Why Most Agencies Aren't Right For You

In this episode, Sebastian and Nathan discuss why most agencies aren't right for e-commerce brands. They emphasise the importance of identifying the problem you want to solve with an agency and being specific about the outcomes and expected ROI. They also highlight the need to consider the type of relationship you want with an agency and validate the culture fit. When vetting an agency, they recommend asking for the why behind their recommendations and an actionable roadmap. They also discuss the number of agencies needed and whether to choose an expensive or cheap agency.

Takeaways

• Identify the problem you want to solve with an agency and be specific about the outcomes and expected ROI.
• Consider the type of relationship you want with an agency and validate the culture fit.
• When vetting an agency, ask for the why behind their recommendations and an actionable roadmap.
• Consider the number of agencies needed based on the bottlenecks in your business.
• Price is not always synonymous with value, so evaluate agencies based on their technical proficiency and ability to provide value.

Chapters

00:00 Introduction
00:32 The Problem with Agencies
05:12 Determining the Support You Need
06:41 Defining the Supplier Relationship
09:01 Validating Culture Fit with an Agency
13:23 Vetting an Agency
23:00 Choosing an Expensive or Cheap Agency
29:57 Summary

Transcript

0:01

Welcome to the Blues Brothers podcast, the show in which we share the challenges, insights and triumphs that come with taking e -commerce brands from seven figures to eight figures and beyond and building the remarkable teams behind them. I'm your co -host, Sebastian Bench, and joining me as always is the brilliant Nathan Perdro. How are you doing? Living the dream, how are you? living the dream. Today we're going to be unpacking why most agencies aren't right for you. We're in an industry where there's a lot of skepticism, criticism, low MPS scores when it comes to marketing agencies. And personally, having talked with thousands of e -commerce operators now, I think a lot of agency client partnership failures stem from not thinking through the following question, which is what problem are you trying to solve with an agency? I really don't think operators spend enough time thinking through that question. And I don't mean you need to be spending three months finding an answer. I think a useful skill to learn is to think through unpack and critically appraise decisions and then make those decisions fast. Um, but what we usually say is, uh, operators partnering up with an agency. but a failure occurs because they weren't specific enough with the problem that they're hoping that agency will solve. And so that they're focusing the agency's attention in the wrong direction or the operator is focusing their attention in the wrong direction. And so that they're looking at the wrong problem. And so what I would suggest is working backwards. and reflecting on what are the biggest constraints on your growth. Do you have any thoughts around where to begin when it comes to putting your finger on the pulse of what are the biggest constraints in your business as an e-commerce brand? Yeah, there's a few different components and I think it also generally stems from the founders skill set as well. But growth of an econ brand really comes down to new customer acquisition and repeat purchase rates. And so acquiring customers profitably and then doing so through getting those customers back to site and to buy again. And so generally speaking, the constraint on most Econ businesses growth is going to be one of those two factors in the early stages. Usually the former before the latter. Now, There's a lot of agencies that service different purposes outside of that, then do have secondary play on effects. For example, a web dev agency, which you might want on an ongoing retainer of $500 a month is going to help with new customer acquisition. Is they're going to make sure that your website functions over time and that it's improving over time? But is it specific enough to solve new customer acquisition? Probably not. And then also when you start to look at the different agencies are valuable for solving new customer acquisition, I think that's where you need to get even more specific in terms of your business. Hmm. Yeah. So generally speaking, from our experience, especially the early stage brands that we work with, the biggest constraint is some derivative of customer acquisition, either new or repeat purchase. And I think the question that you should ask yourself, you said before really pertains to the founder skill set is why can't you solve that problem yourself? I think sometimes it's due to a lack of experience. and possibly a lack of fear of failure that they won't be able to run the marketing effectively to generate customers. Or they're so overwhelmed with the varying responsibilities that they carry. And so they don't have the time to learn that skill themselves. But I think you should in the very first instance, consider is this worth my time? handling the marketing and generating customers through marketing. I think from day zero, I really do think it serves you well to learn, to have exposure to that skillset and start learning skills because later down the line, it will serve you in being able to validate the agency that you bring on board to help with your marketing. But going with the decision that you can't solve it yourself, you don't have the time or you don't have the experience. then you need to get clear on what kind of support do you need. So do you need a better website because it's not converting? Or do you need better media buying? Do you need better creative? So ask yourself, what are the outcomes you're looking to achieve? What is the expected ROI? from that outcome and then what's the expected timeframe of delivery? Because that will then inform the specific skills that you're needing to find within an agency, the specific proficiency that they will have to offer you and... the level of support you need. So whether it's a one -off build of a campaign, maybe it's the setup and integration of your marketing platforms to your website, make sure there's a measurement piece there so you're actually tracking conversions well, or do you need someone part -time? like a freelancer, do you need someone full -time, which generally is definitely not the case, or do you need a full team? And that's where an ongoing agency partnership makes sense. A thing to add there around the sort of putting a finger on the pulse of what proficiency you need. Nothing pretty much, pretty much covered it. So now that you have clarity on what capability you're needing to find with an agency, you should then ask yourself, what's the supplier relationship you want? Unfortunately, the reality is most operators within the e -comm sphere are either worn down, because of past agency experiences or highly skeptical because of the nature of the industry, because of friends that have e -commerce brands that have also shared poor experiences or just what they've read online. And to tell the truth, I encourage the skepticism. I really do think you should have a degree of skepticism and a degree of hesitancy. throughout your conversations when meeting with agencies. But I do think that you shouldn't neglect the importance of considering the type of relationship you're after. Get very clear on that and be very upfront and direct during your agency conversations about what that looks like. So are you looking for a very collaborative, long -term partner to support you and build this thing together? Or... Are you really just looking for a supplier to get the job done so that you can then take over, maybe build, you know, build an in -house team and take it from there. And I think, um, you should be clear about that relationship. create a degree of friction during your conversations during the exploratory with an agency so that they know that you may not be the right fit for them based on your expectations out of a relationship and vice versa. So it's out of respect for them, but most importantly, it's out of respect for the efficacy of that partnership long -term. anything to add there in terms of validating or exploring culture fit with an agency. I think it's important for you to know exactly who you're gonna be working with within the agency prior to signing. I think a big downfall of particularly bigger agencies is that you are interacting with a highly charismatic sales guy. And... you then get sold on a dream by that sales guy and then you get moved to the actual team who generally speaking and this is going to be a huge generalization and tell me if I'm wrong here but if you're going to be working with a paid media agency who's incredibly technically proficient they're not going to have anywhere near the degree of charisma that that sales guy is and so you're going to get pushed to the people on the tools, the people that know what they're doing, the people that are going to be driving your business forward and increasing new customer acquisition. But there is going to be a disconnect from what you expected based on the people that you interacted with versus the people that you're now going to be working with on a day -to -day basis. So it's really important that you should be asking the question, who exactly is going to be on my account? And can I learn something about them? Can I learn what other kinds of brands they've worked on? Can I learn about how long they've worked in the agency? Can I learn about their experience before? the agency knowing all of these things before suddenly committing to an agency I think is really important for ensuring that you do have that culture fit. Hmm, for sure. I think results are number one. I think you do need to ensure that the commercial outcome is always the top priority. And so possibly you're not going to become best friends with the person you're working with. You don't need to be the same type of individual, share the same personality type. But I do think. It's important for you to make sure that the agency, maybe it's the salesperson, is giving consideration to who they would envision you are going to be working with. And then possibly even, it might even be useful to tell that agency, this is how I would describe myself as a boss. This is how I prefer to communicate with my staff. or this is the type of reporting that I find most useful so that they can know prior to coming on board, if everything else is a green flag, prior to coming on board, is there someone in that team that aligns well with the type of boss, the type of manager that that person will be reporting to? Um, and I think honestly, it's a, it's a really good sign if that salesperson or whoever from that agency is actually asking you for that information, or if you were to give it to them for them to actually take the time to write that down and pass that along to their internal team before any final decisions are made in terms of the staffing for that account. Um, because it shows that they genuinely care about the. relationship, which will ultimately, I mean, ideally transcend the partnership. So if it is a three month project that you're looking for an agency to deliver on, you really want the agency to set that up as best they can for success. And you can really support that by giving them the information, by setting the expectation and ensuring the agency has clarity on. who is going to be coming into their portfolio because it might be the case that you're not a good fit and that's okay because there are plenty of service providers out there who will be able to achieve or you would hope are able to achieve the commercial outcome you're after and they might be a better fit for you. So get very clear on that and do spend the time to have that conversation with the agency. Although it is tough and I do understand that you might be worn down because of previous conversations, don't neglect that conversation. I've got a question for you, which is how do you vet an agency? How do you make sure that let's say you know that new customer acquisition is your problem. That's going to be solved through a paid media based agency is your main acquisition channel is paid media. How should you approach vetting that agency to make sure that you're choosing the right one? Yeah, this could be our conversation in itself, but I think the most important thing is understanding the technical proficiency of the agency. So if it is a new customer acquisition problem, center your conversation, center your questions around validating their experience, generating new customers for brands. Ideally brands within your industry vertical, ideally brands of a similar scale. But you do need to test the technical proficiency of the people doing the work. Again, not just the founder who might be brilliant themselves, but the people that are going to be in the accounts every single day supporting you and driving the accounts forward. The best way to do that is through an account evaluation. Problem is most ad agency audits are very high level. They're usually very polished and sales-esque and they don't do a great job at revealing the true proficiency of their team. Now we obviously do evaluations and I've certainly got a few recommendations for founders in maybe even just asking the agency around their order process. But do you have any advice for on that, on that front in terms of if you're about to receive an order, what would you expect? Where would you direct that agency's focus to validate their technical proficiency against new custom acquisition? be number one, asking for the why behind the recommendations that are being provided. A really bad audit is an audit that simply gives you health scores. Hey, your search campaigns are six out of 10, your keyword targeting seven out of 10. This is a three out of 10. So there's a lot of opportunity. A good audit will point out exactly what's lacking. to produce those health scores? Well, your keyword targeting should be more broad. Well, your campaign structure should be more segmented. And then a great audit is going to give you the why behind those recommendations because anyone can say anything. What's important is why are you saying that? And what is the mental models? What is the proof? What does the case studies show? that means that you should actually make that change in the account. So number one, I would be asking for that. I would say every recommendation that you're about to give me in this audit, tell me why I should actually go ahead and apply the audit. The second thing that I would be asking is can you give me an actual actionable roadmap that I could go and execute internally if I didn't choose to move forward? So can you not just say, hey, you shouldn't use performance max? Here's why. But can you tell me, hey, you shouldn't use Performance Max, here's why, and here's exactly what we would recommend doing over the course of the next 30 days to transition the account. And so that technically I could go and take that and I could apply it myself. Because if an agency is willing to do that, number one, it unveils their technical proficiency in just being able to demonstrate a roadmap with actionable whys behind everything. But in addition to that, it also shows that they... have a, and I might be wrong on the exact word that I'm gonna use here, but they're genuine in a way. They have your best interest in heart rather than simply trying to get into a bidding war for your business. Yeah, I think, I think what it is, is it, because it means that you might take that order and run with it yourself. And for them, they're investing the time to give you that roadmap. By doing so, it tells you they don't need you. And so you can rest a little bit easier knowing. that you're not getting sold some crazy dream because they are so hungry. They are so in need of clients that they're just going to say anything to get you across the line. They will give you the roadmap. They will give you the blueprint. for you to run with it yourself because even after 30 days, you might see some improvements based on that roadmap, but there was a reason you went out to market for an agency. You do need support. And you're probably gonna feel pretty good about going back to that agency for a natural partnership to form if they gave away the blueprint with no expectations around a fit or around any sort of contract. I will just go back to what you said about anyone can just poke holes in an account. I think the, what will take you from giving or getting a great audit to an exceptional audit is context. I would personally find it a bit of a red flag if an agency was to offer me an audit. with zero preliminary questions asked because a lot of agencies have different strategies that perform effectively for that individual account, not all accounts are the same. And so I would spend the time making sure that agency asks you and knows the context around your priorities commercially. understands to a degree any decisions behind or any decision that informed the current structure of your campaigns and what you're currently optimizing towards prior to actually giving access or allowing them to perform the order because there's a lot of context missing and it's very easy, especially if they're a great marketer to poke holes in an account and tell you that you're doing terribly when it may not be the case. Absolutely. Another question I've got here for you is, as a D2C econ brand, how many agencies do you need? Again, ask yourself what problem are you solving for? Again, consider where is your highest form of leverage in the business? Can you do any sort of quick win CRO improvements onsite? Can you run the media buying? Can you mock up some creatives on Canva? Or do you have a friend who can possibly do it for you? How many agencies you need? There is no one answer. It really depends on what you're looking to achieve, what your constraints currently are, and what you can do yourself. Do you have a different take? No, I agree. I agree. It's highly dependent on what bottleneck you're trying to solve and where you believe the highest degree of leverage is and then pulling on that lever. I don't really see a need for most agencies to have, sorry, for most DTC brands to have more than, for example, two to three agencies. And if I was to get really specific as to what those agencies would look like at a certain scale, when you can afford to do so, when you have the free cashflow, it would be a paid media acquisition agency. It would be a content agency and it would likely be a retention agency. Um, because those are really the three biggest levers when it comes to scaling, uh, D to C Ecom. Now that's not to neglect anything else as well. Everything else is important and you can probably layer it into a degree, but. They're, in my opinion, the three biggest levers that takes a brand from seven to eight figures. How about a website agency on retainer? If you need it, I don't see, to be honest, like personally, I don't see why you would need it for a Shopify store. It doesn't really make too much sense to me. I don't know what kind of maintenance you require, but if you do require maintenance, if you're constantly making tweaks, then sure. But I think there's a lot of context needed there for me to be able to answer that question. Cool. Should I choose an expensive or a cheap agency? That's the last question we have here. a good I'll probably start it with a quote from Carson which is the most expensive agency is the cheapest one. Yeah. Yeah. you end up paying for all of the poor results that they drive. With that being said, how does an agency price? So where does pricing power come from, from an agency perspective? And I think it's really important that Econ brands understand how agencies operate if they're gonna go and start working with a bunch of them. And so... Honestly, I advise that you go and start to understand the agency model. I advise that you start to go and get a more granular understanding of how agencies scale, what the purpose of an agency is in itself, so that you can choose the right ones and so that you know how they're priced accordingly. With that being said, diverting from the question. Pricing power from an agency comes from number one, the amount of value that they can provide to you. It's a simple math problem. If we can make you an extra $100 ,000, we can probably price higher than the agency that can only make you an extra 50 ,000. That's number one. Number two is brand equity or reputation within the market. We might not drive 100 ,000, we might only drive 50. But if we have the reputation for being the best, if there's an understanding, if there's the equity for being the best, we could technically still price as if we're driving you 100 ,000. Now, arguably that's then gonna hurt our reputation in the longterm, yes. So this has nowhere near the degree of leverage as number one does, but it's still important to know that that exists. And the reason why it's important to know that that exists is because you can be doing number one, the agency can scale, build a bunch of reputation, and then start driving poor results and you catch them at the wrong time. And so this is the issue with most agencies that have 80 to 120 staff. is that you'll go to them out of the incredible brand equity that they've built. You get a Facebook ad from them every single day. And so you're like, okay, well, if these guys are running a marketing for themselves as well, if they've got all these awards, if they've got all these people, if they've got all this talent, if they've got all this brand equity and 195 star reviews, they must be incredible. They've got brand testimonials from... the number one brand in our niche that we wanna be who we're competing with. They must know, they must have got them there so they can get us there. But what you have to realize is that if they've scaled that quickly, there was probably an erosion in service delivery. And as a consequence, they're able to price as if they're gonna give you that value, but they're not actually going to deliver. So when I say a cheap agency is the most expensive agency, there's a degree of nuance within that, which is that, understand pricing power based on brand equity within the market and understand that that doesn't necessarily mean it's a direct reflection on value being provided. There are very large agencies out there that are pricing in the top 5 % but they're not delivering the top 5 % of value. So pricing is not synonymous with value being delivered but it's a good indicator. What are your thoughts on that? Yeah, I totally agree. And it makes sense. I mean, it's just like with anything. It's an expected return. And the greater their brand presence, the lower the perceived risk is. But I would say don't sort of don't ignore the little guy, the the possibly one man band who's been running paid media. for the last four years throughout university. And he is sharp. He is in all the Reddit forums, he's in all the community groups, and he only has a small handful of clients and he's very hungry to deliver and earn your trust. I think there's a separate conversation, a separate conversation you need to have with them around what they're looking to build, what their processes are like, what their capacity is like, and make sure that they're rock solid. But... Just a kind of a side comment. Don't ignore the little guy that you haven't seen online that you haven't received a Facebook ad for who has just been sharpening their craft for the last four years. Last thing I'll say is when it comes to... Gonna have to pause here. Lost my train of thought, I know. The last thing I'll say is around, and I know I'm kind of beating the drum over and over, but I think it really does again, come down to expectations. You want the partnership to be commercially viable, but let's use a, again, a new customer acquisition or a traffic agency. Sometimes what you're after is not just good media buying. Sometimes as a relatively inexperienced Ecom operator, you need support, you need some advisory, you need some education. And so be careful not to conflate the cost of management to the value being provided. because if you do need that education piece, if you do need advisory on a wider e -comm level, but you're working with a paid ads agency who can actually offer that advisory and that education, it may not be commercially viable, dollar in, dollar out for the first three, four months, but you might profit greatly in terms of information and support. And so again, ask yourself what you're needing from an agency. and that will help you understand is an expensive agency actually expensive for me based on what I'm looking for. I agree. Any last comments about why most agencies aren't right for you? Now, I think we covered a lot of it. Yeah, at the end of the day, when you're looking for an agency, you need to be number one, asking yourself the question, what problem am I trying to solve here? Why am I even going to market to find an agency? And can this agency solve that problem? And then number two is going through an extensive vetting process, which is that understand... The agency model is one that anyone can get into. There's an incredibly low barrier to entry, unlike comparatively SaaS. To start a software product, you have to invest at least $50 ,000 $100 ,000 upfront just to make the product. And that's really cheap. Comparatively with an agency, you could start one today. You could stop watching this podcast, you could go, you could create an ABN and you've started an agency. And so because there's such a little barrier to entry, there's just thousands, tens of thousands, hundreds of thousands of agencies out there. And so you have to be careful when you're playing around in the space. You have to understand that a lot of these people might not have even ever done any paid media. and they just want to sell the service and maybe offshore it. A lot of these big agencies don't actually have in -house teams. Funny enough, they're white labeling other agencies that are out offshore as well. I could name quite a few that do that. And so get an understanding of how to vet an agency before you actually even go and start looking at engaging with one. And ask the core question of why do I need them? What problem am I trying to solve? and then understand pricing power within the agency model and how it usually is indicative of value, but that there are exceptions to the rule. Absolutely. That was today's show. For those of you listening, grateful for your time and catch you soon.