The Path to Agency Scale: Product, Sales, or Both?
David: Mike, I think we are both looking forward to your favorite holiday, Thanksgiving, this year. I feel like I can really use a couple of days of doing nothing right about now. It has been a busy fall season.
Mike: Super busy for me, having sold two businesses within a few weeks of each other PLUS speaking plus plus plus. But I am particularly looking forward to this Thanksgiving as I will be eating Thai food with my “children” in Bangkok. All of that eating is in preparation of an eight-day bike ride down the coast.
David: Yes, you certainly have a lot to celebrate! And it sounds like you’ll be doing so in style.
Before I dive into my turkey, and you carbo-load with your Pad Thai, I’ve been thinking quite a bit about our product mix at ThriveHive recently. And in particular the segmentation of the various offerings of our newly combined GateHouse/Gannett company by customer budget.
It has surprised me, frankly, that so few agencies seem to go to market with the essential digital marketing bundle for local businesses you and I proposed exactly two years ago. In re-reading that article, I’d still give the same advice today and with even more urgency based on the rollout of Local Service Ads.
I’ve seen very few agencies going to market with a similar offering in the interceding two years.
Mike: As I recall, we spoke about a bundle that included Website, Citations, Email, review solicitation and management that could be resold in the $300/mo. range. Is that what you are referring to? Something that would bring in $3600 a year with a probable lifetime value of $15,000 or so.
David: Yes, exactly. Ironically, ThriveHive is not pursuing email heavily (I’m still a huge advocate, of course), but one of the reasons I joined the company more than a year ago was a close philosophical alignment on the viability of that bundle.
After a lot of behind-the-scenes platform work this past year, we will be in market with an integrated offering across the other spokes, centered on Google My Business as the hub. (We also layer in human expertise at every stage with our Guided Marketing program.)
And yet as we’ve been aligning the pieces of this bundle, it has surprised me that there’s still so much “greenfield” here.
Is that because the model is broken, or is there another reason?
Mike: Sales is always the hard part. I don’t think the model is broken, but I think that most agencies have no idea how to sell. They know how to build a website or do SEO but often have no mechanism to scale sales.
David: Interesting. So, scaled sales organizations don’t “get it” from a product standpoint, and arguably good “product” agencies just can’t scale. Might it be the concept of scale, not just within sales but across their business more broadly?
Our bundle requires minimal (easy) work beyond setup, across a somewhat large number of customers to be successful.
The traditional agency “bundle” requires a lot of hard work, whether it’s ad writing, bid management, landing page optimization, full-funnel analytics, or link building, but across a handful of high-paying customers.
Perhaps there are just more agency owners who prefer the traditional, more bespoke model even though it’s much harder, less predictable work. (And also for a less-diversified client base.)
Mike: Or maybe they overvalue the work that they do for the client because it is so manual?
David: Well, that’s been my point all along with respect to Local Service Ads. Google is asymptotically devaluing that traditional Ads setup and campaign optimization to zero.
Phenomenal paid search agencies can probably squeeze a few more conversions out of the same budget (given enough data around which to optimize), but unless you’re working with tens of thousands of conversions, by the time you factor in a reasonable campaign management fee, Local Service Ads are probably going to perform just as well.
Smart Campaigns are designed to do the same thing (though I gather, at this point, with less demonstrable success than LSAs).
Mike: Even in organic, I saw incredible benefits accrue to a business by doing just the basics of a Google My Business local campaign. A super simple GMB website, a few posts, some reviews, and only a few links and we saw their conversions skyrocket.
The owner viscerally felt the impact when folks would walk into her restaurant and, not being able to speak English, point to pictures in Google Maps to order something.
I am not in the agency world these days, but it certainly seemed like a great entry-level product that could be sold for several hundred dollars a month, provide real value, and offer a gateway to bigger and better things for an agency. And I spent less than an hour a month on it.
David: I certainly hope you are right! It sounds like the successful fruition of our 2020 product roadmap.
It’s interesting to me to see that some software companies are taking a stab at this bundle themselves — though expecting their small business customers to figure out how to put all the pieces together themselves. GoDaddy and Constant Contact have both released similar offerings in the last couple of months, and even Mailchimp seems to be getting more and more in the landing page / website game, at least in ecommerce.
Can software companies fill this gap on a DIY model?
Mike: Darren Shaw at Whitespark has rolled out a $299/mo Google My Business package that is certainly a nod in that direction, and he understands both selling and the value of monthly recurring revenue. It will be interesting to see how he is making out with it. But he is controlling both the product AND the sales.
David: Noticed that. It’s exactly the kind of Do-It-With-Me human/software blend — in the budget sweetspot of the Total Addressable Market of small businesses — that you and I are talking about. Darren has always been a software guy, though, so he understands scale intuitively.
Mike: Most agencies, despite the fact that they need to learn how to sell, never do. And I think the real question is how do you find agencies that can in fact sell these packages or perhaps learn how to sell them.
At GatherUp I see the 80/20 rule (or even the 90/10 rule) applies. Only a very small percentage of agencies have figured out how to value-add our product at some scale. And we found those by allowing every agency in and they ultimately self sorted.
There has to be a more efficient way to sell this package?
David: We have tried a few different sales approaches with respect to direct customers thus far, and we have started to home in on an optimal approach over the last couple of months. The real opportunity for us, though, lies in the sales force of the (now-combined) Gannett-GateHouse newspaper markets. And that is a channel that may take us considerably longer to optimize!
After more than a decade in local search, David Mihm now serves as VP of Product Strategy at ThriveHive, leading the direction of the company’s search-related product offerings. He’s also the Founder & CEO of Tidings, an email newsletter platform for small businesses that leverages their everyday social media activity, and his own weekly newsletters, Minutive and the Agency Insider. He’s the former founder of GetListed.org, Director of Local Strategy at Moz, and along with Mike, he’s a co-founder of Local University.