You’re Overspending on Marketing — Here’s How I Know
You think you're buying marketing assets, but you're really paying for agency overhead.
By Chris Duprey
As you’ve grown your business over the years, adding staff to every department, you’ve probably never thought about hiring an outside organization.
Hiring a sales agency to talk to your prospects? No way.
Hiring an engineering agency to help you design your product? Not a chance.
Hiring a customer services agency to help soothe upset customers? Absolutely not.
Why do these options seem so off-target? I’ll tell you why: You don’t want some outside company you hardly know handling such an important part of your business.
Instead, you’ll hire salespeople, engineers, and customer service pros to join your team. If any department needs to expand its skillset, you’ll hire accordingly, or you might bring in a consultant to help train them.
But here’s what always confuses me: These same businesses think nothing of hiring a marketing agency to handle all of their critical outreach: website messaging, content marketing, emails, and social media.
The fact that this is so commonplace has helped me understand a dangerous truth: When we pay for an agency to do our marketing, we don’t really understand what we’re buying (or what we’re getting).
The implications of this miscalculation are alarming.
What you’re actually getting when you pay an agency
To me, hiring a marketing agency only makes sense in a fraction of circumstances.
In nearly every case, paying an agency to “take care of” your marketing is as absurd as hiring a sales agency to sell to your customers.
In the back of your head, you know it doesn’t totally make sense. You know you’ll be sacrificing authenticity, but you assume you’ll be getting expertise in exchange.
Here’s the thing: You might not end up getting authenticity or expertise.
Many agencies suffer from constant client churn and frequent employee turnover.
They overpromise in the sales process and then can’t deliver. Clients get angry and leave, cutting into profit margins and destabilizing the agency.
And on top of that, those agencies often outsource their client work to freelance writers, designers, and video producers. So that expertise you were sold never turns into the results you need.
How do we know all this? We were in this business for close to a decade and came to see the traditional agency-client relationship as deeply flawed.
Now, we’re consultants and coaches, helping businesses bring marketing in-house.
You think, ‘We’re buying deliverables — and expertise’
So, let’s say you shell out 12 grand a month, each month, to an agency. As an example, your contract says you’ll get three articles, two videos, and several supporting materials. That’s what you get each month.
What you think you’re getting with an agency is these deliverables: articles, ebooks, email copy, graphic design, and videos.
Then, on top of that, you think you're getting expertise: how and when to use each type of content to generate leads.
In your mind, it’s pretty clear. You pay, and you get the deliverables back.
But your thinking is wrong.
What you’re really paying for is agency overhead
Think about it like this.
How long does it take to produce a blog article? On average, around four hours, according to a thousand writers surveyed by Orbit Media. On top of that, there’s research and promotion. So, let’s call it six hours total.
OK, so your agency delivers three of those each month. That’s 18 hours.
Next up is video: Let’s say each video takes 10 hours to produce, including planning, shooting, and editing.
Two videos is 20 hours.
In addition, let’s say there’s some email copy, maybe a quick landing page design, keyword research, strategy, etc. In all, let’s call that another eight hours of design and planning work.
OK, got your calculator? That’s a total of 46 hours of work. On top of that, let’s throw in some meetings. Maybe another two hours.
That’s 48 hours of work each month.
Your bill? $12,000.
That’s $250 an hour — for every hour the agency is working on your behalf.
That means that blog article is costing you $1,500. That video costs $2,500.
Now, back up a bit. How much is that writer actually getting paid? How about that videographer?
According to payscale.com, the average content marketer makes $56K a year. A videographer is $47K. Factor that out and convert it to hours: That’s an average of about $25 an hour.
Remember, you’re paying the agency 10 times that: $250 an hour.
Sure, there’s equipment and software, there’s expertise and strategy, but ten times?
If the deliverables cost X, and you’re paying 10 times X, where’s all that money going?
To get more and pay less, hire a marketing team
The old benchmark is that a company should spend around 10% of its revenue on marketing. Research shows that it’s often a bit higher for B2B businesses.
If you’re a $5 million business, 10% is half a million dollars. So, before you throw it all at an agency, consider a different approach.
Instead of paying an agency for questionable returns, build an internal marketing team. It’s less expensive, way more effective in our experience, and it keeps our investments in-house.
Building your internal marketing team with a $500,000 budget
As a former COO, I’ve spent plenty of time around budgets and spreadsheets.
If I were to allocate marketing budget for a $5 million business, I would think about salaries first.
Anytime you hire someone internally, you’re going to get a lot more out of them without the agency serving as a middleman.
Remember how the agency gave you three articles per month? Hire an internal writer and you’ll get three articles a week — and it’ll cost you much less.
So, my budget allocation?
- Marketing director: $100K salary
Oversees all marketing, publication calendar, social posting, and email marketing
- Content manager: $60K salary
Writes three articles per week, interviews subject matter experts, and starts a newsletter
- Videographer: $60K salary
Films, edits, and publishes two videos per week, oversees your company's YouTube channel
- Marketing software: $25K
CRM, video hosting software, and analytics tools
- Hardware: $15K
Computers, cameras, equipment, and the like
Right here, we’re looking at $260K a year — and you’re paying salaries above the market rate.
How you spend the rest would depend on your unique needs. I work with clients from more than a dozen different industries. You might need, for example:
- An SEO expert
- A social media manager
- A graphic designer
- A website strategist who can design and develop for your site
- Social media and search ads (especially if you’re in ecommerce)
And so on.
The team you build can outperform any agency. You’ll get more content that’s authentic and sounds like you. You’ll get better email messaging and more engaging videos — all for a lot less money.
But in order to get your team on board and rowing in the right direction, we suggest coaching and training. This way, you can supercharge their skill development and production.
Marketing is no different than any other department
When your company’s growing and you need a bigger sales team, there’s no way you’d ever contract a sales agency to have them speak to customers. Why not? Because they don’t know your business or your industry.
Yet we do this every day for our marketing needs. And we do it without batting an eye, writing checks to far-off agencies, expecting them to instantly onboard through a few Zoom calls so they can take control of all aspects of our messaging.
And the worst part of all is that we're spending way more than we need to to do it.
Your website, your content, your social media account — these are the first things every future customer will see about your brand. When you hire an outside expert to handle that for you, you hand over the keys to your own growth engine.
Instead, hire an internal team and see the benefits first-hand.
Want to learn more about how to do it? Talk to us.
Wondering where to begin?