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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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