The agency of the future: systematization & automation?

Over the last few weeks, I’ve had a number of conversations about the future of advertising and web agencies. On the one hand, many people are concerned about the consolidation of the agency scene. On the other hand, the billing model is also increasingly being discussed. So where should and can the journey take us?

(Reading time: 5 minutes)

Segments and definitions

When we talk about an agency, we usually all mean something different and I think it is of course wrong to lump all companies together. The services are too diverse, the size of the companies and, above all, the complexity and creativity of the work. So when I talk about agencies below, I am limiting this field to the typical smaller agency with between 10 and 50 employees.

These companies usually provide less complex, less infrastructure-driven, but more comprehensive services for small and medium-sized customers. Customers call such companies when they want to make progress in online marketing. Typical services include Building websites, implementing simple stores, setting up newsletter and Facebook marketing, etc. That’s what I’m writing about today.

Customer testimonials

I know a lot of people who work as decision-makers in SMEs and I often hear that they find internet agencies cumbersome and expensive. That the projects are done, but that not much comes of them afterwards. That company owners create trust and convey professionalism during sales talks and that these promises cannot be kept by the subsequent team, or only to a limited extent.

Some people complain that the service density is too low and that they don’t feel understood. Of course, it must also be said that there are quite a few customers who simply have exaggerated expectations. For example, an acquaintance recently told me that he had a newsletter campaign done and not a single order came in by email. That was a scandal. And a cheek. After all, the campaign cost more than EUR 2,000. Tough nuts to crack that you might not even want to crack.

Trapped in best practice

And when I look at what agencies are doing in this area, I think many of us are trapped in a best-practice mindset. You have to have a website, for example. You have to do newsletters. You have to do AdWords. And you have to do Twitter too. This kind of generalization usually brings bad results and that’s what the customer gets.

But it’s often more nuanced than that. When the landlord of my industrial area pub came to my lunch table recently and asked me what he should do on the web, I didn’t really know what to say. Instead, I asked him what he was thinking. His answer: He had contacted a few agencies and all of them had suggested that he have a website made. The offers were between EUR 7k and 20k. But when he looked at his customers, he had the feeling that Facebook would be the right choice. Because they would always be on Facebook somehow before and after the meal, and sometimes even during the meal.

I thought “good man”. And replied that he now knew what to do.

Lack of know-how at the customer

However, he replied that he had no idea about Facebook and asked if I could help him (his asking price: “Get free food in 2016 & 2017”). He hadn’t found anyone who could or wanted to do this with him.

I think this example is exemplary for many small customers. They would like to spend money, but without a huge initial investment and overhead. Small customers would rather be supported, accompanied and coached. So that sooner or later they are able to do online marketing themselves. Due to the size of their company, they simply can’t hire someone to do it for them. So sooner or later they have to learn how to do it themselves.

Much too small

As an agency representative, you will say: “Ui, just stay away from me with such small orders.” And I’m right there with you, we can’t cover such small orders with our agency structures. Before everyone writes to me who does it anyway: Yes, you do exist – the exceptions to the rule. I know that.

But what the industry fails to recognize is the huge potential that lies dormant. In Switzerland, we have just over 500,000 companies in the 0-10 employee category. Out of a total of around 600,000, all of these companies will have to change their marketing sooner or later. More in the direction of digital. So let’s do the math like a milkmaid and say that around 50% of the 500,000 would have any need at all and that they can spend an average of EUR 5,000 per year on marketing, we end up with a market potential of 1.25 billion. Just for Switzerland, mind you.

That is definitely interesting. Unfortunately, we don’t have the structures and the business model at the moment. And the entrepreneurial will.

How could this market potential be exploited?

It is clear that it is not possible to tap into this potential with the conventional agency model. After all, the agency and software business is mostly simply a craft. We don’t even have industrialization in this area. Incidentally, this also applies to the large software service providers.

I think in order to create a company that can serve these small customers well, you would have to consider the following factors, not conclusively:

Fixed product packages with fixed monthly prices

As an entrepreneur, I am a big fan of subscription models. Small customers logically have an aversion to large one-off payments, but are very open to small fixed monthly installments. This has huge advantages from a business perspective, as sales can be planned extremely well.

However, providing a service for a fixed monthly rate has another far greater advantage. As an entrepreneur, you are forced to be as efficient as possible. Because every euro you save in the provision of services is a euro gained. This naturally generates pressure to increase efficiency. Something that we only do to a very, very limited extent in today’s “billing by time model” because it doesn’t help us.

Systematization & “method congruence”

Providing these services is usually not rocket science. I can hear you saying right now that it’s all complicated and individual. That’s not possible. And I agree with you to the extent that there are things that are very complex when it comes to online marketing. But these are the last 20% of the undertaking. What we have to do with new small customers, on the other hand, is lay the foundations and provide information.

Both can be systematized extremely well and subjected to a generalized methodology. By doing this, we increase the quality of these services and reduce costs at the same time. Both to an incisive degree.

Automation

Once you have systematized these processes, you can set about automating them consistently. As there is a lot of software involved, this is easier than anywhere else. This gives you an “unfair competitive advantage” (I’ll write something about this soon).

Just yesterday, Robert Lindh, one of the founders of resultify, an online marketing factory in Sweden, showed me a new platform with which you can automate the creation of advertising material (micro-content for social media), management, billing and playout on various channels for your customers. What takes 1.5 days in a traditional agency, these people do in 1 hour.

Radically good support and personal attention

With so much organization, optimization and automation, you might be tempted to think that small customers should support themselves and that online help should be made available. From a business point of view, that would be a dream at first glance. But there is at least one major hitch: Customers don’t want that.

On the contrary. Customers are insatiable when it comes to direct access, telephone availability, employee competence, etc. Not in their actual consumption of this support, but in their expectations. Instead of seeing this as a problem, a new provider should address the issue. Preferably in advance, for example with 24/7 1st level support. All inclusive – of course.

But really great support is also something that brings a lot. I wrote something about it here recently.

You might think that you can never afford that. I maintain that you can. Because part of the efficiency gains from systematization and automation must be invested in support. Otherwise the model won’t work.

Economies of scale

I think such a company becomes interesting from around 500 customers upwards. Only at this level is it worth investing time in methodology and automation. You can really earn money with the ability to transfer what has been developed once to an extremely large number of revenue drivers. This allows you to create a product that nobody can provide manually or in the traditional way.

Create an alternative

And that’s what it’s all about. Not to found the next agency, but to offer the customer a real alternative. Something that can’t really be compared to anything else, but offers the customer considerable advantages. And, by the way, it also makes for an incredible marketing story.

I’m certainly not the first person to see this market of small customers as having potential. And yet there is no one who is taking it on. Why not?

I believe that we have many good craftsmen in our industry and few real entrepreneurs. While the former simply get to work and implement a project, the entrepreneur takes care of creating the structures to grow conceptually. This means dealing with many unknowns, investing and taking risks.

As long as the agency business runs so easily with the current model, we probably won’t see any major changes. Unless someone does it. There would be enough risk capital available at the moment. So: entrepreneurs first.

 

Interesting?
If other agency representatives are interested in exchanging ideas and discussing business models of the future, please get in touch. I would be happy to arrange/coordinate something.