If you are investing material dollars in marketing campaigns, more often than not, you have considered engaging, or have engaged, an advertising agency to assist you with those efforts. Those decisions whether or not to manage your marketing campaigns with in-house teams versus third-party agencies are typically not easy. And if you decide to outsource to an agency, the selection process can be overwhelming. This post will help make those decisions easier for you.
In-house teams versus third-party agencies
The decision to manage campaigns internally versus externally often comes down to the following things: (1) the size of your media budgets; (2) the complexities/channels of the campaign; and (3) the skills of your team and the analytics tools you have to work with. Over time, my leaning on this decision has changed. I used to want to run everything internally to save on cost (an agency typically costs 15-20 percent more). I also used to want to find disparate agencies with a specific expertise (e.g., one agency for search engines, another agency for social media).
But, as the advertising industry has evolved over time, my opinion on this topic has shifted 180 degrees. Today, I am a proponent of outsourcing this work to an agency, preferably a cross-channel one that can manage all our needs. The reason for this is: (1) the agencies have materially evolved from being single-channel experts to multi-channel experts; (2) strategically, it is better to have all strategies and budgets managed centrally, to easily shift dollars between channels and get cross-channel attribution tracking all in one place; (3) the optimization technologies the best agencies are using, and their direct relationships with Google, Facebook, Amazon and others, are heads and shoulders better than anything your internal team would be doing; and (4) finding a team of good internal marketers is hard to find and manage, as opposed to leaning on an agency’s team and its recruiting and training processes. The techniques that work best each year can rapidly change, and you want to benefit from the most recent learnings (not hire someone with yesterday’s playbook).
So don’t be a penny wise and a pound foolish here, as a good agency should more than cover its additional fees, with materially higher revenue performance from its efforts than you most likely could generate with an internal team.
Step 1: Identifying the best potential agencies for your business
All agencies are not created equal. Certain agencies are expert in B2C, and other agencies are expert in B2B. Certain agencies are full-service agencies handling all services, and other agencies handle certain specialty solutions (e.g., branding, creative, television, B2B lead generation). Some agencies are set up to handle huge budgets, and other agencies are set up to handle smaller budgets. The first step is to have a rough idea of your budget and needs (e.g., prepare to spend 10 to 30 percent of your revenue target on sales and marketing activities), and the next step is to identify the agencies that are best suited to support those budgets and needs.
For purposes of this post, let’s assume you are like most B2C marketers, and you need a good performance marketing agency. That is an agency that: (1) can handle most of your digital advertising needs (e.g., search, social, affiliates, commerce, display, digital video, connected TV); (2) has a suite of sophisticated technologies, reporting and tools to optimize the campaigns across channels; and (3) have an ROI-first mentality, shooting to drive clearly attributable transactions from the campaign at a profitable return on ad spend (ROAS).
With that being the goal, go to Google and search for “best performance marketing agencies,” as an example. You will stumble on a bunch of websites like Capterra, G2Crowd or other bloggers that have ranked the agencies based on customer reviews or their research on the subject. Or, you will find research firms like Forrester that interviewed the best agencies and ranked them, as seen in this chart, as an example. That will help get you started. But you should also talk to your peers at other similar companies to see who they are working with. Get recommendations from other colleagues. And if any agency says you are too small of an account for them, ask them who they refer business to for smaller accounts, as they will have a good idea of the best players in the space. This process might result in a list of around 8-10 agencies to consider.
Step 2: Create a questionnaire and interview the best targets to ensure a good fit
Just because you think they are a good agency for you based on preliminary research, doesn’t mean they really are a good agency for your exact needs. You need to ask probing questions of them, such as:
1. What is your minimum media budget? Are we large enough to be a material account for you?
2. What are your fees? Can we afford your services?
3. What is your industry expertise? Do you have good references from similar companies like ours?
4. Are you working for any of our competitors? Do you have any conflicts we need to worry about?
This part of the process will narrow down your list to around three to five best targets.
Step 3: Invite the best candidates to pitch their services
The pitching process will start with the agency better learning your budgets, history and needs, and most likely will involve them taking a closer look at your current campaigns in Google Ads, Microsoft Ads, Facebook, Google Analytics, etc. After two to four weeks, they should be have completed their research and planning and be ready to present their proposal. In those presentations, pay attention to things like:
1. The quality of their team (and make sure the team on the pitch is the same team that will be on your account, to avoid bait-and-switch)
2. Their fit with your business and team
3. The quality of their strategic-level ideas
4. Their proposed media mix
5. The quality of their optimization tools and cross-channel reporting capabilities
Step 4: Pick the front-runner
Once you pick your favorite agency from the presentations, it is time to take the next step with them. That will include things like speaking to their references and negotiating the agreement and statement of work. This can take several weeks to complete.
Step 5: Formally award the winner
Congratulations, you have formally engaged your advertising agency. Hopefully the above process enabled you to find a really great partner for that will propel your business to new heights. Now starts the busy work of transitioning services from your old agencies or team members, sharpening your pencil on campaign strategy and media mix modeling and setting up all the management processes. This part of the process is as important as the agency selection is, and it will help tee up the campaign for maximum success. Now comes the hard part: executing the winning campaign that hits your desired metrics and managing your agency on a weekly basis (which I will cover in a future post).
A couple useful tips
Here are a couple things to think about. If you can, try to get part of the agency’s fee in a pay-for-performance structure. So, maybe half of its fee is fixed, and the other half of its fee is incentive based. keep that incentive uncapped — the more success they drive for you, the more fees they can earn. Do your best to cap your total fees (e.g., not to exceed a certain percent of the media spend), as these contracts can be very complicated and confusing, with all kinds of fees that can add up quickly.
Hopefully I’ve taken the daunting process of selecting an advertising agency and simplified it into an easy step-by-step guide—one that will result in a well-experienced agency to handle your specific needs, both in terms of team and tools. The relationship between your business and your advertising agency is one of the most important relationships you will have; they are the team that will dictate how quickly you will scale your revenues, hopefully on a profitable basis. And, in today’s high-tech digital world, they are as much a technology partner as they are a media-buying partner, so pay special attention to their capabilities in this regard. Now you’re off on your journey to marketing success and profitably scaling your business.