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Running an online Agency, Spinning the plates, Swydo

Michael Porter for online marketing agencies

At Swydo we see a wide variety of  agencies in our client base. Amongst other individual characteristics, distinctions can be made by the range of services they provide (Some offer just Adwords campaign management, some offer PPC in general, some also do SEO, some will even manage your websites and social media). These agencies of course also differ in the number of clients they serve. Generalizing, most of them could be classified in three groups:

  1. The Boutique agencies: serving a couple clients with a full service attitude.
  2. The Small shops: serving a handful of clients a tailored, specific service.
  3. The Volume makers: serving many clients in a comparable standardized way.

A few weeks ago, during another of many attempts to organize and tidy up my study, I pondered throwing away some of my old college books. Every couple of years this physical heritage of my time at Erasmus University in Rotterdam, studying Business Administration, becomes a bit smaller (Everything is digital nowadays, right? And the LEGO tsunami of my kids could use some additional space). Some of the books will likely always stay, like those about mathematics (Pi never changes, does it?) and classics, like the books from Michael Porter. Just can’t bear to put them in the paper bin.

Porter’s concepts on Differentiation and Cost Leadership often apply strikingly to the agency landscape. Below is one of the basic grids he teaches.

To be honest, although I’ve worked in consultancy and like to conceptualize complex issues, I hate grids. In many cases they feel like a consultant’s attempt of artificially molding the world on two axis while reality never truly fits accordingly. But it is useful for guiding a discussion:

Michael_Porter's_Three_Generic_Strategies.svg

How can we apply this to the agency landscape? Looking at the grid you can feel it coming, don’t you? Do not get stuck in the middle!
Do you recognize the following? With the services your agency provides you’re doing a great job of delivering value to your clients. You could say your agency is comprised of specialists and serves its clients well. Every day your men and women pull out all the stops to make the clients succeed (Implementing conversion tracking, ad extensions, multiple ad groups, 3 ads in an ad group, testing, bid strategies, the works!). But at the same time: by not standardizing, or focussing with accordingly higher compensation for your services, you, as an agency, will always keep the feeling you’re working too hard, doing too much and many different things, while not getting paid enough. Meanwhile the client has the feeling he isn’t receiving absolute Michelin Star quality services, while still paying a substantial price. There’s tension in this!

Boiling it down the basics seem simple. You either offer your clients tailored, top-notch quality services and ask Michelin Star prices, or you have to, very efficiently, offer them a standardized service and quality  (e.g. McDonald’s). Both roads can lead to success. Life in the middle is a lot more challenging. When your services are customized and of medium to high quality, but you’re unable to charge clients accordingly, maintaining profitability will be hard. When your services are somewhat standardized but overpriced, you will have a hard time growing in volume.

That’s Porter for you. However, it appears he did miss a sweet spot that does exist in the middle. At Least there is nowadays, for marketing agencies with the right business strategy and making use of the new tools available to them.

At Swydo we’re noticing successful agencies with 10-15 consultants having enough knowledge and power to serve a wide range of clients well. These agencies decide to invest in training a great team of differing specialities. These agencies are picking up tools that help their specialists become more efficient with their time, that help deliver higher quality to clients, that simply makes agency life easier. These agencies are making a major priority out of marketing themselves to sustain healthy growth. They serve a large pool of very interesting and professional clients with whom they cooperate on a personal level. Many of whom are very on top of results, expect transparent reporting and frequent meetings by phone, skype/hangout or in person. These clients appreciate all the effort the agency puts in their campaigns.

Seeing this successful middle trend, my advice to newcomers would be to shape your team to be as efficiently and of high quality as possible with training and tools, focus your services (PPC or SEO etc.), have healthy margins in your pricing to clients and invest in long term relationships with them (low churn). It can be great fun to run such an agency!