There are many different flavors of agencies and consultancies in all industries – but I know the digital marketing industry best, and from the outside, what the ideal agency looks like.
The one I’m thinking of is essentially selling dollars at a discount to their clients.
It’s a lot more than that, but that’s the crux of what the buyer wants.
This agency offers content marketing services to help their clients get backlinks and organic traffic, which later leads to brand awareness, conversions, and eventually sales.
These services often fit best with companies that are in competitive markets and the Google AdWords cost-per-click prices are high, so investing money in content marketing and SEO makes sense.
But the most genius part of the model of this agency is that they price their services in such a way that the client becomes addicted to them and uses them monthly.
They are not so expensive that the client is incentivized to take the process in house.
Nor are they so cheap that the agency itself doesn’t make healthy margins (from what I can see from the outside).
They probably charge 20-30% more than the cost if you were to replicate all of their services and hire a team in-house.
But then there are other problems if you do take it in house. As the SEO or marketing manager, you’ll have to build this new team of ~5 people from scratch, and also manage them daily. If you are a more technical SEO, you for one don’t know how to hire and manage team, and in addition you have a million other things to do so it would be a net negative, and take away 50% of your time. So it would end up costing more in the end.
The agency charges a healthy $10,000 a month fee for these services, and the traffic starts to ramp up about a month or two later. Once the traffic starts coming in and the in-house manager asseses the value, they can decide if they want to keep this pipeline of traffic coming. Most do and then become addicted to seeing this new traffic come in with minimal additional work on their part, they just have to spend the budget allotted.
Contrast this to a small technical SEO consulting team that wants to charge a very high hourly rate. These consultancies certainly have their place, and can be very profitable in their own right. But the thing they’re lacking that the content marketing agency offers is the monthly stickiness.
The technical SEO services are most often one-time projects. Or they should be, as that’s the fundamental purpose of technical SEO. You want to solve the big problems first that impact the whole website. Technical SEO is not about fiddling with the same thing over and over every month, in contrast to new content creation.
The in-house buyer of the technical SEO services is ok with paying a high amount for a one-time project to solve a big problem, but they’ll also want to try to get rid of this expense once the problem is solved.
There are certainly scenarios where big companies want to keep a technical SEO consultancy on retainer, that’s for sure, but it seems to be a lot less common from what I’ve seen.
What’s the general application for this to other businesses? Well, it’s pretty much the beauty of subscription services. Subscription services get the buyer on the hook for something they want monthly, and continue to deliver over and over. It’s much more efficient for everyone to find the buyer once, and continue to retain them by improving services and value. Netflix is built on this, so is Amazon Prime, and now Microsoft Office and Adobe have converted to subscription revenue. Adobe’s stock price has exploded since implementing the model.
Apple has most recently shown their desire to transition into this model with the iPhone upgrade program a few years ago, then their AppleCare+, and just this month the launch of Apple One which bundles many of their subscriptions together for a discounted fee. They know the power of locking you in with subscription services, and this is a strong play on their part. Tesla also announced their self-driving features will soon be a monthly subscription instead of a one-time payment. Another genius move on their part.
Many, many old-school businesses have offered this, from newspapers to pest control. Marketing agencies love the concept of a retainer model, but what makes it really work is offering the right balance of product, price, and delivery of services that makes the buyer truly love what you’re offering, and become addicted.