The Marketing Agency Blueprint Part 3

If you can define the scope, you can standardize the service and a.s.sign a set price.

The burden is on the agency to build systems and processes, and put the right talent in place, to profitably deliver services at set prices.

The value-based pricing model takes seven primary variables into account: estimated hours, hourly revenue target (HRT), costs, perceived value, builder vs. driver, loss leader, and service level.

Accurate time tracking in a value-based pricing model becomes more essential in order to monitor efficiency and productivity, evaluate employee performance, produce activity reports, and evolve pricing.

If prospects or clients want plans for free, they will never value your agency's services and knowledge.

Your goal should be to sign up the majority of your client base to long-term contracts, preferably 12 months or more.

The largest contract client should not account for more than 20 percent of your annual revenue.

Efficiency is the primary driver of success.

Chapter 2.

Transform into a Hybrid.

A real-time world demands real-time agencies.

Every Firm Is A Tech Firm.

Hybrid agencies will come to rule the marketing world. These emerging leaders are tech savvy, offer integrated services, hire and retain versatile talent, and profit from diversified revenue streams. They thrive on change, and continually apply shifts and advances in technology to strengthen their businesses, evolve their services, and deliver greater value to clients.

As change velocity accelerates, traditional agencies unwilling or unable to adapt will quickly be left behind. Meanwhile, more nimble upstart firms are utilizing technology to construct efficient agency-management and client-services models. Whereas legacy systems slow down large, established agencies, hybrid firms can activate software and introduce processes that lower operating costs, increase productivity, and drive profitability. They are able to build more scalable models that largely operate in the cloud, capitalize on advances in online communications and mobility, and rely on their social graphs to create a more open and collaborative agency ecosystem.

The cloud, which metaphorically refers to the Internet, has given agencies access to affordable hosted solutions for time tracking, project management, customer-relationship management (CRM), lead nurturing, sales, accounting, data storage, campaign management, monitoring, a.n.a.lytics, website content-management systems (CMS), enterprise social networks, technology infrastructure, virtual meetings, and communications.

These cloud applications, which run on third-party servers rather than internal networks and local computers, become the backbone to more dynamic and innovative agencies. Systems and processes that used to take years to build on internal networks can now be activated and integrated in real time, often for small monthly fees.

Technology-Driven Services.

As selective consumption-the principle that consumers choose when and where to interact with brands-continues to drive marketing strategies and budgets, agencies must seek opportunities to bundle their services through value-added reseller (VAR) and affiliate programs.

The HubSpot VAR Program is a perfect example of the opportunities that exist around technology-driven services. In February 2010, HubSpot cofounder and CEO Brian Halligan (@bhalligan) introduced their VAR program and began investing significant company resources in training and certifying marketing agencies on the use of its inbound marketing software.

Certified partners-more than 500 agencies in more than 15 countries-are given access to educational resources, selling tools, training programs, and private online communities that facilitate customer interactions and peer-to-peer communications. In addition, partners who resell the HubSpot software receive a 20 percent margin on each license for the life of the customer.

Agency partners are featured in the HubSpot Services Marketplace,1 an online directory that connects providers with organizations seeking marketing support. HubSpot uses a Customer Happiness Index (CHI) score, which is automatically calculated by its software, to grade partners based on the marketing success of their clients. HubSpot and non-HubSpot customers can search the Marketplace for services including: Do inbound marketing for me.

Call to action b.u.t.ton design.

Landing page design.

Lead nurturing.

Social media marketing.

Blog article writing.

On-page search engine optimization (SEO).

Pay-per-click (PPC).

Video production.

Premium content.

Website design.

According to HubSpot's Jordyne Wu (@jordyne), director of business development, the Marketplace has referred more than 2,500 transactions to VAR partners totaling more than $4 million in service revenue for the agencies.

My firm was HubSpot's first partner agency as part of a beta program that began in spring 2008. We tapped into HubSpot's training and methodology to evolve our traditional PR and marketing services into the emerging areas of search marketing, social media, and content marketing. Our value-based pricing model made it possible to effectively bundle and promote service packages designed specifically for the needs and goals of HubSpot customers.

Without investing a single dollar or minute in the development of our own software, we were able to accelerate our growth and drive sales by expanding our digital services and marrying them with a third-party solution. It is partnerships like these that agencies can use to disrupt and thrive in the new marketing world.

Insight into the HubSpot VAR Program.

I asked HubSpot's Peter Caputa (@pc4media), director, Value Added Reseller Program, to share his thoughts on the program and the growth opportunities that exist for agencies moving forward: Recently, a prospective partner said to me, 'There's no one out there like HubSpot who is trying to help marketing agencies be better marketing agencies.' There are so many challenges that marketing agencies face that are externally imposed, such as the changing landscape of services they must learn and deliver, as well as internal challenges including client acquisition, profit margins, and account retention. From working with hundreds of agencies of all types and sizes, we've discovered ways to help agencies with these challenges and for several years have been packaging up training and support services on top of our core product to help them.

Most agencies and consultants lack the time to even do their own marketing, let alone do the research and development to know where the market is heading, what services they should offer, and how to offer them efficiently so that they can help clients maximize their return on investment. More than 170,000 people who are either self-employed as marketing consultants, or who work at a marketing agency, have downloaded the thought-leadership content that our marketing team has produced. With data from more than 5,000 customers using our integrated marketing platform to both execute and measure their online marketing activities, we have insight into what works and what doesn't.

When we publish guidelines, share tools, and provide best practices that are specific for agencies, thousands of agencies download the information and share it with their peers. Sharing this with our partners has made it possible for them to sell, measure, and deliver ROI to our mutual clients, making it a win-win-win. While many of our longstanding partners have seen a 200-plus percent growth in revenue, there is still a huge opportunity for agencies, as evidenced by the more than 30-plus new partners that come on board each month, and the thousands who report that they are still struggling with how to build their marketing agency. We're tripling down on our partner program this year based on our successes and the demand.

The Challenges of Becoming a Product Business.

The most profitable and efficient opportunity for most agencies is in third-party software integration; however, there are a number of reasons marketing service firms may venture into proprietary product development, including: pursue perceived market opportunities, create recurring revenue streams, differentiate from compet.i.tors, improve internal processes, and increase valuation.

Although some marketing firms, such as SEOmoz, an SEO software company, have successfully transitioned from a predominantly service-based to product-driven business, it is a challenging proposition for most.

In an April 24, 2011 TechCrunch article, "What Should You Do With Your c.r.a.ppy Little Service Business?"2 Mark Suster (@msuster), a two-time entrepreneur and venture capitalist at GRP Partners, articulated why service businesses should not become product businesses. Although the post specifically addresses technology service providers, the same principles and reasoning apply to marketing agencies.

"This is where many service businesses make mistakes and go pear shaped. They get 'product business envy' because they read too much TechCrunch about their product brethren raising money at crazy valuations and getting sold at even crazier ones. So they set out to build a product business within a services company," said Suster.

He goes on to describe the three main problems that arise, which can negatively impact an agency's core service business. 1. Agencies do not realize how difficult product businesses are to build, and they falsely a.s.sume their successes selling services will translate into a competency selling products.

2. Increased costs a.s.sociated with product development create larger exposure risks in down markets, thus destabilizing the business.

3. As resources are funneled into the product side, firms can lose sight of their core business-services.

The moral of the story: Be cautious when pursuing shiny objects. Do not let delusions of grandeur or product envy cloud your vision for building a strong service-based agency.

The Tech-Firm Transformation.

Evolving into a technology-driven service firm, an essential component of every hybrid agency, requires two common elements: immersion and integration. Let's examine how each plays a role in an agency's transformation: Immersion.

Agencies, particularly their leaders, must have an insatiable appet.i.te for knowledge about the technology industry, and a desire to be early adopters of products and services. Agencies that understand technology trends and innovations are able to more readily adapt their own business models, continually increase efficiency and productivity, evolve client campaigns, and make strategic connections of seemingly unrelated information. This requires professionals to: Read the essential publications, such as TechCrunch, Engadget, GigaOM, Gizmodo, Silicon Valley Insider, All Things Digital, and Wired.

Watch the technology trendsetters, such as Apple, Google, Facebook, Salesforce, and Twitter. Monitor for news that affects client campaigns and look for opportunities that apply to agency services and agency management.

Follow and engage with influencers, including media, bloggers, venture capitalists, and entrepreneurs.

Attend conferences and webinars in search of inspiration and ideas. Seek out events that deal with start-ups, mobility, and enterprise technology.

To understand the value of technology immersion, let's take a look at how changes to Google's algorithm-admittedly, pretty geeky stuff to follow-directly affect marketing agencies. Although SEO professionals and webmasters are commonly in tune with Google news, I would argue that the search giant's moves are equally important to PR, advertising, web, and content agencies.

In February 2011, Google began rolling out its Panda algorithm changes. The goal, as stated on the official Google blog, was simple: "To give people the most relevant answers to their queries as quickly as possible."3 The first rollout impacted 12 percent of Google queries, and was designed to reduce rankings for low-quality sites in favor of sites that featured valuable original content, such as research, reports, and thoughtful a.n.a.lysis.

We will stop there for a minute. Google, which controls approximately 65 percent of the search market, was telling companies in very plain terms that duplicate, low-value content is bad, and original, high-value content is good. This was not anything new, but for years outlaw agencies have built their businesses preying on clients' needs for short-term results at any cost. They use unethical black-hat SEO tactics, and flood the Internet with low-quality content, in an effort to boost search-engine rankings and drive website traffic. These agencies are a black eye on the marketing-services industry. They sell shortcuts, not long-term solutions.

Agencies that had not taken note of Google's moves yet hopefully were on high alert at this point. However, just in case companies were not making the connections, Google, which usually is relatively tight-lipped about its algorithm changes, made another announcement in April 2011 on its Webmaster Central Blog.4 This change, which affected all English-language Google users around the world, incorporated user feedback signals to help people find better search results. Google claimed it affected approximately 2 percent of U.S. queries.

Then, in May 2011, Google provided very pointed guidance on how to build high-quality sites, and explained how the Panda change was just "one of roughly 500 search improvements" they were expecting to rollout in 2011. Their advice to marketers in general, and spammers, sc.r.a.ppers, and content farms in particular, was this: Search is a complicated and evolving art and science, so rather than focusing on specific algorithmic tweaks, we encourage you to focus on delivering the best possible experience for users.5 Google went on to offer 23 questions that organizations can ask themselves in order to a.s.sess site and content quality.

Google's core message, which has not changed through the years, is to create lots of valuable content that people will want to link to and share. Therefore, in order to grow smarter and faster than the compet.i.tion, organizations (your clients) must continually publish multimedia content online through blogs, podcasts, videos, optimized press releases, case studies, white papers, ebooks, and bylined articles. As a result, savvy agencies have been listening and building services around demand for high-quality content creation.

However, it does not stop there. Remember the lesson of selective consumption and the importance of recurring revenue in building a strong agency. Agencies have to construct campaigns that cater to consumers' evolving needs and demands. They have to help consumers find the information and products they are looking for when they are looking for them. Content creation is just the beginning. How will the content be spread (social media, e-mail, and PR), found (SEO), and consumed (web and mobile)?

In other words, this one example of Google's algorithm change, which professionals who were immersed in the technology world saw first, demonstrates the need to constantly adapt and integrate services across traditionally detached marketing disciplines. Digital and traditional services have to be aligned, and specialized agencies must begin working more closely together for the sake of clients and each other. It is the only way to create stable recurring revenue from campaigns, and achieve the success factors that matter to clients today.

Integration.

Being immersed in the tech industry is the first step, but, as we saw in the Google Panda example, you must have the willingness and ability to change your agency's services, processes, and infrastructure to accommodate market shifts. This requires the consistent investment of time and money, often without an expectation of ROI. The key is to take calculated risks, and learn to trust your instinct.

My agency's relationship with HubSpot started this way. In fall 2007, when we first signed on as a customer, I had no idea how we were going to use their software, but, at the time, I felt the industry was rapidly moving toward search, social, and content. I had read about HubSpot in a tech article, and I saw them as a vehicle to train our team in new methodologies and to eventually differentiate us from other firms. It was only a matter of months before we began to recognize the true potential of bundling our services with their software and expanding our capabilities to provide more measurable impact on our clients' businesses.

I have had similar experiences with other software platforms after first reading about them in tech blogs, and learning about them at technology conferences. Applications such as Yammer, Basecamp and Highrise (both 37Signals products), GoToMeeting, Skype, TweetDeck, and Evernote have changed the way we do business. Although you will invest a lot of time and energy in testing platforms that are not a fit, you should always be experimenting and looking for ways to improve efficiency and increase the value delivered to clients. We will talk more about technology and core agency platforms in Chapter 4.

Meet the Demand for Digital Services.

The demand for digital services is immense, and growing. According to the Ad Age 2011 Agency Report, digital services accounted for an estimated $8.5 billion, or 28 percent, of U.S. agency revenue in 2010.6 In addition, Forrester has reported that interactive marketing spending on mobile marketing, social media, e-mail marketing, display advertising, and search marketing will near $77 billion by 2016, representing 35 percent of all advertising dollars.7 However, it is becoming more difficult to differentiate these dollars. Every agency, or at least the ones that will still be relevant in the coming years, is a digital agency. Although the resources dedicated to social, search, mobile, web, e-mail, and other digital strategies will vary, interactive marketing should be fully integrated into every program and budget.

Having a digital division or group within an agency is not sufficient. Your agency's future depends on its ability to adapt, deliver measurable and meaningful results, and develop professionals who are capable of providing consulting and services across multiple disciplines. Although there are tremendous opportunities to build businesses focused on niche markets and services, the generalists who excel at blending interactive and traditional strategies, will control the power and budgets.

Resist the Dark Side of Digital.

There are no shortcuts to success. Building your digital capabilities is a process that requires significant time, training, and experience. If you want to move into blogging, social media consulting, SEO, video, e-mail marketing, mobile, and other high-demand areas, prove you can make it work for your agency first.

Invest the resources now to launch a blog, engage in online communities, gain a following, experiment with new content-publishing channels, conduct webinars, boost search-engine rankings, and generate leads through custom-built landing pages. Focus on creating value, and use it to demonstrate your expertise and advance your agency.

The market is moving fast, with growth opportunities everywhere, but do not come into it unprepared and try to sell services you are not qualified to deliver. Agencies can quickly get themselves in trouble when they overpromise clients to win new business. Never lose sight of your ethics and reputable business practices in pursuit of a dollar. The cost to your agency, and the reputation you have spent your career building, is far too great.

Let's examine the case of JCPenney to see what happens when digital services go wrong, and explore four lessons agencies can learn from the debacle.

JCPenney Wears the Black Hat.

In an exceptional piece of modern-day investigative journalism by David Segal, the New York Times uncovered an elaborate JCPenney link-building scam, orchestrated by its former black-hat SEO firm. Allegedly unbeknownst to JCPenney, the firm built thousands of spammy paid links to JCPenney.com for key search terms such as area rugs, dresses, and furniture.

The result was top rankings in Google for JCPenney products that most likely drove millions of organic site visits during the 2010 holiday season-a critical time for the retailer, which had seen sales sink to 2001 levels and was still reeling from the death of its catalog business. According to the Times, the number-one spot in Google for dresses alone could have generated as many as 3.8 million organic visits per month.

The Times had an SEO expert, Doug Pierce, head of research at Digital Due Diligence Advisors (formerly with Blue Fountain Media), a.n.a.lyze JCPenney's remarkable organic performance. Pierce described the program "as the most ambitious attempt to game Google's search results that he has ever seen." The Times turned over its findings to Google, which took "strong corrective action," according to Matt Cutts, head of Google's webspam team, resulting in significant drops in JCPenney's organic rankings.8 So what can agencies learn from the JCPenney fiasco when building their digital services? Here are four takeaways: 1. Google will win: Google's webspam team is on a mission to protect the quality of Google's search results. They are smarter than SEO professionals and far more powerful. So it is best to play by the rules. Like anything else in life and business, just because the other guys are getting away with it (for now), does not mean it is all right to cheat the system.

2. Don't be desperate: Decisions driven by desperation can be very dangerous to your agency's long-term health. Do not let client demands for short-term results, underperforming campaigns, or financial pressures force you to sacrifice your integrity.

3. There are no shortcuts or guarantees: Pleading ignorance when Google catches you will get you nowhere, so make sure your practices are ethical and that they pa.s.s the "icky" test-that feeling you get in business when something just does not feel legitimate and most likely is not.

Authentic SEO requires time, and a combination of on-page optimization-page t.i.tles, URLs, page descriptions, ALT text, headers, copy-link building from credible sources, and regular content publishing on your clients' domains. Commit to doing it right over time, and you will reap the rewards.

4. Focus on content and the long tail: Content publishing is the most powerful strategy available to build inbound links, boost search-engine rankings, drive website traffic, and generate leads. Concentrate your services on attracting organic traffic from long-tail keyword phrases.

The long tail applies to the collective strength of lower search volume, longer keyword phrases in the demand-curve tail, and their ability to outproduce a relatively small number of top traffic-driving keywords at the head of the curve (or header phrases). For example, marketing agency would be considered a header term, whereas how to build a hybrid marketing agency would be a long-tail phrase.

The Greatest Opportunity for Growth: Content.

Although agencies have been clamoring for their share of digital budgets and influence in the areas of search, mobile, and social, content publishing has largely been overlooked. Agencies that provide strong, multimedia content services are a rare and valuable a.s.set in the new ecosystem.

Powerful, action-oriented content has become an essential part of every marketing strategy, and it offers an enormous opportunity to differentiate and grow your agency and your clients' businesses. There are undisputed benefits to blogging-more indexed pages, inbound links, website visitors, and social media reach-and tremendous lead-generating potential in ebooks, case studies, webinars, white papers, and original reports. The general rule is, the greater the value of your content, the greater the return on your investment.

However, continually producing premium content worthy of links and leads is not easy. It requires significant time and resources, executive support, long-term vision, internal expertise, and often a willingness to share the knowledge businesses once held sacred. More than anything, it requires the ability to be effective business copywriters, generating content that engages audiences and motivates them to take action.

There are many talented writers and content services available, but few that possess the wide range of capabilities needed to satisfy the core elements of effective business copywriting. Public relations agencies, communications pros, freelancers, former journalists, and traditional publishers are all in the conversation as possible sources, but many have yet to step up and evolve their capabilities to meet the growing demand for results-driven online content.

Let's take a look at seven core elements of effective business copywriting, and some tips on what to look for when hiring writers: 1. Strategic: Online content has to connect to business goals and brand messaging. Hire writers that understand marketing strategy, and how to deliver copy that integrates across web, search, social, and PR strategies.

2. Brand centric: A brand is the sum of experiences and perceptions. When someone hears a company name, or sees its logo, what comes to mind? It may be based on their last interaction with a customer-service representative, the referral of a friend, or a lifetime of personal experiences with its products or services.

Words, images, and actions define your brand every day and, with selective consumption, websites and online content may often serve as the first-and possibly only-opportunity to make an impression. Business copywriting must convey core brand messages, tell an organization's story, and create positive perceptions that motivate action.

3. Buyer-persona focused: Great copywriting makes personal connections with readers. Copy needs to speak directly to buyer personas, address their pain points and bring value. Therefore, copywriters-whether internal or outsourced-must have a clear understanding of your client's target audiences, and know how to engage them.

4. Optimized for search engines: Online content must be crafted for visitors, but optimized for search engines. Ideally, business copywriters will have core SEO knowledge and capabilities.