much like social media marketing was sort of the darling in ’07 and ’08 influencer marketing is definitely the darling of 2018, 2017 and I think 2019. If your clients haven’t asked you about this, they’re going to.


  So the power of being able to find someone who already has a loyal following, has already earned their trust, has the credibility with that audience, to get them to talk about your client or their product or their service or to feature them on their podcast or their vlog or whatever their medium of choice is, that there’s great value in that and clients are beginning to really assign a significant value to that as opposed to buying media.


  And I’m not suggesting that they’re going to do one over the other. I’m just saying that this now is sort of one of the new elements of PR, that is really a huge, huge part of many agencies profitability and their AGI. I will tell you, though, that the influencer marketing right now is really the wild, wild west, some influencers have it all buttoned up, they’ve got a rate card, and they know exactly what they’re willing to sell, and how much they’re going to sell it for.


  Others it’s really a phone call or email negotiation, and they don’t really have anything set in stone. So the upside is as you can negotiate, the downside is it’s hard to keep them on track and make sure that they deliver what they promised they’re going to deliver. So a lot of agencies are under estimating influencer marketing, they’re putting together their estimates for their clients. They sort of think of it as paid media. And they assume that everybody sort of has all their ducks in a row.


  And depending on the level of influencer you’re working with or if you’re working through one of the third parties, that sources influencers for you, and negotiates on your behalf or on both of your behalf on the fees and the deliverables. That’s great. But if you’re going to somebody who really isn’t as sophisticated, or maybe is a micro influencer, and doesn’t have all of this figured out yet, it can be very labor intensive. So on the more sophisticated and it’s a legal quagmire in terms of the documentation, and all of that, and on the less sophisticated and you really have to do a lot of babysitting.


  So the upside is it’s very profitable and clients really love it. The downside is it’s not very well defined right now as a deliverable, and so a lot of agencies are in the beginning, as they’re learning kind of the ropes of it, it’s not as profitable for them, because they’re not estimating it well. So be mindful, if you’ve been doing it and you think, “Oh, this is ridiculous, I can’t make any money.” What I would suggest to you is yes, you can, you just need to think about the pricing more accurately, more taking into account all of the nuances that come with working with basically amateurs who are selling their celebrity.


  And if you haven’t gotten into it at all, I’m going to tell you two things. One, I think you’d better either jump in or find a partner. But again, back to being the generalist quarterback and having specialist partners, either you need to be good at it, or you have to have a partner who’s good at it. Because this is really something that most clients are asking about, or wanting or should be asking about. So you want to be able to deliver that one way or the other.


  And be smart about the way you estimate it, because it’s going to take about twice as long as you think it is, especially in the beginning. I think it gets easier when you go back to the same influencer and you sort of have your routine with them. But in the beginning, it’s very time intensive to negotiate those deals, and then to babysit those deals, but influencer marketing, not going away. And in fact, I think will continue to be more popular and more in demand.


  Another place where I think agencies, another tactic where I think agencies can really shine. And by the way, I love this tactic, because it’s super sticky. Once you are doing this for a client, they don’t want to extract themselves from you, because they don’t want to extract themselves from what you’re doing for them around ratings and reviews. So many agencies are packaging up and putting together a program where not only are they monitoring the reviews that are already being left for your client, or the ratings that are already being left and then responding to those.


  But more importantly, what the agencies are doing is they are soliciting ratings and reviews from customers. And part of that is just the mechanics of making that solicitation. And then following up and all of that, a bigger part of that, in my mind is what agencies do really well, which is understand the psychology of the buyer, and sort of understand at what point after Drew drives his new car off the lot, is he most in love with his new vehicle, because that’s when we want to ask him for that rating or that review.


  So agencies are really understanding that psychology and they’re putting together a whole program where they’re soliciting the new customer or the returning customer at the exact right moment where they’re sort of as happy as they’re going to be about the brand or the product or the service and asking them to make that comment or to leave that review. But they’re also managing and monitoring and then responding to the reviews A, that not only those people leave, but B, the ratings and reviews that are just left organically.


  So lots of agencies are… It’s a nice profit center for them. But I will also say that a lot of agencies are sort of phoning this in. So they’re sort of watching the reviews, and that’s the kind of work then that the clients pull in-house. So if you’re going to do this, you need to really sort of systemize it. You’ve got a sort of a pattern that you can follow over and over and over again and then you can demonstrate results.


  The beautiful thing about this is obviously, it’s incredibly easy to measure and show your client, “Look, you were at a 3.6 and now, thanks to the program that we’re running together, you’re at a 4.2, or whatever that number is.” So the upside of this is, it’s easy to prove the value of what you’re doing to once clients see that you’re doing it, and they don’t have to do it. Because as you all know, this is one of those areas where clients are freaked out about this, they are afraid.


  And many of you are going to find when you bring this up the client’s like, “No, I don’t want to ask people for reviews, what if they say bad things?” So you’ve got to have an answer for that. But we also know that we are in a ratings and review economy. And so your clients have to wade into these waters and far better for them to wade into it with you. So ample opportunity for profit here. And also, once you’re doing it well and the client realizes they don’t have to screw around with it, it’s very sticky, they don’t want to break up with you because then they’re going to have to take it back over again. So it’s a great way to retain clients and to provide ongoing value to them.


  Another tactic and in fact, I think probably the biggest and most important trend, probably of both podcasts that I think really, really, really needs to be on your radar screen is the whole idea of voice optimized content. When you think about it, five years ago, nobody had an Alexa in their kitchen, no one had the Google device or the Apple device, we were sort of talking to our phones, maybe a few of us on the high end, we’re talking to our cars, but most cars you weren’t talking to, an