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Revenue & Features Editor, Co-host of Content Lab, 15+ Years of Writing and Teaching Experience
July 26th, 2019
According to Marcus Sheridan, who speaks around the world about the Big 5, cost is the number one article topic to drive website traffic.
If you’re considering hiring an agency to help with your Inbound marketing, cost is probably central in your mind as well.
Nick Salvatoriello — who has worked at HubSpot, run his own agency, and now works as a Client Success Manager at IMPACT — talked with me about retainer fees, the cost of outsourcing content, and why the traditional agency model is flawed.
John Becker: To begin, why do companies hire an inbound marketing agency?
Nick Salvatoriello: At its most basic level, the relationship between a digital sales and marketing agency and a client is to be an extension of their team, no matter what.
That's why you go out to contract with agencies. You want additional horsepower of some kind, some additional capability of some kind in your digital sales and marketing operations.
JB: Talk to me about your first experiences working with clients.
NS: When I was at HubSpot, my specialty was in training and onboarding hundreds of digital agencies all around the country and around the globe onto HubSpot’s Agency Partner Program. I consulted regularly with all kinds of marketing agencies on how they could implement HubSpot into their own unique business models.
A year after HubSpot went public, I then was offered a chance to take over running an existing agency’s client services operations for a year, and I learned a ton about how I could get creative with pricing and packaging.
And then I joined IMPACT, which is a leader in the inbound agency space, and saw how we have actually tried multiple different pricing models over the years around, and also how the way we worked with our clients evolved as our services approach (and pricing models) evolved.
So that's informed a lot of my perspective around how agencies price and package and what's the ideal way for that to happen.
JB: How long is a typical contract between a customer and an agency?
NS: It will depend on what was the genus of their need. At times, there is an acute, specific project need: We have to get off this platform or there's an event coming up or I was just hired and I have no idea what to do. And therefore, the agency comes in to help solve that one problem.
In that case, the engagement could be brief and projects can be scoped around a time and materials sort of approach.
Usually, though, both the client and the agency are looking to work together for a significant period of time. I'd say at least six months, if not a year or more. If we're talking about doing inbound marketing, digital sales, content marketing, and the like, I think most people realize that that's going to take an all-hands-on-deck approach.
Not to mention there's upfront costs for both parties invested in the sales process and onboarding process.
The agency is going to invest a lot of time in getting to know a client, their business, their style of working, and their team.
It's the same for the client. They have to begin by researching agency partners, they have to vet them, they have to go through and get to know the agency.
Building a growth strategy to stake the company’s future on takes time — and is not undertaken lightly.
Generally, these are six months to two-year type relationships.
JB: So, how do agencies typically charge? Is there an ongoing flat fee, or are companies charged based on specific deliverables?
NS: The most common thing we see in how agencies charge is what we see in a lot of professional services, which is by time. They charge may be by the hour, and some firms will charge in 15-minute increments.
The challenge with this model is a lot of the clients don't anticipate or appreciate the cost that might be associated with the research necessary for an agency to become knowledgeable about your business, your brand, your team, and your website. That can represent a significant time investment up front.
So I think that can be the challenge with charging by billable hours. Sometimes people don't want to pay for a quarter of an hour or a half an hour to have a conversation that they think is actually not part of the package deal.
So that brings me to the next piece of how agencies can price, which is sort of on a subscription basis.
When I ran an agency, I would charge $2,500 a month and we would meet and spend as much time as we needed to address a client’s issues.
So, part of the client’s budget goes toward "retaining" the agency (the access, the meetings, the coordination, the planning, the troubleshooting).
That was something we broke out and told our clients was $2500 per month minimum, whether we had deliverables on the schedule or not. That gives us time every month to meet, talk, strategize, and plan.
Sometimes, the desired outcome might not be deliverables. It could be transferring of knowledge, building certain capabilities, having your company’s reputation improve online, or gaining alignment between departments.
Alternately, there can be a sort of commission structure, where an agency gets paid for a certain number of leads or sales. There’s pros and cons to this structure, and we wrote a great post about it.
Now, the most sophisticated billing structure is a blend of all of the above, which involves value points to quantify costs. These represent the time and effort necessary to complete a project task — and also how much that task is valued or worth in the market.
This allows for client and agency alignment around a standard unit (a “point”). Points are given a fixed dollar amount, and clients can decide how to use their points, based on their monthly budget.
JB: How has your work with clients informed your view of the ideal client/agency partnership?
NS: What I do now is I talk with people who are leaders in sales or marketing departments about the best way for them to use their own time and budget and resources to accomplish their goals.
The most essential resource that everyone seems to be lacking is time: We don’t have the time to do this or that, or we don’t have the focus.
Sometimes, businesses don't even know what's missing. They just know that the leads and the sales and the business growth are just not there, and they're looking for advice on what to do.
Most of them start with “If I just give you enough money, will you just take care of this problem for me?”
It's kind of what people hope: that somehow somewhere there's an agency out there that will just take care of it for them, and they just have to find the most reputable agency that they can find for the budget. And then everything will start to take care of itself.
That doesn’t work.
JB: So what does?
NS: When I ran my own agency, I realized that people were hiring us for two different things.
One is to be their strategic advisor on what they should do with their resources, what they should do next, where they should focus, and how to keep the momentum going.
In other words, it was more around consulting, project management, prioritization, focusing and getting alignment and troubleshooting any roadblocks organizationally/logistically.
The other part of what people were paying us for was to actually produce things and to get things done. To ensure that certain sales and marketing deliverables got produced (which, in reality, required a collaborative effort with their team).
JB: If a company is committed to having an agency do their content marketing, what do the deliverables look like?
NS: When sales and marketing leaders are reaching out to agencies, their motivation is usually they want to get found by more people in their target market. They want to show their industry that they’re easy to do business with and that they’re experienced, fair, and professional.
They may think that it’s just a matter of putting the right keywords in the right place and finding a guru who knows the algorithms.
I think the big wake up call is that the ability to generate content, both written and video, has become table stakes to winning and being perceived as a leader in the market.
Some marketing managers will still tell us, “but my sales reps haven't created content historically, or they don't have the time. That's not their expertise. They're not comfortable doing that.”
They think they need an agency to do it for them — to film them, record them, interview them, and then put it out there.
So, getting a video production team in to film your people and make videos, that's a deliverable that people often seek an agency’s help to produce.
But it’s still going to be more expensive over the long term to have to pay a firm every time a company wants to make a video rather than hiring an agency to mentor your own team to become self-sufficient producers of their own video content.
Basically, the campaign by campaign pricing model model doesn’t work with your long term needs because digital sales and marketing is not a temporary program where you get it all done in one quarter.
Imagine how preposterous that seems to your audience. Do we really expect them to see that burst of content we created a year or two ago and say, “Well, it looks like they really cared in the third quarter of 2017!”
You need to acknowledge that your audience wants to be educated and wants to know that you're answering their questions every single day.
Content marketing is a discipline that you're going to have to adopt in your organization. And if you're good at it, you're going to beat your competitors who aren't.
This is why people are investing in sales technology. It's why they pay well for good sales reps. Because this is a skill and a competency that you want to be building inside your organization.
JB: So, a company needs to realize that it has valuable knowledge for their customers, AND they need to realize that they have the authority and responsibility to share it.
NS: Many companies don't feel like they have the competency to do their own content creation and publishing well.
They don't really actually have a very good sense of the work that's involved. I think if they did, they might actually reevaluate whether they have time to do it or not and what an agency should be charging for in order to help support the company in those efforts.
If you want to get an agency to do the writing, the research, the keyword knowledge — if you want them to conduct the interviews, arranging the transcriptions, go through the content, and then format and optimize a blog post, you’re talking about a lot of hours.
What’s more, with an outside agency, there’s going to be a great deal of back and forth on feedback to get sign offs on drafts. Again, you're talking about a lot of hours, because they’re not in your organization every day.
In a traditional time-based pricing model, you pay billable hours for all of that time. In a deliverable-based model (say, charging by the blog post), the agency will usually set a fee per post. So a short, relatively easy post to draft, finalize, and publish costs the same as a long, time consuming post.
Either way, the agency will be overcharging or cutting corners. It rarely all balances out for either party. This is why we see so much turn over in the agencies going with the time and/or deliverable-based pricing model.
JB: So a better model would be…
NS: A better model would be to have an agency that understands this: that in order for their clients to win in the market, they're going to have to own their own ability to plan, schedule, and produce helpful content that answers their prospect's questions regularly — and in a frequency and a level of intimacy that cannot be effectively or affordably outsourced to a third party.
Every single week.
It can actually be actually a much more positive and valuable experience for all if the agency focuses on empowering the client’s team through consulting and coaching on how to apply these principles internally.
It's more affordable, it's more scalable, it's more resilient to shifts and changes to organizational dynamics to have a group of people who get increasingly more smart and savvy about your business, your industry, and the tactics at large.
So, using an agency to consult, then hiring a content manager — sort of an editor in chief — and then eventually content creators, video creators, videographers, that type of content team, is worth the price, in my experience. Not the old school, “Pay us five to ten thousand a month and we’ll feed you four blog posts a month and one eBook a quarter.” That model is broken.
The agency that can say, “here's what works, here's the process,” and they can give regular feedback, regular coaching — and then can train and get buy-in from the entire sales team.
This kind of model is more flexible and more efficient.
And, there is still accountability.
If the company shifts or pivots, the agency can help the team become resilient with either defending the existing priorities or adjusting to those new priorities, all while still making sure the client’s team is steadily producing helpful, educational content that addresses the top questions their buyers want to hear from them on.
The key is, the company is not just renting the know-how from the agency, it’s subscribing to a consulting retainer designed to help its own team become sales and marketing rockstars. That way, a company is owning its own know-how, and the agency is there to help advise that process.
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