Profitable ecommerce growth is harder than ever before. And forget about finding the right agency to help you achieve that profitable growth.
Why is this?
Simply, the traditional agency model charges based on the total revenue driven for their clients — not the gross profit that they drive. This sole metric is a leading indicator of success, not indicators such as gross profit.
Not to mention the massive influx of marketing agencies flooding the markets in the past 3-5 years.
As a result:
- The agency seeks to maximize overall sales
Bottom-line profit margins shrink as they track a leading metric
You end up leaving your agency partner with a bitter taste in your month
Repeat ad nauseam
If you own an online business, chances are you’ve come across the following scenario (This is specifically about ecommerce but it also largely applies to local businesses as well): You’re struggling to increase revenue on your own so you go searching for outside help. A so-called expert ecommerce marketing agency helps you. You sign on for $2000 a month and they say that the results will come after six months. But after those months, you have little to no leads or revenue to show for it.
Believe me, I’ve been there as well. Before I owned my agency, I was forced to do the same. I was forced to go to agencies that promised the moon and the stars.
Here are the issues with this:
- Case studies – They’re likely spitting off just a few success stories that they have.
- Lack of strategy – They don’t have a proven strategy to grow an ecommerce business or a local business. You want an agency that specializes in either local or ecommerce. Both require dramatically different tools to master, not to mention each requires years to master as well.
- ROAS, not ROI – They measure their results based on a top-line version of ROI (aka ROAS) instead of taking into account your variable costs. So in their eyes, they are still achieving “success” even though you’re not making any money. Instead, the master metric that should be measured by an agency partner is gross profit
- Single service vs. full service – You also hear many agencies state that they’re full service when in reality they specialize in just one service such as Facebook ads or SEO. They list all of these other things they specialize in, but don’t implement them as part of your core strategy.
- Practitioners vs. dilettantes – Most agency owners have never actually even grown a business outside of their agency. They built a business to serve clients, but have never been through the gauntlet of actually growing the types of businesses that their clients have. So how could they possibly really understand the pain points of their clients and how to solve them?
This model of going from agency to agency is at best flawed, and at worst making hundreds of thousands of ambitious business owners fear even looking at their bottom line.
What to do about it?
There’s a new-era agency model businesses look for in an ad agency:
Practitioners – An agency built by people with direct ecommerce experience, growing a successful D2C brand before starting the agency
Active Learning – Currently own their own in-house DTC brands so they are continuously staying up-to-date on what is working best, and have an active understanding of the struggles of growing an ecommerce business.
Performance and value-driven – No more charging a percentage of ad spend. How does charging a percentage of ad spend in any way relate to how you should be compensated as an agency? Look for an agency that is compensated based on performance or is value-driven. Nothing else.
Master KPI is your gross profit – A good agency uses gross profit as its sole metric of success. Is the bottom line growing?
Branding and direct marketing – Not one or the other — both. As a result of focusing on gross profit, emphasis is placed on building the client’s actual brand over time. Which, as a byproduct, increases the customer lifetime value and reduces the customer acquisition costs dramatically.
The goal of every business is to drive profits and grow sustainably, so why would the goal for a marketing agency’s clients be any different? Anything other than this is just morally wrong because by focusing on top-line revenue as a metric, they are only boosting their egos and serving their bottom line.
Whether your dream is to transform the world or just be able to run a business that you enjoy, your day-to-day actions are driven by that vision and that dream of the future. And whatever agency you work with as an ecommerce business owner should have you as the hero of the story, and not themselves.
Related: 10 Laws of Social Media Marketing