This article was originally published on MarketingProfs, on December 6th, 2016.
Agency life isn't what it once was. No, I'm not making yet another Mad Men reference. I'm talking about how agency life has changed in just the last two decades.
A friend of mine put his finger on it the other day: He said clients' views of agencies and how they interact with each other changed drastically during and after the financial crisis of 2008.
Blame the Great Recession
What my friend meant was that before the recession, there was the widely held concept of a digital "agency of record," but as the financial crisis hit and businesses looked to batten down the hatches, agencies were either dropped or had the scope of their work cut greatly. Moving out of the crisis, companies began to employ multiple agencies to specialize in the various areas of their marketing campaigns instead of the previously used agency-of-record model. That led to lower price points not only because of fractured scopes but also from an increase in competition and overall fear on the part of agencies about losing their share of campaigns.
With the proliferation of the digital marketing agency and the inexperience of some of their owners regarding things like pricing and scope-setting, client perceptions of their agencies have started to stray from the once-honorable agency-of-record viewpoint (a partnership with trust in capabilities and character) to a transaction-based interaction where everyone is replaceable and should know that.
Now, of course, this isn't so for everyone in the market. There's still such a thing as an agency of record; and, on the other side, many companies use multiple specialist agencies treat them as partners, with respect for their time and efforts. Still, the amount of misjudgment agencies is receiving from their clients is growing.
Negative Agency Trends Affecting Client Perceptions
Although the theory above is a good start, a handful of recent and not-so-recent trends have helped establish unrealistic expectations for clients who now look at you, the agency, in the wrong light. Oh, and did I mention that it's your fault?
Fear of the client's choices and of the competition
Many small and medium-sized agencies have a lot on the line when fighting for new business. With retainer sizes often smaller than their larger competitors' and growing overhead with employees and tech spend, a new client at one time or another can make or break an agency. With that added pressure on them in the sales cycle, it can be very easy for an agency to be afraid that a prospective client might choose another agency on the basis of price. It's because of this fear that these agencies often look to discount their prices and even add additional projects and services in an attempt to win business and showcase capabilities. The result is a client's skewed perception of the value of a single agency and its service.
Now, I know what most agency owners are already saying in their heads when they read that. "You should never discount your services! Whenever I find myself in that situation in the sales cycle, I remind myself that I have a backbone and then pitch my services at the same or higher price. If I lose it then I lose it." To which, my response is... At some point, you'll get off your high horse.
Every agency finds itself in a tight situation where they need to discount their services or cut scope from proposals in order to add revenue. This is just the reality of small service-based businesses; and, though it sucks, it is something that must be dealt with through the agency owner's "backbone" (I hate to agree, but s/he's mostly right) and through differentiation in your agency, whether it be through experience or services provided.
If you know you're the only agency who can provide a specific service or do it the right way, you should make sure your prospective clients know this and then never step away from the set price. If they don't choose you, they'll suffer and then come back to you with a greater amount of respect for your capabilities.
Misrepresentation of the agency's size and capabilities
Agencies that are looking to win clients when pitted against larger competitors may sometimes misrepresent their true size and capabilities. Some agencies might tell you that they have a 30-person team but will leave out the fact that 20 of them are 1099's living in a different part of the country. Some agencies might say they have PPC capabilities when, in reality, they "know a guy" half way across the world who builds campaigns for them without fully understanding the rest of the digital campaign.
Both those examples seem excessive, but these types of things happen all the time. Misrepresentations, no matter how big or small, will almost always come back to bite an agency in the ass by setting a client's expectations too high while their inability to meet them is nowhere to be seen. The result: distrust within the client's relationship with that agency, but also distrust of agencies in general.
Agencies finding themselves in competition for business need to take a more honest and direct approach when discussing their capabilities. Your team size may not be as impressive as your competitors', but as a result you may be more agile. Though you may not have a full list of service offerings and capabilities, maybe you specialize in a specific area and do it better than anyone else. Honesty may not win you all the business you're looking for, but it damn sure will set better expectations with your clients than misrepresentation would have.
Not enough client education on team setup and processes
From my experience, most clients' knowledge of agency procedures fall into two categories: Clients either don't know shit about them (and embrace it) or claim to know how things get done (yet are often wrong). Very few actually understand how agencies are set up. Those who fall into the other two categories can be dangerous.
Clients who don't understand how things run in an agency environment can have unrealistic expectations of pricing, project turnaround times, or communication, ultimately leading to faulty perceptions of an agency and their campaign with the agency.
That isn't their fault, at least at the beginning of a campaign. There's not one way to run an agency, and clients shouldn't be expected to know how your agency works; but that damn-well better be something you teach them early on. Giving new clients a glimpse behind your curtains so they can see who's working on what and how you work together internally helps them understand their campaign and your process.
Clients who have a more intimate understanding of their agency's team structure, processes, and full capabilities are more likely to better utilize the agency's additional capabilities throughout their campaign and are more likely to be understanding when something goes wrong.
If you don't show them your inner working, you run the risk of becoming a faceless, replaceable agency to your client.
Not using contracts and pricing models that help agencies get paid for the work they do
Winning a new client often comes down to the scope, pricing, and structure of the agreement. It's that simple. So what happens if the agency's contract is too generic in how it lays out scope and legal recourse? Depending on the client and the client's perceptions, bad things could happens.
For many small and medium-sized agencies, signed contracts are the things that tell them what to do within the campaign and how much they're getting paid, but unless it has enough detail written in surrounding extenuating circumstances (they almost always happen), clients can walk away with the perception that their new agency is responsible for "all of their marketing."
Most clients don't come to this conclusion with malicious intent (although there are some out there that do); instead, they simply misunderstand the fine print that may or may not be clear enough in your contracts that help you get paid for all of the work you do, both recurring work and one-off projects. Read through your contracts and ask yourself:
- Does it clearly state what we will and won't be doing on a regular basis?
- Does it clearly explain your pricing structure for ongoing work and one-off projects?
- Does it have the necessary legal disclaimers that will allow you to take the necessary actions to get paid for work completed?
If your contracts don't clearly answer those questions, you may be doing a poor job at setting expectations with your clients on what and how work will be done and how you will get paid for it. Spend time going over your pricing structure with your clients before they sign with you to ensure their clear understanding of what the proposed scope entails and how you will handle requests for anything outside of it.
Your contract should clearly reflect that explanation, and your team members should understand it so they can enforce it.
Buck the Trends, Create New Opportunities, and Become the Agency of Record
The age of clients' viewing agencies in a favorable light is not over ; in fact, opportunities to become a truly trusted partner are increasing in the digital arena for some, with greater interest being shown in sales enablement services by organizations. That said, agencies need to be able to overcome the above-noted negative trends if they want to establish themselves as contenders for the coveted agency-of-record title.