Here’s a secret no one wants you to hear: Marketing agencies are destined to die, and if you rely on one, you’ll die with it.
This may sound like insanity coming from someone who founded a digital agency and has seen that agency grow from two people to over 60 in just under two years. But it’s true. When I realized the truth, it hit me like a freight train. As an agency, we are set up to fail from the very start. The relationships we build with our clients cannot go on into perpetuity. And companies that rely on agencies for their revenue are doomed to die.
But before you think I’m throwing in the towel and walking away from my company, just pump the brakes. This isn’t one of those articles. I think the agency and client relationship can work, but it needs to fundamentally change.
Our biggest competitor
We’ve lost clients. GASP! That’s right, I’m admitting to losing clients. Every agency will tout some gaudy number of over 90% retention rate. Well, we do that too. But we pick and choose the numbers that allow us to come to that conclusion. The fact is, we’ve lost clients for good reasons and for bad reasons. But whenever we lose them for good reasons, we always lose them to the same competitor: the internal marketing team.
You see, we’ve worked with about a dozen of the “unicorns” and they have all outgrown us. Eventually they look at what we were doing and figure they can handle it internally or that it is on “autopilot” and can be managed with limited interaction. And for the most part, they’re right!
Regardless of how competent we are, and I tend to think we’re pretty damn competent, we’ll never be able to replace the ability for a VP of Marketing to walk down the hall, grab their content team, and pull them into a meeting. We can’t be privy to the conversations that happen in every meeting. We don’t get the small nuances of our clients. How could we? We’re not in their offices enough.
So, our content, our campaigns, our emails will always be just a bit different from how they’d like them to be. Yes, they’re approved, and, yes, they’re successful, but they’re not them. They weren’t created by our clients.
Eventually they decide they’ve learned enough, we’ve laid enough groundwork, and they feel comfortable transitioning the activities internally. Sure, they’ll usually keep us on for more technical work like SEO or analytics. But the relationship always takes a natural course that we haven’t been able to alter.
And before you think this is a “me” problem, I’ll have you know that I’ve talked with dozens of other agency owners, and I’m on the sunny side of the cynicism scale when it comes to our outlook on the client/agency relationship. Most of them sum it up with a common colloquialism in our industry: “The minute they hire you, they’re looking for a reason to fire you.”
So what are we to do? Is it our destiny to churn through the industry? If software companies can land clients that last for a decade, why can’t services?
Can agencies and companies be successful together?
Well, maybe they can. But something’s got to change.
We’re not your CMO
This is one of the biggest problems when it comes to the relationship between companies and their agencies. They expect the agency to be a de facto CMO. The agency is responsible for coming up with the ideas, deploying them, managing the systems, and reporting everything back. In fact, we’re treated more like a CMO and marketing department all rolled into one. But again, we’re not you. Our message is always going to be slightly off from where you’d like it. We’re never going to know your customers as well as you do.
I’m sure there is some other agency marketer out there thinking, “You’re just not trying hard enough, Mike!”
Trust me, we’re trying.
We spend months on industry analysis, customer journeys, buyer personas, and everything else that helps understand our clients and their market. But we can never grasp the tiny nuances. Because we’re usually doing this for a couple hundred clients. And we don’t live and breathe your business. You’re paying us $5 – 20K per month; it unfortunately takes more than that to make us breathe your air. Harsh, I know, but it’s true.
What do I propose?
Well, we’ve been testing a new type of relationship with a few clients, and it’s showing some promise. But let me explain the framework. I believe that the new client/agency relationship needs to have defined start and stop points. The goal should always be to eventually move the operations and the creative to an internal team. But getting there will usually require us to fulfill the work for the first part of the engagement, train and vet a marketing team through the latter part of the relationship, and finally let go and wave goodbye as they sail off into the sunset.
The clients we’ve worked with under this form of arrangement have easily had the best success, when measured by ROI, of all our clients over the past year. And they are happier to boot. Because they understand the relationship. They don’t feel like their hands are tied by their lack of expertise or bandwidth. They can see the light at the end of the tunnel, and that gives them enthusiasm.
And the relationships don’t have to end cold-turkey. We usually stay on for technical work, but strictly in a tactical role. We can come back for a short engagement to do checkups or to help them out of the mud when something goes wrong.
What agencies need to do
Embracing this open-and-close relationship with clients will cause some angst for agencies. Many of them are currently set up to have clients remain with them in perpetuity. But this structure causes ups and downs in staffing for agencies. The agency model is notorious for layoffs that are tied to client campaigns. But if this new model is embraced, agencies would better be able to forecast their staffing needs because they would know the exact runway they have with every client.
Additionally, if this idea is accepted, agencies would have to let go of one of the most treasured assets in the agency model: the autopilot client. We all know who these clients are. They’re the ones agencies make their entire profit from. The other 80 to 90% of their clients provide revenue, but the autopilot clients are the ones that provide the profits. These are clients that rarely call and rarely expect anything from you. In fact, the agency fees are little more than a line item for them that never comes up for review.
But similar to some SaaS companies that will cancel and sometimes refund dormant accounts, agencies need to develop a higher level of accountability and honesty. We need to be providing real value and services for the fees we’re charging. And I really do believe that this one thing is what will hold back the industry from embracing this idea. The autopilot clients are life preservers, and it can be terrifying to let go of that flotation device.
In the end, though, it all comes down to survival of the fittest. Dinosaurs will die and the agencies that accept this truth and build towards it are the ones that will survive the industry climate change.
The contributer is Mike Templeman, CEO of Foxtail Marketing.