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Author: Gareth Healey

Managing Millennials and Gen Z

Managing Millennials and Gen Z 

I was invited to speak at The Digital Marketing Hub event in Manchester recently. The organisers gave me free rein on what I wanted to speak about. It didn’t take me long to think of the subject matter; managing Millennials and Gen Z.

I have a deep interest in all aspects of leadership and management, but this is a subject that interests me for 3 reasons:

1. Personal Experience – I ran my own agency for 15 years and grew it to 175 staff. I learned a great deal about managing and leading people. I also learned was that no matter how much insight and experience you gain, the challenge of managing people is never finished. Its a game with no end as the rules are constantly shifting and evolving.

As I got older, naturally the age gap between myself and our younger team members grew wider. It was clear that the younger members of our team had different attitudes and wanted different things than I did. They needed to be managed, motivated and led differently. Of course, in hindsight, I made mistakes when I was managing people. Nothing serious, but there are certain things I could have done differently.  I was certainly influenced by the negative stereotyping that Millennials are plagued with.

2. Sector Challenges – One of the biggest challenges facing the agency sector is recruiting and retaining talent (of all ages). Young people, in particular, have far more choices and are in more demand than ever. How can you hope to recruit and retain people if you can’t manage them effectively in the way that they want to be managed? Beer fridges and ping pong tables are nice, but they’re not the answer to getting the most out of our young people (or them getting the most out of us as agency owners). 

3. My Clients – My agency clients frequently point to managing Millennials as a source of frustration. This applies to agency owners of a similar age to me as well as directors who are Millennials themselves. Usually, my agency clients are not concerned with how problematic it is for them. They genuinely want to understand more and upskill themselves to provide a better agency for their younger people to work in. 

The Generation Game

The exact dates of when “generations” start and end are often disputed. The figures below seem to represent a consensus. It can be useful to split Gen Y (Millennials) into 2 groups. Millennials have experienced such a volume of change in their lifetimes. The attitudes of older and younger members of Gen Y can vary significantly. People currently in their 30’s have different attitudes to those currently in their 20’s. This has been shaped by the sheer velocity of technological advancement. The recession of 2008 was also a big influence.

When I researched this article, I’m not sure which of these facts came as more of a shock…

The fact that, at 48, I’m an “older” member of Gen X?

The thought that Millennials can actually be as old as 38 years of age (not that I consider that old)?  

The revelation that Millennials already represent around 50% of the UK workforce. 

The realisation that older members of Gen Z have either already started their careers or will soon be leaving University?

Myths and Stereotypes

Given the age profile of Millennials its surprising that you often still hear people referring to them as young people. Even more surprising is the amount of myths and negative stereotypes that are still following this group around.

If you Google Millennials, the content is skewed towards negative sentiment. The “WE Generation”, the “Me Me Me Generation” are some of the labels they attract. Indeed, Millennials are accused online of killing everything from doorbells to entire industries (N.B. as a parent of Gen Zers,  I can bear witness to the redundant doorbell in my own home).

The traits of today’s younger generations are often called into question. They’re accused of being lazy, entitled, self-obsessed narcissists who lack loyalty and will hop from job to job without a moments thought. Despite the fact that many of these myths have been debunked by studies such as The Deloitte Global Millennial Survey, the stereotypes seem to linger.

Ultimately its a fact of life that older generations complain about the young. Even Peter the Hermit (born circa 1050) is said to have griped that young people “think of nothing but themselves”. Before you ask, no I didn’t know Peter!

Whatever the reasons, Managing Millennials and Gen Z employees is seen as a difficult task and remains a hot topic of conversation.

Breakfast anyone?

When my agency clients ask me how they can improve managing younger members of their team, my answer often surprises them; stop managing them(!) 

Young people don’t want to be managed (at least not in the way my generation did when we were at the early stage of our careers). Millennials want to be in an environment where they can thrive. The environment might be augmented by physical things such as quirky furniture, ping pong tables and the like, but its the company culture that really makes the difference.

Peter Drucker famously said, “Culture eats strategy for breakfast”. This is something I’ve used to guide me throughout my career. His principle point that your people really make the difference, is particularly true for agencies.  Drucker died in 2005, but I’m sure if he was around today he would view the right culture as being paramount for motivating, nurturing and getting the best from young people in the workplace.

Company culture is a huge topic in its own right. Culture can’t be defined and created overnight. It’s borne out of the values of the agency (which are themselves heavily influenced by the values of the leaders of the business). Its effects are more wide-ranging and far-reaching than just the impact it may have on younger workers.

I’ve identified 4 key factors for agency owners to focus on in order to develop their culture in the right direction. This will enable the culture of the agency to support and influence how its younger team members interact, grow and perform.

INSPIRATION

Today’s young people want to be inspired. They want to work for a business with a purpose beyond just making money. A purpose, not just a profit motive.

If you and your agency want to leave a mark on the world, this will be attractive to young people. They want to do the same. Your ability to convey the purpose behind your agency in simple clear language will not only be engaging and inspiring to your team members. The purpose (or WHY) is a vital part of your Customer Value Proposition and crucial to winning new business.

A word of warning; your purpose must be AUTHENTIC. Millennials and their younger counterparts hate hypocrisy. The mission must be genuine AND be at the heart of the agency.

Millennials don’t want to be managed, they want to follow inspirational leaders and be guided, coached and mentored by them. 

TRANSPARENCY

Today’s young people have grown up with more easy access to information than ever before. I remember having to wait in the University library for the right textbook to be returned! Millennials have no concept of this.

Younger workers need information like oxygen. It’s like fuel to them. They also demand the ability to see behind the scenes of what they are interested in. They use social media to view their favourite celebrities at home etc. This, combined with a more ethical and stronger stance on business with a purpose, makes transparency a vital ingredient to Millennial culture.

You can’t share every piece of information with your team but share as much as you can. When they understand what you are trying to achieve they will be far more likely to want to help you achieve it.

Millennials want progression. They want to see what is possible for them to achieve and understand the steps they have to take to achieve it. 

I’ve learned you can’t over-communicate with Millennials. The more information you give them, the more they will want. It can be quite challenging at times, but its a mindset of a generation and its not going to change.

Despite being digital natives, I find younger people respond well to face to face communication from their leaders. I think this in-person communication is something that some agency owners have started to overlook and feel is not relevant in the age of Slack etc. They are wrong.

Admitting mistakes and showing a degree of vulnerability is not something that features in many management textbooks. Whilst nobody wants mistakes, encouraging people to be open about them provides learning opportunities. Crucially, if you as an agency leader are prepared to open up about the fact you don’t always get things right, then this creates the sort of human connection Millennials crave. Despite being surrounded by technology (or maybe even because of it), they value human relationships with their colleagues more than ever before.

ACKNOWLEDGEMENT

Millennials and Gen Z people need to be heard. They need to feel like they have influence and are using it. Once again, technology plays a part here. The ability to publish to the world online is something young people are predisposed to do.

Gen Y & Z are generations that have been lavished with praise, recognition and awards for achievement since childhood. From the classroom to video games, badges of achievement have been bestowed upon them.

 

With this background, it’s not surprising that younger colleagues expect to have a voice, as well as regular feedback and praise. Like information, you simply cannot give enough praise, acknowledgement and feedback when managing Millenials and Gen Z people. As if this wasn’t enough, it’s very important that it’s delivered in a timely fashion. The more that you communicate in person the better. Don’t just tell them they did a good job, tell them why it was such a good job and why it made a difference or impressed you! Make sure they’re seen as the heroes and they get the credit where it’s due.

A few words of caution. Studies show that Millennials as a generation prefer more public recognition than their older colleagues. However, the old adage of praise in public, reprimand in private still holds true.

It should also be remembered that people are individuals. If you have a young Millennial in the agency who is quite introverted, your idea to present them with a bottle of Champagne in a company meeting using a song you’ve written just for them, might not go down as well as you expect!

AUTONOMY

Millennials crave autonomy. They’re a generation that is full of self-belief. They want responsibility early and the flexibility to achieve goals how they want to achieve them. This means you must give them latitude and not try and turn them into clones of yourself or other members of the team.

What worked well in the past might still work well today, but Gen Y and Gen Z are focused on putting their mark on something (not slavishly following rules).

As a business owner though, of course, it’s only right that you want some control. You need to give them autonomy but within a framework. In order to achieve this its best to set boundaries or guidelines rather than rules. I describe it as ten pin bowling with those child-friendly rails up. Let people bowl how they want, but show them where the outlying barriers are (and have some checks in place to stop them crashing into them if you can).

Younger staff members are more entrepreneurial than their predecessors. Many of them have grown up in the Gig economy. They don’t understand the concept of working for a company all your life. They want to grow and develop. They want to follow and explore their passions. As an agency owner, at the very least you should encourage this spirit. Allow people to research and explore their other interests. Support people with their external learning and/or side hustles. Give them either time or resources – or both – if you can.

Last but not least, the world of work is changing. 9 to 5 office hours are not the norm they once were. Millennials and Gen Z don’t live to work, they work to live. They’re more comfortable with working from home and at hours to suit them.

You must think productivity rather than presence in the office here. The more flexibility you can embrace around hours and working patterns the more attractive an employer you will become. That said, this is one of the most challenging aspects of managing Millennials and Gen Z employees. Agency businesses are fluid and priorities are forever changing. For most agencies, this needs to be a transition and not a blind leap of faith.  

Don’t manage, motivate.

Clearly there are a lot of things to consider when managing Millennials and Gen Z people. It’s vital that you focus on creating a culture they can thrive in rather than trying to manage them to closely.

When it comes to Gen Y and Gen Z, culture may eat strategy for breakfast, but it eats traditional managers and outdated thinking for lunch.

Gareth Healey
Gareth is the founder of Beyond Noise. He has 25 years experience in the agency sector. A business coach and mentor, he works exclusively with ambitious owner-directors of established independent marketing agencies.

How to become a niche agency – PART 6

Finish with WHY

This is the penultimate post in my series on how to find your agency niche. The last 3 articles have focussed on refining your target audience (WHO), communicating the value you deliver (WHAT) and using your approach to differentiate your offer (HOW). In this piece, I’m going to look at the core purpose or mission (your WHY).

These posts are as much about crafting an effective Value Proposition as they are about becoming a niche agency. Finding your agency niche is not a particularly effective growth strategy on its own. You must find your agency niche and communicate it effectively. That’s where the Value Proposition comes in.

People are often surprised at my approach to creating a Value Proposition. The likes of author Simon Sinek have popularised the opinion that you should start – not finish – with WHY. I understand this view of course. If you, as an agency owner, already have a clear purpose that clients will find engaging and motivating then, by all means, start your Value Proposition or pitch with your WHY. 

Unfortunately, I find that many agency owners don’t have such clarity of their purpose. Rather than starting with WHY, I find that crafting a Value Proposition in the order that I’ve described can be a more productive, and less frustrating, exercise. It also usually leads to a deeper understanding of what makes the agency and its owners tick. 

Why are we here?

If you’re an entrepreneur, then chances are you started in business for a number of reasons. That said, the primary objective for most is financial reward. To make a profit.

Whilst this is usually the core reason, people have different levels of ambition. Some want to make millions, others just want to make enough to support themselves and their families. In addition to income, many entrepreneurs want to build a business that has value. A value that at some point they can realise through a sale or exit.

There are other reasons for starting and running a business beyond the financial aspects of course. Doing something you love, being in control of your own destiny, greater flexibility or even simple necessity can all come into play. 

Many entrepreneurs start with an idea for a business or product that they believe is either new, revolutionary or has untapped potential. They have the drive to create something or to exploit specific market potential.

Whilst agency founders are no different from other business owners, I find the most common reason for agency founders to start an agency is control. To utilise and build on their skills in order to serve clients and create/deliver work that they can call their own. To be masters of their own destiny rather than work for an established agency.  To do what they love in the way that they want to do it.

Starting out

Establishing any business is challenging, but starting out in the marketing agency sector is easier than many industries. There are few barriers to entry to the agency market. Little capital investment is required. No formal qualifications are necessary. Agencies can be created quickly. In some cases, they can even evolve from a founder establishing themselves first as a freelancer(s). 

This ease of entry is a great thing, but it does leave me to reflect that many agency owners are not driven by a big vision. Their business goals are personal to them and not usually invested in creating a new product or re-shaping an industry. They have a desire to create great work and results for their clients of course. However, as these clients are usually ill-defined (see WHO), painting a vision for what long-term impact the agency wishes to achieve can be hard to do. Capturing such a vision in a way that delivers impact and meaning to prospects is usually even more challenging.

Whatever the reason(s), it’s vital for growth that an agency has a clear mission and compelling WHY. Whether it’s expressed at the start, middle or end, your WHY is the beating heart of an effective Value Proposition.

Why is this important?

Having a purpose or WHY you do what you do is incredibly important in business today Not that its a modern concept.  The 19th Century German philosopher Frederick Nietzsche said, ‘He who has a why can endure any how.’

Why you do what you do, and why it should matter to your clients, team and the wider world is more important than ever. It’s a vital part of attracting clients, recruiting and retaining staff. It’s integral to marketing, managing and developing a niche agency.

Your WHY is actually important to 3 groups of people:

1. Clients – I’ve spent a lot of time in this series emphasising that the focus of the Value Proposition is communicating the benefits of your niche agency offer to clients. Having a strong mission (WHY) gives clients a reason to believe. It creates an opportunity for clients to understand and start to develop an emotional connection with your business. Crucially it helps your agency stand out from the competition.

2. Colleagues – The main focus of a Value Proposition is to engage clients. There are, however, a group of very important people that you also need to keep engaged. Your team. Helping your people stay on track, motivated and loyal to your agency is increasingly difficult as competition for talent is intense. A strong WHY clearly communicated is vital in keeping your team engaged with your business. I find this is particularly powerful in a niche agency where some members of the team may not understand the importance of working in a niche. Your WHY is particularly important for employees who are Millenials. It is generally accepted that younger people need to feel connected to something beyond the company bottom line to make their best contributions. Millennials crave purposeful work i.e. they will work hard to make the agency profitable if they understand and engage with the purpose behind its work. This purpose must extend beyond the pursuit of profit.

3. You (the agency owner/leader) – Last but not least, your WHY must motivate you as an agency owner. As I noted earlier, starting an agency is relatively easy, but I know from personal experience that running an agency is tough. Having a clear purpose to guide you and influence your decision-making is as useful for you as the agency principal, as it is to your team.

How to find your WHY

The most effective WHY’s are born not created or manufactured.  In other words, the agency purpose is ideally borne out of the personal beliefs and vision of the agency owner(s).

Finding your WHY, therefore, demands quite a lot of reflection and maybe even some soul-searching. It should be influenced by the beliefs, values and aspirations of the agency owner(s).

How this plays out is, of course, itself influenced by the number of founders involved and the size and maturity of the agency. If its a relatively small or young agency with few shareholders then the WHY should naturally be heavily guided by the vision of the owner. If the agency is more mature and larger with an established culture, whilst the founder’s input remains a priority, the WHY might be shaped more by a wider group and take into account established culture and wider context.  

When I’m helping a niche agency client define their WHY, I encourage them to consider 4 areas… 

1. What do you/your agency enjoy doing? 

What energises the agency?

What drains it?

Does what excites your people, also excite your clients (and vice-versa)?

Why do people join your business?

Why do people stay?

Do you excel at innovation or change or do you enjoy predictability, order and delivering proven processes?

 

2. What are your core strengths?

What things do you always do? 

What do you rarely or never do?

Are you a creator/innovator or a builder/maintainer?  Does your agency like to make a difference in a short space of time or have a bigger impact over a longer period of time?

Do you make your money from your core strengths? If not, why not?

3. When are you at your best?

Where do you add your greatest value? N.B. You add the greatest value where you solve the greatest client problems.

What type of client personalities get you more enthused about what you’re doing than others? 

 

What is driving you to be the best (insert type of agency here) you can be?

Are you best at strategy and/or new ideas or do you excel at delivery, data or analytics?

4. How will you measure your impact?

What are you fighting for?

What does success look like for your agency? How will you know when you’ve achieved it?

What future are you trying to create (for your agency, clients and the wider world)?

How do you want to be remembered as an agency? What will be your legacy?

How does your agency contribute to the wider world?

What are you passionate about or frustrated by?

Bring it all together

Before integrating it into your Value Proposition, you should create a purpose statement to describe your WHY…

  • Most purpose statements start with “To”.
  • Choose words that suggest positive action.
  • Keep it short. Don’t overcomplicate it.

Does this statement resonate with you and your team? Does it make sense to existing clients? Will it engage new prospects and new people?

 

Summary

The pursuit of growth and a profitable agency is what keeps many of us coming in to work each day. But what is your big vision (beyond making money)? 

Your success is really measured by the impact you have on the world around you. This is WHY you exist and is certainly why many clients and most of your people want to work with you.

This is the final building block of a powerful Value Proposition and the key to exploiting an agency niche.

 

 

 

How to become a niche agency – PART 5

The importance of HOW

In my previous articles on becoming a niche agency, I firstly looked at refining WHO your target audience is. I then urged you to define WHAT value you deliver for them N.B. not what services you perform, the VALUE your audience actually receives from your services. Benefits not features.

In this piece, I’m going to look at the next stage in the agency Value Proposition. How you can differentiate your agency with HOW you work or interact with clients.

HOW you work is a key aspect of the Value Proposition for a niche agency.  That said, it’s slightly lower down the hierarchy of communication for me. In my experience, busy clients who are under pressure, rarely care too much about how you deliver for them as an agency. As long as you deliver for them.

I actually find it strange that many agencies promote HOW they do things as a priority, Talking about this seemingly ahead of lots of other more important aspects of their business. Moreover, they often choose to take this route rather than consider positioning themselves as a niche agency with a specific and definable target audience.

 

We’re different (but the same)

In an industry built to create and differentiate brands, marketing agencies are surprisingly poor at differentiating and marketing themselves. Rather than help us to stand out, the terms we use to describe our agencies are often strikingly similar. Many have become clichés.

Take a look at most independent agency websites and you’ll encounter familiar terms and recurring soundbites. Most of the descriptors are commonly preceded by we and/or we’re. Here’s some familiar examples:

We’re full-service – We do everything for you (even though they usually don’t, or quite possibly can’t). I find it amazing how this term can still be seen by some as a differentiator or motivating to prospective clients. Maybe the one-stop-shop agency was a compelling idea in the 1980’s, but we now have so much better access to information. We also have tools to help us communicate and manage the process better. In the 2020s I don’t believe clients are interested in an agency whose core proposition is everything under one roof.

We’re specialists/experts – This is usually followed by a number of claimed specialisms in usually inter-related but nevertheless independent disciplines. If you want to be a niche agency you must find a niche market and supply it with a specific service.

We’re Award-Winning – I value awards from a team motivation perspective. I also appreciate their ability to substantiate and add a degree of trust in the agency’s capabilities. Award ceremonies are so numerous though. Which agency doesn’t have a shelf full of plastic gongs to show off?

We’re a friendly bunch – I find that every agency claiming this is right. Agencies are filled with great people who by their very nature are friendly and easy to work with. Sadly it’s not a credible differentiating factor. Neither is the near-ubiquitous agency dog designed to convey furry friendliness. Rather than make an agency standout, a picture of the agency dog on the website has become almost “me too” and even has its own social media #agencydogs hashtag to emphasis its mass appeal.  My own dog is welcome in my office any day, just not on my website.

We’re honest/transparent – Trust in advertising and marketing agencies has declined in recent years. Media agencies, in particular, have been dogged (no pun intended) with transparency issues.  Unfortunately, trust has to be earned. Simply claiming honesty just seems to imply you have something to hide.

We’re results-focussed – Now we’re getting a little warmer here. The marketing industry on both client-side and within the agency sector are being held to account like never before. Results and metrics are paramount. Can you deliver the results though? Actions speak louder than words. Clients are far more interested in real case studies that demonstrate an ability to deliver, rather than overtures about what your agency focus is. Indeed, if you’re an agency that isn’t focussed on results you’ve got big problems.

We’re passionate – Telling somebody you’re passionate just doesn’t cut it (for them or you). Like trust, you have to really experience passion. Even if you can get a degree of energy and commitment across in your communications its at best only a hygiene factor for somebody considering working with you.

We’re different – Saying you’re different but then using the same language and images as loads of other agencies really doesn’t work either. If you’re genuinely different, don’t tell me; show me. Tell me HOW!

A Genuine Difference

Please don’t be offended by my cynicism in the list above.  We’ve all used at least some of these terms to describe our agencies (myself included).

I’m being particularly challenging to make a point of course. When describing HOW your niche agency works in your Value Proposition, the objective is to differentiate and stand out (not to fit in and be like those other agencies). Using the above terms is paradoxical.

That said, you don’t have to aim to be completely unique. The quest for uniqueness can be a frustrating process that often ends in a Value Proposition that is too contrived and hard to understand. 

What we’re looking for here is differences in the way you work or how you approach things in a slightly different way. In a sea of sameness, a slightly different take or, indeed, an explanation of HOW you produce your value for your niche audience can make all the difference.

The key though is to not only identify and communicate HOW you’re different. You must communicate HOW these differences benefit the client. Why does working with you – in your way – enhance the clients’ chances of getting better results? Why is your way better than the other agency the client might be considering working with?

How to find and utilise your HOW

Making HOW you operate an integral part of your Value Proposition is a great way to differentiate your agency. It’s also usually far easier to do if you are a niche agency.

By nature, HOW you operate can be personalised more if you have a defined niche audience. The benefits of your HOW can be more easily communicated and will be instantly more relevant to a niche group.

You may already be working in a way that is different from other agencies. Alternatively, you may have some ideas on how you can evolve how you work and use it to not only deliver your services but also engage clients prospects and help you stand out.

It’s important that you’re able to explain your HOW and the benefit to your clients. Simply saying that you’re great at client service and you really place a lot of emphasis on it, for example, is not enough. It’s not specific enough to how you work, it’s not differentiating, and it’s an easy claim to make but practically impossible to substantiate.

Here are some areas to explore to help you create a story around your HOW:

1. Brand your methodology – Have you got a specific process you go through when working on a project? Do you approach client problems in a particular way or with a unique perspective? Could this be explained in detail and be branded as a bespoke methodology? Remember to include what benefits the client(s) derive from working in your way. Always think you not we.

2. Embrace a methodology – You can work in a different way to other agencies but using methodology created elsewhere. There is a lot of talk within agencies about Agile at the moment. This is an example of how some agencies have adopted the way of working from software development and utilised it in a different environment. Agile and Scrum have become common buzzwords, but the core principles of deploying self-managed teams was something my own agency was doing 15 years ago. Have you seen a way of working elsewhere that could be adapted to suit your agency? Could it become a point of difference for you?

3. Values & Principles – Are your company values a graphic on the office wall or do your values REALLY dictate how you operate as a business?  Can you honestly say to clients that you have a specific value system and there must be a fit with this if you are to work together? People want to work with people whose values align to their own so this can be a powerful message and a key differentiator if there is a natural fit.

4. Try before you buy – Can your agency claim a particular commercial approach to doing business with a client?  For example, could your digital marketing agency conduct a localised trial of your proposed activity first to identify if the results that are required can be achieved?  If not, then maybe you could claim to not take on the work.

5. Expert / Personality – Does your business have a leader or senior figure in the business that is a recognised expert in your client niche?  Can you use this person to create a process around HOW you operate?  Can you elevate their profile to make them a focal point in HOW you work?

6. Onboarding – The start of any client relationship is crucial. How you onboard clients could be a point of differentiation.  How do you engage with them differently in those vital early stages of working together? How does this benefit you and what is the benefit to them?

7. Engagement – Onboarding a client is one thing, but what about your ongoing relationship?  Do you work with clients in a different way than other agencies? Do you have fixed-term contracts or set review periods? Do you embed a member(s) of the team in the client business for the duration of the project/contract?

8. Walled Gardens – Do you have research, knowledge, information or insight that clients would value but don’t have? Can you explain how you can give them access to this information only when they become a client? Can you offer clients training for their teams on specific aspects of your work together? Once again, this type of approach is far easier to establish if you’re a niche agency. You can capture your learnings and expertise from working with other clients and give new clients the benefit of it. This is much harder to achieve if you are trying to appeal to clients across a broad spectrum.

9. Pricing – Do you or can you price differently from other agencies. The industry is desperately trying to lose the shackles of the billable hour. Do you price your work on value delivered not on the time you spend? Do you work on some sort of revenue/profit share basis? Can you claim to have skin in the game and invest some of your own money in the project you are working on with a client?

10. Staffing – Do you staff your agency in a different way to your competitors? There must be a benefit to you of doing this, but is there also a tangible benefit to your clients? Can you express this benefit in a way that is interesting and motivating to prospective clients to want to learn more.

Summary

HOW you do what you do is an important component of the Value Proposition for any niche agency.

The way your agency works can be as distinctive as the work it produces and the results it delivers.

In my next article in this series, I’m going to look at the final building block of any Value Proposition. Some would argue it’s the most important, I certainly think its the one that can connect with your clients in the most emotional way; WHY you do what you do and what you believe in.

What is the role of a mentor?

The benefits of Mentoring

WHAT IS THE ROLE OF A MENTOR?

Since exiting my own agency, I’ve become known and recognised for my skills as a mentor. It’s a part of my business I enjoy, particularly when I’m working with marketing agency founders. But I’m often asked what is the role of a mentor and what benefits can mentoring bring?

I believe we all need mentors, both informal and formal, and I’ve benefitted immensely from learning from some amazing people over the years (you know who you are!) The role of a mentor is multi-faceted and consists of at least 9 roles. So what exactly are these roles, and what are the benefits of mentoring?

The role of marketing agency mentor is only one aspect of Beyond Noise, but it’s often the one that I find I can deliver the most value.  Indeed, it’s the reason why I called the business Beyond Noise in the first place. I enable busy agency owners find time to get away from the day-to-day to think and plan. They say a quiet mind can focus more objectively (and we all need to do that from time to time).

Supporting an agency founder through mentoring not only benefits the individual themselves. It brings additional benefits to the people that work for them, people that work alongside them and, of course, the performance of the agency as a whole.

There are many different views on what constitutes mentoringand lots of debate around its relationship with the discipline of coaching. I think everybody would agree there are areas of overlap between both.

Personally, I prefer to refer to myself as a marketing agency mentor rather than marketing agency coach. Mentoring to me is more supportive and encouraging whilst coaching is more directive.  Both have a role to play in personal development of course, but when I’m working with agency owners I prefer the label “mentor”. 

My clients are experienced people who are very creative and entrepreneurial. I think it’s important to preserve the boundary that they are running their own businesses and making their own decisions.

My role as mentor is to support their decision-making using my own experiences to influence and guide them. There are many benefits of mentoring, including accountability, but I don’t see myself as a business coach that “trains” agency owners or keeps regularly checks on their delivery of tasks. My clients can do that for themselves.

As a marketing agency mentor, I find myself having to use a number of skills and perform a number of roles when working with my clients. I define them as the 9 roles of mentoring. Which role I am performing at any one time depends partly on the situation, but crucially on the needs and requirements of the client. 

Sometimes these needs are evident and something they are very aware of, other times I need to do a lot of listening to try to interpret from myself what role(s) is most suitable to help them solve there issue and make progress.

So what are the 9 roles, and how do they translate into the benefits of mentoring?

THE 9 ROLES OF A MENTOR (NO PARTICULAR ORDER)

1. Role Model – What is the role of a mentor if not to be a role model? This is a primary role of any mentor. Somebody the agency owner admires for their qualities, behaviours and experience. Somebody who has been there and got the T-shirt as they say. As a title, “role model” sounds pretentious, but we all need great role models in our lives. I have benefitted from a many in my time. For me it’s an opportunity to share stories and experiences from my agency career in order to help others make a success of their own career and business.

2. Performance Coach – This role offers support in a particular area or areas. It is by name and nature more coaching than mentoring, but within a mentoring context it is short on timescale and focussed on selected topics or issues. Its purpose is to improve the performance and productivity of the agency owner in a particular area.  Business Development and Marketing the agency tend to be high on the list here. Importantly for me, as a marketing agency mentor I am not there to operate as a surrogate manager.  No agency owner, or any entrepreneur for that matter, wants that.

3. Challenger – One of the most valuable benefits of mentoring. As a challenger, I help the agency founder access a greater level of self-awareness and more of an open-minded approach to key issues.  This role excels when a good relationship has been established first and as a mentor I am able to use good, insightful questioning. Mutual trust is vital to success in this area as often it involves me playing the role of devil’s advocate and/or pushing the agency owner to re-think their approach or decision-making.

4. Professional Friend – The ability to speak openly and directly without judgement or fear of being seen as rude is crucial to the mentoring relationship. As a marketing agency mentor, I am able to address issues and concerns that the colleagues, family, friends and even the agency owner themselves, are reluctant to raise or maybe are avoiding.  Such issues and concerns must always be dealt with in a constructive manner.

5. Thinking Partner – Some people think better when they have somebody to listen to their thought processes and help them focus on an issue.  This demands great listening skills from a mentor. Sometimes just having an experienced ear to listen to their thoughts, allows the agency owner to clarify their thinking and decide on the best course of action for themselves. As a mentor, if I can guide the thinking a little and add value along the way, a better outcome is usually achieved.

6. Sounding Board – A vital role of any mentor and a key distinction from the coaching role in my view. My clients have often made, or at least formed, a decision on a particular subject, but they value the opportunity to sense check their thinking, validity, reaction and effectiveness. As a marketing agency mentor this makes perfect sense. It can’t be done for every decision of course, but for key decisions it is invaluable. As marketing agencies we A/B test lots of our output, so testing our decisions on the running of the business seems obvious.

7. Guide – They say you can’t coach knowledge, but as marketing agency mentor I find that experience is something that can really add value. As a mentor, I ensure all my clients make their own decisions and take ownership of them, but if I do try and guide them along the way with a few relatable experiences of my own in order to advise but not lead.

8. Accountability Partner – One of the key benefits of mentoring is just having somebody who you respect spend time with you on a regular basis. As outlined above, I don’t see the role of mentor to be somebody that cracks the proverbial whip, but I do see accountability and keeping my clients on track as a key output.  No matter how driven we are, we can all procrastinate and make excuses for our lack of progress. Having somebody meet with you and expect to see actions and progress from the previous session, can be that added bit of extra motivation that many agency owners need to create growth.

9. Cheerleader – Last but not least, I believe we all need a bit of encouragement at some points in our career and personal lives. Helping the agency owner feel supported, motivated and engaged with the organisation is a crucial part of my role. I often find that as people are so busy and working in a very competitive environment they can lose sight of what they have achieved or how successful they are. They can certainly lose focus on what opportunities lie before them. As we all do from time to time, some of my agency clients occasionally suffer from imposter syndrome. A timely reminder of just what they have achieved and just how much knowledge, skill and experience they possess is often all it takes to get them back on track again and thinking positively about the week aheaWhat is teh role of a meny

Summary

The benefits of mentoring are numerous and multi-faceted. The 9 roles of a mentor can be dialled up or down depending on the individual and even on a meeting by meeting basis. All these “hats” are used instinctively by great mentors to get the best out of their mentees, and in my case get the best results for my agency founders and the businesses they run.

How to become a niche agency – PART 4

First WHO now WHAT

In my previous articles on how to become a niche agency, I outlined the benefits of a niche specialism. I also detailed what I look for in a Value Proposition. In my last piece, I explained how I start to guide the articulation of a Value Proposition. I encourage my clients to start with WHO they’re targeting. The next stage of the process is to consider WHAT you do or, more importantly, WHAT value you deliver to the people you’re targeting.

On the face of it, “what do you do?”, is a simple enough question. But I find many agency owners struggle to give a clear answer. Is this because of the industry we are in?  I reflected last time that so many agency owners seem to find it difficult to articulate WHY they exist. Surely explaining WHAT you do is easy enough? Once again we can’t be in a unique bubble here in agency land, can we?

WHAT do you do?

Explaining what you do as an agency is vital to engaging new prospects and winning new business. You must be able to communicate what you do quickly in easy to understand language. Its the essence of the fabled Elevator Pitch.

When I ask agency people WHAT their business does, I usually get one of the following responses:

1. SERVICES – A service or list of services centred on a marketing channel(s) e.g. we’re an SEO agency, we do social media, we’re a web agency etc.

2. LABELS – An industry label that we’ve become accustomed to using e.g. we’re a full-service agency, an integrated agency, a digital agency, a UX agency.

3. BUZZWORDS – Something convoluted containing lots of marketing-speak e.g. we’re a group of superheroes developing human-centred immersive experiences designed to disrupt and engage.

Whilst the responses are naturally different, a common occurrence is that they invariably start with the words We or We’re.  I think this points to a wider issue and something I touched upon in my last article.

People in agencies often view WHAT they do as WHAT they actually – physically – do. They create ads or design logos or produce social media campaigns. This is not wrong of course, but when I ask people what they do, I really want to know what value they deliver. What are the results of their endeavours? What do their clients’ actually pay them for? 

In short, I don’t want to know what features their agency has (they’re predominantly the same as every other agency), but what benefits they deliver. This is teh essence of an agency with a niche specialism.

WHAT can you do for me?

It’s an overused stereotype, but it’s often noted that we British tend to be more reserved than other nationalities. In general, we’re not as brash and self-promotional as people from the United States, for example, tend to be. We can view confidence as a negative quality and occasionally as even a bit vulgar. We can also be guilty of being too self-effacing or modest. These are not bad qualities, but when it comes to business it can mean our true intentions and the value we offer are hidden.  You don’t have to be from the United Kingdom to display these traits or behaviour of course, but either way, I think I think they can be limiting.

I’ve heard people say that American networking events are quite different from those held in the UK, particularly if you are in the commercial hubs of New York or LA.  I’m told it’s not unusual for somebody to approach you with the phrase “Hello, what can you do for me?”

Whether this is true or not,  I think we can learn something from this concept. If you’re operating a service business, your customers are rarely interested in the service itself. They’re interested in what the service can do for them.  How it can solve their problems or enhance their lives?  And it’s not just about the physical results. How does your service make your clients’ feel emotionally? What do you do for your clients as people as well as for the companies and brands they represent? What is the value you deliver?

At your service

Unless they have a productised aspect of their business, marketing agencies sell professional services. Just like accountants, lawyers, plumbers or hairdressers, agencies sell their skills, not products.

Increasingly, agencies are being viewed as more of a commoditised service, just like some of these other trades. Clients buy on price and availability. Relationships are becoming shorter and more transactional.

Unlike some of the other service-based businesses, agencies are not subject to any scrutiny or governance by professional bodies. Marketing agency staff don’t have to undertake any formal training or gain any professional qualifications in order to sell their services unlike, say the legal profession. Competition in the agency market is fierce and trust in the sector is at an all-time low.

Moreover, mirroring the attitude towards marketing in general, marketing agency services are often viewed as a cost rather than an investment. Something to be bought as cheaply as possible.

Part of the reason for this is that despite the prevalence of digital media, marketing activity as a whole remains difficult to measure and quantify as ROI.  The other reason is that marketing is often seen as less of a need and more of a desire. If you have a leaky pipe, you need a plumber and you need one now. If you run a company, you must legally file certain financial information that most people need an accountant to support them with. 

Not only the results but occasionally the objectives of marketing can be difficult to quantify.  Marketing itself is not a need. Sales are usually the objective, with marketing being simply one route to achieving them. The explosion in media channels and marketing techniques has also served to complicate matters even further. Whilst bringing us massive opportunities and additional – more measurable – options, the additional channels have also served to make the art of marketing more complex and harder to understand and appreciate.

What are you selling (and not selling)? 

If you’ve read some of my other posts, you’ll know I get frustrated with agencies that have a seemingly insatiable desire to promote themselves based upon the breadth and not the depth of expertise. 

Whether it’s working with clients from multiple unrelated sectors. Or agencies that claim to be able to deliver everything from high-level marketing strategy to volume delivery across all the media channels you’ve heard of (and some you haven’t). This lack of focus frustrates me and seriously impacts their ability to project the value and find resonance in the market.

A word of caution though. I’m an advocate of focus, but we live in a complex world. I prefer to push for what I call T-shaped breadth rather total niche specialism. You need to have deep expertise, but you must have an understanding and appreciation for how all the other pieces of the jigsaw fit together. This is crucial if you really want to maximise the value you deliver and work successfully with your clients and their business partners.

The first step to clarifying WHAT you do is to decide – and often refine – what you’re selling. What do you have real expertise in?  What area of your business offer is your real passion? This in itself can be a cathartic experience for some.  It makes them realise their true expertise. Sometimes, it makes them reevaluate their entire business.

It has been said that the essence of strategy is sacrifice. What don’t you do? What will you immediately say you can’t deliver? Again, whilst counter-intuitive to many, this concept can be quite refreshing if you embrace it.

Take a look at your revenue streams. Where does the bulk of your revenue come from?  You might claim to offer – say – social media marketing, but does it make up such a small part of your revenue that it’s not worth thinking about?

Think of it another way. What is usually your first brief from a client? Do they ask you to review their entire marketing and suggest a new strategy? Or do they ask you to quote them for a new website?

Maybe your first conversation with a client isn’t directly linked to marketing at all. Does the client talk to you about their business first?  Do they impress on you the urgent need for more sales or a desire to convert more visitors to their website or increase basket spend?

What value do you deliver?

If your value proposition describes exactly what you do or what you sell, you’ll find it hard to differentiate yourself.  If, on the other hand, it describes what the effect of what you do is, then this is where you can start to stand out in the market.

The benefits or effects of your work. The value you deliver. This is truly WHAT you do, for your clients expressed in a way that most interests them. Not lists of services they may or may not fully understand or desire. Actual goals they want to achieve.

Of course, this is not a simple process. The benefits a client can derive from your efforts can be tangible or intangible, rational or emotional, functional or aesthetic.  

The closer you can get to communicating WHAT you do and what value you deliver in a way that demonstrates tangible and rational benefits and resonates emotionally with your prospects the better. In short…

The Value you Deliver = (Tangible + Rational benefits) x Emotional resonance

The tangible and rational benefits are usually the way you benefit the clients’ company/brand. It can be beneficial if there are some numbers in there (or at least a financial focus). 

Tangible Benefits = Quantifiable things your work actually produces or achieves. More sales, more customers etc.

Rational Benefits = You might save them money or produce work faster or in a different way than your competitors.

The emotional element can be about the clients as people as well as their company of course. How does your work make them feel or help them to do their job? Be wary of being too generic here though. Making clients feel great because we’re a friendly bunch to work with is not differentiating or compelling enough.

Emotional Benefits = How you make your clients feel. Are they able to do their jobs better, safe in the knowledge you always deliver to deadlines? Or maybe you have more expertise than they do and they can trust you to help them get the results they need and get noticed in their role.

However, you express the value you deliver, retaining a focus on how WHAT you do benefits the client is obviously the key. These things can be expressed and communicated in so many different ways. What is important is that you retain a focus on the fact that it’s not about WHAT you do, it’s about the effect of WHAT you do does for them.

Summary

If you’ve been following this series on creating a niche specialism, you should be well on your way to creating a compelling Value Proposition. You’ve defined a market and have a clear focus on WHO your clients are. 

You should now be clearer on WHAT you actually do for your clients and what value you deliver to them. You should have more of an insight into what a difference you actually make to their lives and businesses. You should also have some ideas to communicate your value in a more clear and compelling way.

In Part 5 I’m going to be looking at HOW your agency operates, and how this can be used to differentiate yourself. If you have a picture of the office dog on your website, this next one may be for you.

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How to become a niche agency – PART 3

WHO not WHY…

In my previous articles on how to become a niche agency, I outlined the benefits of a niche positioning. I also explained what I see as the differences between a Value Proposition and a Positioning Statement. Here in PART 3 of this series, I’m going to start to unpack my approach to building a Value Proposition so that you as an agency owner can apply these principles to your own agency (or any similar business for that matter). Firstly, and at risk of being controversial, I suggest you start with WHO you’re targeting!

I’m a long-term admirer of the speaker and author Simon Sinek. I’m naturally a big fan of his best selling book, Start with Why. I’ve spoken to many people who use this book as a reference point when looking at positioning. They first look for the WHY in their business proposition. They try to find, identify or clarify their purpose, cause or belief.

For some this makes sense. A compelling purpose or WHY is a powerful thing and forms an excellent foundation for creating a Value Proposition. For the majority of agency owners though, identifying a WHY is a difficult and frustrating exercise. In my experience, it often stalls the positioning process before it has really got started.

I think many often overlook the fact that Sinek’s book is fundamentally about leadership, not marketing.

Simon reminds us frequently that “People don’t buy WHAT you do, they buy WHY you do it”. I totally agree. If you’ve read my previous articles on positioning, you’ll know I get frustrated when I see agencies marketing themselves with WHAT they do (simply listing the services they provide). 

However, I believe it’s often particularly difficult for agency owners to identify their WHY. I also note that Sinek’s mantra “People don’t buy WHAT you do, they buy WHY you do it” in itself starts with People (the audience). The people who are your existing or prospective clients. 

My point is, if you’re not clear on your market then how can you effectively communicate with them? Moreover, how can you effectively build a business designed to serve them? That’s why I always recommend you start with WHO you’re targeting. WHO is your target audience?

Why is the WHY so hard for agencies?

Marketing agencies are not unique in finding a purpose or compelling WHY difficult to easily define.  However, as a sector, they do share some similar characteristics that make defining a WHY particularly challenging:

  1. Reason for starting – Agencies are often started by people who have worked in other agencies but decide they want to go out on their own. Their purpose is really just to work for themselves. This is a great thing, but it doesn’t translate well into a customer-facing value proposition.
  2. Reason for being – Agencies, particularly those with a more creative focus, are set up by people wanting to test their own skills, to create work that they themselves are proud of. To work on clients that they like or have an affinity with. Again, this is a perfectly valid reason for starting an agency, but it’s not an easy thing to translate into tangible a client benefit.
  3. Standing Out – In such a crowded market it is hard to stand out. Of course, this is exactly the reason we are considering positioning in the first place. But, with so many similar agencies with similar offers in the market creating a distinct message supported by a unique mission is difficult. 
  4. Intangible Assets – As service businesses, agencies naturally don’t have a product to guide or help them crystallise their WHY. For example, they can’t point to wanting to produce the finest quality, ethically farmed meat. Or they can’t claim to be driven to produce cosmetics that don’t contain any harmful chemicals and are kinder on people’s skin.
  5. Client motivations – A client may use an agency for a number of different reasons. Frequently the defining success factor of the relationship is more sales for the client. This works well as a shared goal, but I’ve never come across a situation where the agency has to encourage the client to embrace the concept of selling more. Its a very valid purpose, but one which doesn’t feel particularly differentiating and is perhaps a little too obvious.

I’m not suggesting that the WHY should be ignored, far from it. I’m just advocating a more pragmatic approach.

Start with WHO

I’ve worked in the industry for nearly 25 years. With the possible exception of those 15th round of client amends moments, I’ve seen few things cause more frustration or the rolling of eyes than strategic client briefs that fail to mention the target audience.

“How can they possibly expect us to create great marketing communications for them if they’re not explicit about who they’re targeting?” would be the cry. 

It’s the very first thing we looked for in the brief. If it wasn’t clear or focussed enough, it was the very first thing we fed back to the client. Have you ever taken a strategic client brief and not asked them who their target audience is?

Eat what you cook

As agencies, we often fail to heed our own advice. We spend hardly any time dissecting our target audiences. We rarely question the need to become more focused. We seem to find a positioning “for everybody” perfectly acceptable and often desirable.

Defining who your agency is for is important. Defining who your agency is NOT for is equally important.  The exercise of positioning your agency in a niche is not about appealing to more clients. It’s actually about attracting fewer clients, but making a stronger connection with them. Being more relevant to them and their needs.   

Its also about differentiating yourself. Positioning yourself as an expert in the minds of your target audience. Clearly communicating you are “for them”, already sets you apart from the thousands of other agencies offering similar services but in a less targeted way. You can connect more easily with a smaller audience and when you have a connection with somebody it’s far easier to sell to them.

My advice is to treat yourself as your own client. Take your agency through the same process you would if you were talking to a client about positioning strategy.  Start by segmenting your market. Ask yourself who your target audience is. Encourage your colleagues to get as tight as possible to the target market. A niche is not your entire market, try and find your niche.  Build some audience personas to test your approach and help you and the team become familiar with the target audience

Take charge of your own destiny

As I’ve said, defining a target market is challenging for most agency owners. Many of you will already be working with a wide spread of clients. Either you or your team may crave the variety of work that this in theory at least, provides. Some of you may be worried that niching or focussing on a more tightly defined target market will present problems such as conflict of interest. Some of you may be unwilling or afraid to change.

Having run my own agency and worked with many others, I can empathise with these points of view. I believe passionately though that niching your offer and – at the very least – marketing your agency to a more specific target market is the way to grow a profitable independent agency in the current market.

If you’re still not convinced, maybe this thought will tip the balance. I’ve met 2 agency owners this year that, in slightly different words, lamented that they “don’t get to choose who we work with” i.e. they regularly attracted and won new business, but felt they had little influence over what sector or type of client they won. This really struck a chord with me.

If you are an entrepreneur you’re in business for many reasons but one of them is control. You have the ability to decide what your business does, when you do it etc. Of course, all businesses have customers of some sort and you need to keep them happy if you want to succeed. But the ability to decide what you sell and WHO you sell to is a fundamental part of being a business owner. Why then do agency owners feel that they have no control in this area? Lack of confidence may be one factor but I believe the root cause is that they don’t set out to work with a target market.

WHO you want to work with is as important as WHAT you do and a fundamental part of WHY you do it.

How to define WHO

When I work with established agencies on defining WHO they should target, I often find that my clients want to start with a wish list. They focus on which clients they would really like to work with and/or which sectors they have a personal affinity for.

This exercise has some value of course. It uncovers what motivates people and where they would like their business to go. They can become quite excited (particularly if they feel constrained by working with anybody that comes their way as I suggested above).

The visioning process can be counter-productive though. An agency’s perfect clients may be some way from the reality of their current situation. Whilst I’m all for setting ambitious goals, blue-skying the client list can quickly become demotivating.

What I find works better is to start with who they are currently working with and refine the target market from there. This doesn’t mean that the agency must continue to target the same clients, but it highlights the agency’s strengths and track record and who they are best suited to. If you dig deeper sometimes you can be surprised by what treasure you can uncover.

I follow a 4 stage process which is outlined below:

1. Type of Business

Firstly I look at what type of businesses the agency works with. This in itself can be cut many different ways and is an interesting exercise. Some of the areas I explore: 

  • Are the clients in B2B or B2C (i.e. start with who they – your clients – serve!)
  • What market sectors, industries or verticals are the clients in?
  • What sizes of companies are they?
  • Where are they located?
  • Do they share similar problems (even though they might be in a different industry)?
  • Do they share similar audiences (even though they might be in a different industry)?
  • Do they have an established marketing department?
  • Do they have in-house capabilities for marketing production?
  • Do they work with other agencies?
  • Are they growing, struggling, flat-lining?
  • Are they value/premium brands?
  • Etc, etc…

2. Type of People

An agency’s clients have 2 identities. They’re a business first and foremost, but they are also a collection of people. I like to uncover not only what types of clients businesses an agency works best with but the type of people they are most suited to working with. What people does the agency support best and help to thrive? Who do they work with when they get the best results?

Some of the areas I explore: 

  • How senior are your main/regular client contacts?
  • As marketers, how sophisticated and experienced are they?
  • Do they control the budget?
  • Do they have a team?
  • What motivates them in their career?
  • What motivates them to work with you as an agency?
  • How would you describe the dynamics of the relationship?
  • What problems do they have?
  • Etc, etc…

3. Impact you (can) have

Thinking about the current clients I then go on to explore the impact that the agency has on – and for – them.

Some of the areas I explore: 

  • What tangible results do you deliver for your clients?
  • What’s special about how you deliver these results?
  • How do you make your clients’ lives easier?
  • Why do you deliver good results for some and not so good results for other clients?
  • Etc, etc…

 

4. Not for you

Finally, I look at refining the list to see whether there are any client types (not individuals) who the agency doesn’t want to work with.

  • Which type of clients would you resign immediately (if you could)?
  • Which type of clients would you never work with (this might be industry-specific and related to your values e.g. SOME agencies might prefer not to work with clients in the gambling sector)
  • Be honest, what type of clients don’t get results from you.

N.B. This exercise comes with a caveat. A reminder that business is not easy and the perfect client doesn’t exist. We’d all like to think we could live in a world where clients don’t change their minds and budgets weren’t finite and/or timescales were flexible. The reality is we don’t and therefore a dose of reality often needs to be applied here.

The importance of WHY

I hope this article has achieved 3 things as a minimum:

  1. Convinced you that thinking about your target market first is crucial to a great Value Proposition.
  2. Highlighted to you that the deeper you can go into your target audience, the more information you will have and the easier they will be to find and convert.
  3. Given you a head start on how to go about defining your WHO.

As a final point, by suggesting you start with WHO you’re targeting, I want to make it clear that I’m not for one second saying that having a compelling WHY is not important. Nor is it impossible for agencies to find.  

Indeed, having a strong purpose or mission is vital for the modern organisation. Studies have shown that it’s particularly important and motivating to younger people.

For the reasons outlined above, I just think it is easier to start to piece together a niche positioning and articulate a compelling Value Proposition for an agency when you start with who.

Next Time…

In Part 4 I’m going to be looking at WHAT your agency does for its clients.

You’ve defined a market and have a clear focus on WHO your clients are. But WHAT do you actually do for them? How does it really add value and what motivates them to buy from you? If you’re thinking we build websites or we do their digital marketing, then I think you’ll find this next piece interesting. Stay tuned.

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How to become a niche agency – PART 2

The importance of niching

My last article on niching was the first in a series. I had some great feedback on how to become a niche agency and hopefully, some of you are returning for Part 2. In case you missed it, find Part 1 here.

As you can tell, I’m an advocate of agencies’ niching their offer. It’s always been a viable strategy, but the market is more suited to specialist players than ever before. There are far too many generalist agencies and even more generalist digital agencies. I except, however, that the decision to niche is hard and the ability to deliver a niche offering is even harder.

In my last piece, I focussed on presenting the case for why marketing agency owners should niche their businesses. In this article, I’m going to explore some of the mistakes that people make. I’m then going to explain what niching really means.

We all make mistakes…

You’ll not be surprised to hear that the first mistake I think people make when niching is they don’t do it at all (or at least they don’t do it properly). Here are some other common mistakes I see when people are considering niching (and how to avoid them).

  1. They don’t go far enough – They consider focussing on a few industry sectors as niching. To make a difference and be transformational, niching your agency has got to feel uncomfortable. If it’s in your comfort zone, you’re not going far enough. Specialising in Sports Marketing is not a niche. Specialising in marketing football clubs is getting there.
  1. They believe that the niche is the entire market – Your chosen niche is just your target market, it’s not your total market. Other clients outside or on the periphery of your niche may choose to buy your services. N.B. Rest assured they will (!)
  1. They consider only industry sectors – When people think of targeting a niche they usually focus purely on industry sectors. There are many nuances and ways of cutting niche propositions. For example, you might choose to focus on clients that want a specific result (regardless of their industry).
  1. They consider it a marketing comms or worse a cosmetic exercise – Niching must establish a change in your entire agency. If it’s just a few words on your website it’s not going to achieve what you want it to.
  1. They don’t do it early enough in the agencies life-cycle – If you’re a young agency and you’ve survived the first year in business, now is the time to be thinking about niching.
  1. They don’t see the wider benefits – Niching is not just about winning clients and growing revenue it’s about developing expertise, sector knowledge and a brand.
  1. They try to be too unique – We’re not looking for unicorns here. Differentiation is the goal, not complete uniqueness. If you try too hard to be the only one in the market then you’ll never find that elusive gap or make the decision.

Niching is Positioning

As I explained in my last article, niching is not something to be afraid of. It’s in essence choosing and achieving focus. The tighter the focus the better. It’s the ability to appeal more intensely to a smaller group of clients. In a highly saturated market, it gives your agency an instant competitive advantage. You become an expert in your field.

More importantly, niching is just another way of looking at market positioning. Many of you will have worked with a crosshair positioning map where brands are placed on the axes relative to their positioning in their market. BMW as premium drivers’ cars versus Ford as a more mainstream functional vehicles for example.

Put simply, positioning is determining the distinctive place that you want to occupy in the market, relative to the competition and in the minds of your target customers.

The most effective positioning lives at the intersection of relevance (fit with your customers’ needs) and differentiation (the difference between your business and the competitors). 

Whilst most agencies use this as a tool for supporting their clients, many fail to give it a second thought when thinking about their own businesses. Most agencies place themselves firmly in the centre of the crosshairs. Wanting to deliver everything to everybody.

If the issue of positioning is talked about within agencies, it’s usually thought of as a marketing problem or activity. The outputs are usually the fabled crosshair model, a positioning statement and maybe even a couple of options for straplines.

Positioning is often treated as purely a marketing concept. In reality, it’s more fundamental than that, it’s about your business model. It’s not just a marketing decision, it’s arguably the most important business decision you’ll ever make.

Finding your niche positioning

You can spend hours analysing the market, your competitors, the economy, trends and/or trying to predict the future. Some of this is useful, but it rarely uncovers a clear niche which everybody in the organisation subscribes to.

As with many things, I find starting with the end in mind is the best approach. What is the outcome we are trying to achieve? I also find a template or formula saves time and works well too.

A niche positioning is of no use if it is not captured and communicated well. The way we communicate our positioning is through a Positioning Statement and/or Value Proposition. 

This is the outcome we are trying to achieve.

 

The Value Proposition and Positioning Statement

Almost as important as finding your niche and committing to it, is communicating it.

As poor as many agencies are at targeting customers, they usually find similar challenges in communicating with them.

The process of moving from the language of “award-winning team of committed individuals that specialises in X, Y, Z and A, B, C” is a big hurdle. It can be helped by summarising the positioning of your agency in a Value Proposition or Positioning Statement.

The terms Value Proposition and Positioning Statement are often used interchangeably. I think Value Proposition is a more modern term (I certainly don’t remember it from my degree!)

Technically there are differences:

Value Proposition (VP) – A short compelling statement that describes what customers can expect to receive by using a product or service.

Positioning Statement (PS) – A similar statement to the VP, but with more of a focus on how your brand performs and what advantages you have over those of a competitor or competitors overall. And why these differences matter.

Crucially both focus on benefits (to the customer and over the competition respectively). This is important as so much marketing comms from marketing agencies focuses on features not benefits (how many awards won, people employed, number and type of services etc).

You can have both a VP and a PS of course, but I prefer to keep things simple. I also prefer to focus on the Value Proposition. I believe marketing agencies spend too much time looking inward and/or comparing themselves to other agencies. Bizarrely this results in most agencies looking and sounding the same. The PS tends to fuel this a little.

A VP is more client-focused.  I like the fact that it zeros in on what problems clients have (both from a brand and personal perspective) and how your agency solves them. you need to know the problems and you need to know how you solve them and how effective  you are at doing so.

Clients, like all customers, are most interested in what you can do for them. They’re not bothered about your view of why you’re better than alternatives. That’s for covering later in the sales cycle (if it’s necessary at all).

 

A formula for success

A quick Google search will reveal many formulas and templates for creating Value Propositions. 

I like to use this version:

  • We are for…(who your target clients are)
  • Who are dissatisfied with… (ideally the clients’ problems but could also be current alternatives to your agency)
  • We…(what you actually do and deliver – Tangible Benefits and Logical reasons to believe)
  • By…(how you do it)
  • Because…(why you do it and what you believe in – Emotional reasons to believe)

Practice what you preach

If you complete the formula above you will end up with a list of bullet points. You can then create a paragraph of text if you wish.

In the interests of showing an example and to prove I try and take my own medicine I created the following for Beyond Noise:

We are for ambitious joint-owners of established independent marketing agencies who are between 10 and 50 people. They are dissatisfied with the performance of their business (but want to grow not exit). We provide growth advisory services including business strategy, marketing strategy and performance optimisation. We do this through mentoring agency owners and their senior management teams. We believe that enjoying the journey of growing and running a profitable agency is as important as an exit.  We are also keen to promote gender equality in the sector and are particularly keen to work with female agency owners.

 

This is by no means perfect and it will evolve over time. I really want to niche further into a specific type of agency. For now, though this has really helped me to focus on my niche and sell my proposition.

The words are chosen carefully. For example, the people I want to work with must be ambitious (they want to make big changes). They must want to grow and not be desperate to sell (yet). They are ideally joint-owners (they get more clarity and traction, and I get more satisfaction, from working with partnerships than I do with sole owners).  I’ll not go into further detail as this is not my point.

The real question is can you describe your agency’s positioning in these terms?

 

Next Time…

In Part 3 I’m going to unpack the Value Proposition formula above and give some examples of how I’ve applied it to agencies and how you might do the same.

If you don’t want to miss it, sign up for my email updates here.

How to become a niche agency

Becoming a niche agency

Why niche?

I spend a lot of time with my clients discussing how they can become a niche agency i.e. an agency that is more targeted towards certain types of clients and/or offers fewer services.

There has always been a lot of discussion about the benefits of niching.  With the amount of competition and disruption in the agency market, it doesn’t surprise me that niching remains a hot topic. If anything, the debate is intensifying.

My own experience is a testament to the power of niching (by client sector at least).  We built our agency into a £12M business by specialising in retail. It was a very powerful and successful strategy for us. It also gave me a unique perspective on the challenges and barriers to becoming a niche agency.

In this series of articles, I’m going to look at the advantages of becoming a niche agency. I will also be outlining what steps agency owners should take to niche successfully and grow their businesses.

Let’s start by looking at why niching is the exception rather than the rule. What drives and motivates so many agency owners to avoid niching?

The lure of full service

The attraction of being a full-service agency or, in other words, an agency that is set up to advise and create campaigns for clients across all media platforms, remains a powerful draw for many agency owners.

In theory, at least, the more services your agency can offer, the more client opportunities you can generate.  The larger the number of services you have, the more business you can gain through cross-selling and up-selling your clients.  But is this really true?

The term full-service agency has been around in advertising for many years. More recently, the explosion of digital channels and the complexity that this presents to marketers, has seen many digital agencies refer to themselves as full-service (even though they remain focussed on digital media).

You would be forgiven for thinking the opposite might have occurred. The proliferation of media channels, impact of technology and the way that the big agency groups – even with their huge resources – struggle to consistently deliver “full service”, could have killed the term. Specialisation would seem a more appropriate business strategy in today’s saturated agency market.

There are incremental costs involved in offering a wide portfolio of services. This places huge pressure on the business model and is difficult to sustain. I often liken this to a restaurant trying to maintain a huge and varied menu.

Despite this, for most independent agencies, the lure of being able to do everything still holds many agency owners in a trance-like state. 

An obsession with breadth 

As if offering a wide range of services was not enough of a challenge, many agencies are not content with coping with breadth alone. They insist on the added complexity of offering a wide range of services to a similarly wide range of clients. Both variety of services and diversity of clients is the goal for many agency owners.

Of course, there are advantages of having a diverse customer base. In theory, at least, it means you have more opportunities to win more clients. You’re not constrained to or limited by market sectors. Variety of work and the different challenges presented by diverse markets can provide the agency and its talent base with more stimulating and rewarding work. 

Whilst these can be seen as positives, I would argue they are really advantages for the agency rather than its clients. 

One true client advantage of using an agency with a wide client base is the ability for an agency to cross-fertilise. An agency may create better work for their clients by using ideas and strategies formulated in one industry and transferring them to a client in another – unrelated – sector. Of course, this can work, but when it comes to client diversity I think there are more advantages for the agency than for the clients they serve.  Moreover, they are usually perceived advantages rather than reality. 

A fight for survival

Getting any business off the ground is tough. About 20% of UK SME businesses don’t survive the first year. Half of startups don’t last for 5 years and fewer than 33% get to celebrate their 10-year anniversary.

Moreover, approximately 75% of UK SME businesses don’t employ anyone other than the owner. If any business makes it past these milestones it is a considerable achievement in itself.

Hard habits to break

When they are in the early stages, agencies are understandably in survival mode. Staying afloat is the focus. New business opportunities are hard to find and even harder to turn away.

At this point, it is understandable why almost all agencies work with clients from any sector (unless they have an ethical stance or a particular reason not to). The need to become a niche agency is simply not a priority.

Sadly this becomes a hard habit to break. Client business is hard to resign and once a diverse portfolio is established it becomes self-perpetuating.

A wide client base can feed further complexity for an agency. Young agencies with a small number of clients are naturally eager to grow their accounts. Growing and developing an agency can often mean taking on work that is not the core specialism of the firm. If an opportunity to do this occurs though it, like any new business, is hard to turn down.

If they are lucky, many agencies find themselves 5 or 10 years into their journey with a wide variety of clients. The problem is that the strategies that work for establishing an agency, doesn’t necessarily work for growing an established agency.

Breakout 

As much as they can be positives, having a breadth of clients and a breadth of services can be a burden for agencies. Not only is it a challenging business model to maintain, but it is also a challenging business proposition to bring to market.

As I noted earlier, growing any business is an achievement. In my experience, agencies can reach the 10 person mark relatively easily, but breaking through this is hard. Similarly, the £1M turnover milestone is a difficult threshold to break through.

Agencies of circa 10 people can become trapped in a kind of gravitational pull. They are usually working on a project by project basis with most of their clients. They are – hopefully – profitable but have little surplus to reinvest in the business. Usually, they are still working for a diverse client portfolio.

This dynamic, and the resulting inability for an agency to achieve what some call escape velocity. This is usually fueled by a reluctance to become a niche agency. Diverse clients and a variety of services dominate the makeup of these types of agencies as do references to full-service.

Courage and hard work

Even if the desire exists, trying to become a niche agency is hard work. Niching takes courage and conviction. It also takes a fair amount of soul searching and often a dose of creative thinking. Agencies excel at this sort of work for clients, but applying these things to your own business can be difficult, time-consuming and frustrating.

Many people are simply afraid to niche. A concern that having a niche market limits business opportunities is often raised. I find quite the opposite is true.  I can speak from personal experience.  

What sometimes helps is a realisation that your niche is not your market. If you become a niche agency, your niche gives you focus, it doesn’t and shouldn’t, dictate your market and your entire revenue streams.  

Niching is a strategic decision. Michael Porter says “The essence of strategy is choosing what not to do”. Becoming a niche agency is the courage to differentiate yourself in the market. To stand for something, and stand out from the competition. It will mean you can’t do everything for everybody but this is a good thing. It’s called positioning.

The power of the specialist

Rather than thinking of it as niching, I encourage my agency clients to think of the challenge as focusing

Allan Leighton, the ex- CEO of one of my past clients and current chairman of The Co-Operative Group, used to use a very powerful mantra “Winners Focus, Losers Spray”

Niching is not some sort of odd practice that only a handful of agencies should do. At its core, its the action of focussing your strategy, your business model and your people. It is about being an expert, a specialist. Its what service providers and professional knowledge companies need to be.

Technology, changing working practices, in-housing and the big media groups are all making the market for independent agencies even more challenging. There has never been a better time for independents to focus and specialise.

The future of independent agencies is about being small, agile and focused experts. People with big important problems want experts to solve them, not generalists.  They are also invariably happy to pay for the specialists’ skills, accumulated knowledge and expertise. 

Agency services are sold not bought

When it comes to selling services, the simpler it is to explain what you do the better. 

Clarity of message is important, but it has to be focused on what the agency does for its clients. So many agencies fall into the trap of describing literally what they do. They list and describe the services they provide rather than explaining how they deliver value to their clients.

Clients don’t buy agency services. There is too much supply and demand is rarely immediate. As an agency owner, you must sell your services. You must convince prospects why they should choose you, what is different about your agency and what you can do for them.

Doing this is far easier if you have positioned your agency.  If you have a clear target market, specialist expertise and, crucially, a compelling value proposition.

In Part 2, I’m going to explain what I mean by a value proposition. I’ll also be uncovering how I’ve helped agencies achieve more clarity and helped them stand out through better positioning.

Does your agency have service-market fit?

service-market fit

Why don’t marketing agencies focus on service-market fit?

In addition to being a marketing agency mentor,  I’m active in the tech startup sector as both an angel investor and a mentor to tech start-ups. Understandably, the tech sector gets a lot of media coverage these days. Amongst other things, there is a vast amount written about start-up tech businesses and their pursuit of what people call product-market fit.  Which got me thinking. Why don’t you hear anything about service-market fit and why don’t marketing agencies and other service businesses focus on it?

What is product-market fit?

The term product-market fit was coined by Marc Lowell Andreessen the co-founder of Netscape. He described it as “being in a good market with a product that can satisfy that market.”

Over the years the term has had different interpretations and emphasis. I notice that people often now use it to denote when a start-up starts to gain traction i.e. customer numbers and sales start to increase. I don’t think this is wrong, but I find more use for the term in more of a strategic context.

For me, product-market fit is when a business has identified a specific market, defined a problem/need in that market and developed a concept for a product that will solve or satisfy these issues.

The building blocks of product-market fit

In order for a product company to achieve product-market fit, a number of core elements need to be in place:

a) A sizeable and commercially attractive, but nevertheless, very SPECIFIC market(s) has been defined.

b) The business has a clear understanding of their target market, their behaviours, their motivations and their mindset as people (not just as customers)

c) There is a problem, an underdeveloped opportunity and/or underserved needs within the market. N.B. Customers might not necessarily be aware of this, but the business has validated it. When UBER started in San Francisco, few of their first customers had really been crying out for their concept, however the market and the underserved need was there.

d) The business has or can create, a product that will deliver value by solving the issues above.

e) The product is so effective at solving the problems that customers are willing to PAY to access it. This is simple, but overlook it at your – commercial – peril.

f) The product outperforms competitive offerings or alternatives (if indeed any exist).

Whilst product development is an iterative process, and product-market fit should lead to market traction, the sooner the criteria for the fit can be established the better. 

 Product-market fit should not just be seen as a signal of success, more a vital component and a building block of it.

Which comes first, the product or the market?

When people refer to product-market fit, all too often the focus is placed on the latter part of the term (a product that can satisfy the market) and not the former (in a good market). Importantly, Andreessen emphasised that the market matters most.

When a great product meets a bad market, the market wins.  When a bad product meets a great market, the market wins. When a great product meets a great market, both win.

Conventional wisdom leads us to believe that most products are created before they are sold. Inventions and historic discoveries have of course resulted in millions of commercial products. And some products have also been created by accident (the Post It note is one of the most famous examples). Nevertheless, today’s product development is primarily about innovation, not invention.  That said, even the wheel was created to solve a problem! 

Today you have to identify a market problem/need first. Only then should you “sell” the idea to your selected market to ensure it is truly required and commercially viable. If the feedback is positive you can then build the product out properly. This is the essence of the MVP (minimum viable product) approach.

Time spent building a business around a product is pointless. Building a business around solving a problem and/or satisfying a need in a market is the key. The product is the vehicle, the means to the end. 

Find a market, identify a need and then develop a product.

Customer First

There is a danger in making the product development process sound incredibly simple. It is obviously not. In modern society, access to information, products and services is fast and easy. Finding a product-market fit for a new product or idea is difficult. Finding a large enough market, that has a need that is EITHER underserved by others OR is a need that the market itself has not truly come to appreciate can be a real challenge. 

The ability to find a great product-market fit, whether the solution uses tech or not, can make the difference between your company being a success or failure.

Tech start-up founders are looking to solve problems for a specific group of people by building scalable tech products. However, it is customers, not start-up founders, that decide whether a product meets their needs or solves their problems or enhances their lives. That’s why smart tech founders spend so much time defining and refining their target market(s). They analyse not just their customers’ problems, but their behaviours, attitudes and how they approach the rest of their lives. 

Achieving absolute clarity on who the target customer is, allows product teams to build and tweak their products with a clear understanding of who will be using it, what they will be using it for, how they will be using it and, crucially, why they will be using it.

The target market is often segmented and profiled using audience personas or persona archetypes (we used to call them “pen portraits” back in my advertising days). Whatever you call these things, they achieve the same objective. They provide a profile of the customers not just by the traditional methods of demographics, but by looking at how they think and behave using psychographics.

Tech start-ups have a very high failure rate, but one pitfall is easily avoided. Many founders become obsessed with the product, not the customer. Constantly improving or tweaking the product, adding more features and enhancing the user experience is a sure-fire way to burn cash without achieving any traction in the market.

Customer-first thinking and an obsessive focus on the value proposition is a way that most start-ups can avoid the pitfalls of too much expensive product development and not enough actual sales. 

Product-Market Fit

Sell futures not features

My friend and business associate, Mike Killen, has a modern take on the old marketing adage, sell the sizzle, not the sausage.  Sell futures not features. In other words, it is what the product can do for the customer that is important, the results it creates and the problem it solves, not the features it has.

The “value” a product delivers is what people will pay for. This value is captured in a value proposition which should form the basis of all marketing and sales activities. 

The value proposition sits on the front line at the interface with the target market. If the value proposition of a product can effectively capture who the product is for, what they need it for, how they will use and why it exists and is better than a comparable alternative the battle for sales and market share is half won.

What is service-market fit?

So what has this got to do with marketing agencies and where does service-market fit come in?

Whilst product-market fit is a frequently used term, you rarely hear it applied to service businesses. Indeed, if you do an exact match phrase Google search for “product-market fit”, you get nearly a million results. Doing the same search for “service-market fit”, delivers only just over 3,000.  All terms are not created equal it would seem, or are we all obsessed with products and not services? 

Most tech products are – at their core – actually service providers. The very nature of most SaaS products and companies is that it is technology delivers an experience or service. The fact that such businesses don’t rely on people to deliver the service though means that they are more repeatable and scalable business models.

Regardless of what industry you are in, or what business model you are operating, service-market fit follows the same principles as product-market fit but, of course, applies it to service-based offerings. 

There is a school of thought that service-market fit should be analysed BEFORE product-market fit for SaaS businesses. In other words, you should find a target market, identify a need and/or problem and then analyse whether people would buy a service to solve it. Do this BEFORE you then build a product to automate/deliver the service using tech and you will save yourself a great deal of time and money. 

What this means for agencies.

The majority of marketing agencies use people, not products, to deliver their services to their clients. All of them use technology to support the delivery of these services in some way of course, but their clients buy the time and skill of the people in the agency.

Nothing wrong or surprising in this. What does continually mystify me is why agencies seemingly give so little credence to forming or re-shaping their businesses using the service-market fit model.  

As I have explained above, the first stage to achieving product/service market fit is define the target market.  Agencies spend a vast amount of their time looking at target markets and segmenting their clients’ audiences, but almost no time at all segmenting or defining their own.

Most agencies are extremely reluctant to target a particular client sector.  For a long time, my own agency had a market focus. Not a particularly tight one I admit, but we were retail specialists. Looking back I often reflect on the knowledge and power this gave us. I don’t think I fully appreciated it at the time. The ability to target prospects at their own industry conferences, the opportunity to become subject matter experts, the ease with which we could converse with and onboard new clients were just some of the many advantages this had.

Crucially though, by having a target market we had a head start in identifying what problems our clients had. What was keeping them awake at night?  What opportunities did they want to exploit? What industry-specific needs did they display?

Having this knowledge not only enabled us to target a particular audience, it enabled us to construct, develop and review the services we provided around those clients and the needs they had.

So many agencies describe their businesses in terms of the services they have to offer. Many still cling to that coveted badge of honour that is full service.  “We do everything for everybody” they shout from the rooftops!

Describing your agency with a list of services is like a product company listing out the features of their product(s). It is features, not benefits. The sausage, not the sizzle.

Having a more focussed market (client segments) with a more focussed product offer (services) gives you power.  It gives you deeper expertise and more control of your business.  

You can start to measure your results better and you can start to set your prices for delivering the services. You don’t have to accept the “costs” dictated to you by the market norms of what is adjudged to be acceptable hourly rates etc. You can also develop your agency by adding the services (talent) that will really benefit your clients and enhance their experience,  rather than adding people to simply satisfy workload or capacity issues. 

In summary…

If, as an agency owner, you embrace service-market fit thinking when building your business, you will identify what types of clients will benefit most from working with you. What issues or underdeveloped needs do they have?

How can the services you offer (or maybe some that you currently don’t) BENEFIT those clients? How can you improve their user experience? 

How are you BETTER than other alternatives they may have (N.B. awards and having an office dog don’t really cut it)? 

How can you bring these elements together in a compelling value proposition that communicates how your agency fits with your target market

What do you need to do to change your agency with service-market fit thinking?

 

Growing or Scaling – which one is right for your agency?

Growing or Scaling your agency

Growing or Scaling?

It seems to be the current trend to talk about how to scale businesses rather than grow them. Are you growing or scaling your agency? Many people, myself included, use the terms grow and scale interchangeably, but are they the same thing?

In short, the answer is no.

I spoke at a conference for 80 digital agency leaders this week. Part of my talk included a section on the difference between growing and scaling an agency. From the feedback afterwards, this seemed to strike a chord with many people in the audience.

My point on this was that growing and scaling are different things. They might exist to achieve the same goal (a bigger agency), but they require a different approach and growth plan.

Growing an agency is difficult. Scaling an agency is not only harder, but it is a different strategy that will certainly need more investment, and may even require a different business model entirely.

What defines growth?

According to the OECD, high growth companies are businesses that grow revenue by 20% or more for 3 consecutive years. Doing this in a business, in any sector, is a significant achievement.

However, even growth in revenue over this timeframe, whilst enviable, does not necessarily qualify a business as scaling (or more importantly, a business that is scalable). Despite the frequent commentary around scaling, I’ve found it difficult to find a definition.  So are you meant to be growing or scaling your agency? Here’s what I think…

Is there a difference between growing or scaling your agency?

Revenue growth is usually a good thing for any business, but for many firms top line growth often comes with additional baggage; a comparable increase in costs. 

This is particularly true for marketing agencies, where securing additional clients generates more revenue, but the costs of the business also usually increase. Being a people-based business model, agencies require more human resources to service the additional clients. In short, growth is achieved, but as costs can grow at a similar pace to revenue, profit only increases proportionally.

Scaling on the other hand, is where revenue increases at a much faster rate than costs. Incremental customers and revenue are acquired. The business does not need to increase costs to service or satisfy this growth. Economies of scale are realised. The gap between revenue and costs widens and, in theory, profit grows exponentially.

Growing any business is a challenge and agencies are not different. Scaling a business however requires more than just hard work, planning and rigorous execution; it requires a certain type of business model.

The traditional marketing agency business model, or any service business for that matter, relies on the quality and number of the people that it employs. The same applies for any professional knowledge firm including accountancy firms and legal practices.

In their traditional format (leaving aside the rise of online legal services platforms etc) for these types of businesses, growth in top line revenue fuelled by more clients, requires additional people resources to service the growth 

Growth in revenue therefore, is usually accompanied by a corresponding growth in business costs. Of course, action can be taken to control the rise in costs and it will rarely be as linear as the example shown in Fig. 1. Some economies of scale may well be realised, but broadly more clients means more revenue, means more people, means higher costs.

Growing or Scaling

Of course, growth in both revenue and costs can translate into growth in profits, but the profit figure may well be larger based purely on size not on efficiency. In this situation, profits grow but profit margins are likely to stay the same.

 

On the other hand, scaling a business can result in bigger profits derived through increases to both revenue and margin.  If revenue grows but costs increase at a lesser rate, the gap between them widens (Fig. 2).  Improvement in profit margins, as well as profit overall, are the result.

 

In either the case of growth or scale, the speed with which they are delivered and the timeframe over which they are maintained is significant, but it is not a determinant of whether a business can be said to be scaling.

 

Growing or Scaling

Different Business Models

It is not that marketing agencies can’t scale, it is just that some business models are more suited to scale than others. As a people-based service firm, the business model of a marketing agency has many advantages:

  1. It is easy to set up – few barriers to entry exist
  2.  Low investment is required
  3.  It is a relatively low risk business model
  4. Break-even can be achieved quickly
  5. Successful agencies can produce healthy profits for their shareholders
 

These advantages are in stark contrast to the tech firms that are so prevalent at the moment. Tech firms are higher risk. They usually require higher levels of investment and funding at the early stage of their development. Failure rate is high and the break even for the majority of these firms is much later in their evolution than a service business.

That said, they say where there is risk there is reward.  Tech companies have much more potential for larger upside than service firms like marketing agencies. Whilst risk is high, the upside in terms of profitability, sustainability and saleability can be much greater than a service firm.

The difference is in the business model. You can grow businesses that rely on people for the delivery of your service (particularly if the people are adding or creating value not just delivering a process), but they’re difficult to scale.

Tech based businesses have the edge when it comes to scaling. In order to scale, a business needs to serve many customers, frequently. Reach and distribution is vital. If technology can facilitate this then economies of scale are more accessible and realisable. 

Accepting the heavy initial investment, once a tech firm has passed break-even point and gained traction in recruiting new customers scaling is underway. This is demonstrated in the classic “J curve” (or “hockey stick”) trajectory (Fig. 3).

A service firm usually has a flatter growth trajectory, whilst a tech firm (or similar) is more of a rollercoaster. That said for a lucky few Tech founders at least, the potential for a much steeper scaling phase is more easily accessible.

Scaling your agency

Different Businesses

To illustrate my point further, let’s take a look at 3 separate companies.

 1. Marks and Spencer is a British retailer established over 135 years ago in Leeds. It currently has 85,000 employees, with revenue per person standing at around £122,000.

2. WPP started life as a manufacturer of teapots and baskets, but after Sir Martin Sorrell took a controlling stake in 1985, he built it into a global advertising and marketing services group. Today it employs 130,000 people and has revenue of £130,000 per person.

 3. Facebook needs no further introduction. At less than 16 years old, the company employs – only – 40,000 people. They currently run a business that achieves revenues of £1.16M per person.

Three very different businesses built on 3 very different business models.  The difference in revenue per person between Facebook and the other 2 is remarkable (N.B. the profit per person figures are even more astounding) 

Clearly, Facebook is a tech platform and whilst there are several reasons for its phenomenal success, the scalability of its platform, and therefore its entire business is certainly paramount.

Scaling an agency

Growing an agency is not an easy task. Scaling an agency, whilst not impossible, is even more difficult and requires a different strategy.

Fundamentally, to truly scale an agency you need to embrace a different business model. The knowledge firm providing expertise/creativity through people is not scalable.

The scalable agency model must-have technology as a facilitator at its core.  It must be able to serve an increasing number of customers without a corresponding increase in costs.

It must be able to use technology to deliver reach. Today’s tech puts agencies in a unique position, the ability to more easily access clients and distribute value to a much wider audience.

Crucially I believe that to scale an agency, you need to have much more of a productised and systemised business. Consultancies are usually, by nature, small boutique operations.  To scale an agency you need to break away from the traditional agency consultancy model.

Is growth right for everybody?

I’m a believer in continuous growth and having a growth mindset. The maxim “if you’re not growing you’re dying” has always resonated with me.

However, I also believe that size, in itself, is not a strategy.

As an agency owner, you don’t have to be obsessed by size or scale. Neither do you need to be fixated with scaling. 

There is a great deal to be said for being small in today’s agency market. Small is agile and nimble. Small is personal and service focussed. Small is expert and artisan.

If you do want to grow your agency, make sure you have a vision for what that size needs to be and why the size is important.  Are you aiming for growth or do you want to scale the business?

If you do choose to scale then assess whether your business model is capable of achieving it. What needs to be changed, improved or adapted to give you the platform to be able to add more clients, more revenue but not increase your costs at the same rate?

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