2018 Marketing Agency Report

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Hubspot’s Marketing Agency Growth Report for 2018 discusses the biggest issues facing marketing agencies this year.  Using survey responses from over 1,000 agencies, the report looks at common issues agencies are facing, provides expert’s insights into these issues, and suggests possible solutions to these problems.

The survey, conducted by Hubspot, gathered data from subjects primarily in the US, the UK, and Canada. Responders held a variety of positions in the agency they worked for (although most were in the CSuite) and worked for companies with diverse revenue streams, number of employees, and years in business.

Below we have summarized the report and discussed a few of the points that we feel are most important. If you would like to read the report in its entirety click here.

Finding new clients

By far the biggest pain point for agencies was finding new leads and new clients.  60% of all people surveyed said that trouble finding new clients was the main reason their agency was unable to grow as quickly as they wanted. Despite the high number of agencies that say generating new leads is their biggest pain point, most agencies also reported that they were confident in their ability to generate new leads indicating that, while finding new leads and clients is a pain point, it is a surmountable one for many agencies.  This is a good sign for the industry because it indicates that the market is strong and there is still a healthy demand for marketing services; however, the more troubling issue is that only 52% of agencies are confident they can attract the type of leads they are looking for and only 54% of agencies are confident that they can turn down leads that are not ideal.  This is a huge problem because taking on clients that do not fit with your agency can unnecessarily increase workload without significantly increasing revenue.

The Solution

There is no easy solution for finding perfect leads, and there never will be.  Finding new leads takes time and effort, but it is important to make sure that your efforts are managed effectively.  To generate new leads, it is important to establish a value based, repeatable process that will connect potential clients to your agency multiple times on multiple platforms.  A popular, though not particularly successful, advertising strategy marketing agencies employ is to send out mass emails and write blog posts without an overarching cohesive lead generating strategy in place.  It is very difficult to connect with ideal leads and effectively demonstrate to them the value of your agency in this manner.

A better solution would be to create a more targeted approach to lead generation.  Find out who your ideal client is and focus your efforts on this narrower group of companies.  If you feel that your agency already employs a cohesive strategy, but has not generated leads yet, don’t be concerned.  Many agencies give up too quickly on their process.  Keep reaching out to clients and make sure that all of your communication forms a consistent brand image that shows the value of your agency.

Another way to improve the quality of leads is to diversify the source of these new leads.  47% of people surveyed said that their agency’s main source of leads is referrals or personal networks.  Referrals can be a great source of leads, they demonstrate that your client is willing to vouch for your services, but getting leads solely from referrals makes it hard to grow as an agency.  Typically, leads generated through referrals are similar to your current clients.  They will have a similar budget and similar expectations which means that as your agency becomes more experienced, you will still be doing the same work for the same prices as before.  Just like finding leads in general, there is no quick solution to diversifying where you obtain your leads, but it is a critical step in growing your agency’s client base.  If you feel that your company is ready to take on bigger and more diverse clients, but your primary source of leads is still referrals, consider investing more time and energy into growing other lead generating sources such as marketing events, email outreach, or your agency’s website.

Negotiating Contracts

Negotiating contracts and hammering out the legal details of agreements can be a challenge for any agency. Many times, agencies don’t want to upset a prospective client and will go to great lengths to appease them. Because of this only 66% of agencies surveyed use contract terms to prevent clients from prematurely canceling their services and a mere 36% of agencies have clients sign legal documents to protect their intellectual property (IP). Agencies, in their haste to sign new clients, rush through the negotiation process.  As a result, they risk giving away precious IP, risk leaving themselves unprotected from clients who withdraw prematurely from contracts, and risk opening themselves up to other issues down the line.

The Solution

The most important thing that an agency can do is to clearly lay out terms regarding IP, payment, and other legal issues at the beginning of a partnership.  Once a client has agreed to hire you, it is very unlikely that they will walk away when these issues are brought up.  They have already invested time and resources into selecting you as their marketing agency, and it’s crucial at this stage to make sure a contract is agreed upon outlining exactly what services you will offer, at what price, and who retains ownership of any IP.  In this contract make sure that your payment terms in particular are specific, and that there are ramifications such as late fees if payment is not made.  Being specific about payment will create a little more stability and predictability with your revenue stream and is a very important step especially if your agency is part of the 57% of agencies who have less than 3 months of cashflow.

Another solution that agencies have started to employ is creating proprietary solutions that can be used with many clients while the agency retains the intellectual property rights. This is a great first step because it prevents clients from reusing your content beyond what you intended it to be used for and it gives you much more control over the content you create.

A final suggestion is to create and have a set of standard legal documents in place: a non-disclosure agreement, a master services agreement, scopes of work, change orders, etc. Creating these standard documents means that a client cannot take advantage of you by pressuring you into signing a contract or NDA on their terms and you will know exactly what legal standing your company has with regards to all of its clients.  When creating these documents, consider including a clause that allows you to showcase the work you do for your client. New clients almost always want to see examples of your past work, and it is important to make sure that you have the ability to show your previous work off.  Present all of these documents at the time of signing.  As said above, it is unlikely a client will walk away once they have agreed to hire you meaning at that point in time you are in a position of relative strength.  Use it to your advantage and negotiate terms that you feel comfortable with.

Talent Acquisition

Talent acquisition, a vital part in growing and improving any marketing agency, is another major pain point throughout the industry.  43% of agencies surveyed said that they did not have enough time to focus on administrative tasks including staffing plans, 35% of agencies had difficulty finding employees with the “right fit”, and 12% of agencies reported that they had trouble retaining existing employees.  This creates a roadblock for agency growth with 28% of agencies surveyed listing lack of talent as one of the reasons they are unable to grow as quickly as they want to.

The Solution

One solution when experiencing difficulty hiring and retaining talent is to offer employees a greater range of benefits.  Remote and flexible hours are now commonplace in the marketing world, but other benefits such as profit sharing, training, paid leave for both mothers and fathers, and retirement 401k matching were all mentioned by over a third of all survey participants as benefits their agency should provide.  It is important to consider giving employees these benefits especially if your agency finds it hard to raise actual wages.  These benefits can cause talent to choose your agency over others and can make your employees feel valued.  Benefits such as training, educational conferences, and stock options show that your agency is willing to invest in its employees and can help garner loyalty for your agency among employees, make them feel appreciated, and as a result are more likely to stay on even if salary is higher elsewhere.

Providing a path for growth within the company and providing training are also critical steps when hiring new talent and making current employees feel valued.  Opportunities for career growth and recognition are some of the reasons that many employees are willing to accept a lower salary at their job. Without initial training for new employees, and without continued training and a path for career growth, workers might get discouraged and look elsewhere for work.  This is a major problem throughout the industry.  Only 50% of agencies are structured for career growth and only 41% of agencies have a training program in place for new hires. As important as it is to hire new talent, retaining old talent is arguably just as important, or even more important, because current employeesalready know about your agency, your clients, and have expertise, knowledge, and training that will be lost to your agency if they leave.  A good strategy is to invest just as much energy in retaining talent as you do in recruiting talent.  Try to help current employees move forward and feel valued in any way you can even if you are unable to officially promote them.

The Industry

The marketing industry is, as a whole, a difficulty industry to be in.  Clients are more demanding than ever, and the large number of marketing agencies vying for clients’ attention has made the market very competitive.  Many agencies feel like they have to reduce prices or offer more services to retain and get new clients.  This, in turn, has forced employees to work more account on wages that are not only not keeping up with other industries, they are actually declining when taking cost of living and inflation into account.  71% of agencies expect account managers to manage over 4 accounts at any given time with 37% of account managers managing over 6 accounts.  This can seriously erode the quality of life at these organization and contributes to the talent retention and hiring issues that many agencies are dealing with in 2018.

The Solution

One of the best ways to deal with the issue of too much work and not enough money is to say no to clients that ask too much or that will not be a good fit for your agency.  This is one of the biggest reasons why agencies feel overworked and is a serious problem throughout the industry.  Only 54% of agencies are confident that they can turn down ‘bad fit’ clients.  Tim Williams working at Ignition Group believes that, “in good times or bad, better pricing is the key to better profits, and better profits are the solution to paying competitive salaries that allow you to retain the best talent…Revenue is vanity. Profit is Sanity.”  It is important to acquire new clients, but it is not worth reducing your price to the point that you can barely sustain your bottom line to get those clients.  Many experts agree that cutting costs and offering more services is not the best way to help your agency grow.  Rather it is better to maintain rates or even raise them.  Although some client might leave (and very few usually do), employees now have enough time to focus on the remaining clients.  Employees will be happier, workflow will be smoother, cashflow issues will improve, and the quality of work you can produce for your remaining clients will increase.  Unlike agencies where employees are overburdened and there is too much work, agencies that selectively choose clients create an environment that fosters and stimulates growth.  Saying ‘no’ to a client or potential client now can save a lot of headaches in the future.

Using staff utilization rates is a very effective tool when looking at what parts of your agency, and what clients, are profitable and what parts of your business are unsustainable. Already 58% of agencies track these rates, and in doing so are able to streamline their business by cutting parts that are holding them back.  Other pieces of software such as Service Operations Automation, can also help to improve resource management and ease workflow congestion to improve your agency’s bottom line.

Marketing in China

Although the report by Hubspot focuses on marketing agencies in the United States and the United Kingdom, these issues are very much present in the Chinese marketing industry as well. Similar to the marketing industry elsewhere, the market is competitive, and this competition has led to the development of the same issues of low staff retention rates, overworked employees, and low salaries as agencies compete against each other and feel forced to offer more services for lower prices.  The lightning fast pace at which the Chinese businesses world changes has put additional strain on Chinse marketing companies because they are forced to work in such a fast-paced environment.  Business conditions are constantly changing, clients grow quickly, and marketing agencies are expected to keep pace.  That is why in China retaining staff and continually training them is even more important than elsewhere.  Employees need to be kept up to date on new advances in the market.  Investment in human capital and making sure your employees are happy and not overworked can be expensive, but in China it is absolutely worth it.  To learn more about the Chinese marketing industry and read more articles like this visit digitalbootcamp.asia.

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