Flip the Switch Episode 34: Digital Agencies 2018

SOPHIA: Today on Flip the Switch. Apple has investors worried after posting a dismal Q1. And Jeff Bezos has decided it’s time to increase the annual fee of Amazon Prime.

In big telecom news, Sprint and T-Mobile have agreed to merge. And the founder of WhatsApp decides to exit Facebook.

Today’s main topic is focused on the current state of digital marketing agencies and how clients are looking for less of a vendor and more of a partner.

Let’s get into it.

01:00 AUSTIN: Welcome to Flip the Switch presented by Power Digital Marketing. This is episodes number 34. We’re happy to have you.

01:06 PAT: 34. Is that Shaq when he was on the Heat?

01:07 AUSTIN: Nope. Shaq on the Lakers.

01:10 JOE: It was LeBron James.

01:11 PAT: Oh yeah. That must be it. At any rate, we’re running out of athletes but we still do have a lot of good episodes left including this one.

01:17 AUSTIN: Oh yeah. We hope you all have been doing pretty well. I know it’s been a week or so since we put one out. The last thing we had was a great interview, which I think we all really enjoyed. And today though it’s just going to be Pat and I and the rest of us, just chatting away. We’ve got some great news to cover, and then of course, our main topic. So why don’t we got ahead and jump into our business news and trends.

01:34 PAT: Absolutely. So the very first piece that we’re getting into today–Apple. So this came out on Bloomberg earlier this week, but Apple’s earnings report is basically going to confirm what investors have been worrying about since the slide that kind of started after the holiday season. And it’s basically that the iPhone X or iPhone 10–whichever type of person you are–did not live up to the hype.

01:56 AUSTIN: It did not at all. And I think this a bit of surprise just in terms of the general direction that Apple has gone. Every single iPhone has been a winner and it’s kind of a guarantee. And I think the way I feel about this is maybe they’ve gotten a little bit too comfortable. And expecting that their customer base will just re-up.

02:15 PAT: Yeah, exactly. So we’ve talked about this a lot. Apple has the unique situation and benefit of knowing that at any time, if they release a product, they’re going to have tens of millions of people on either the pre-order list or the wait list. People that have the Apple care plan… whatever. That can just upgrade to the newest piece of technology.

There’s going to be demand for it always from a core group of people.

The problem becomes how much that can disseminate into other aspects of the population, right? So I think the key for Apple, especially in a smartphone market that’s getting consistently more saturated. You have competitors like Samsung. Even the Google phone.

That it has similar functionality to the technology that Apple once pioneered. So this is another scenario where we’re seeing a first mover in a market place starting to slip a little bit in terms of their grasp of their market share.

03:04 AUSTIN: It just seems like what Apple did with this most recent iPhone is go a little bit away from who they’ve been in terms of the wireless aspect. So that was a big thing for the user base. There’s always this connection between a wired headset and the phone. And then where you plug it in.

And I think taking that away has had some pretty negative effects. When you look at the market analysis from what they’ve done with their customer base–that is one of the biggest pain points that customers have. Is that they are not acceptant of the new headset, and the way that the phone is now wired. Where you have to have multiple plugs, just to use 2 things at once.

And that alone is pushing people in a different direction, or just causing them to not buy the new phone. And keep their old device because they simply do not want to have to choose to go with a hands free situation.

03:53 PAT: Yeah, so I think that there’s that. There’s the actual technological and tactical aspect of it. I think another thing we saw though with the iPhone X that was different than any other device that they had released was that the price-point was absurd. The price-point was $1000 for a phone.

And I think for the first time, Apple is realizing that they can’t just create these high price points, banking on everybody buying it. And that what’s we’re really seeing. And that’s going to dictate their strategy moving forward.

Looking at this article that was posted on Bloomberg, we can see that they’re planning on releasing a lower priced iPhone X. And they are saying that that launch itself could move up iPhone’s sales by 5% in a year.

And this is actually Gene Munster. He’s the founder of Loop ventures. I think they’re a VC firm out of the Silicon Valley area–saying this. And he’s a long-time Apple analyst. And he does say though that the caveat… he warns that the days of the 15% annual iPhone growth are over.

And that really confirms kind of what we had talked about, is that people are really beginning to value the technology a little bit more. And they’re not going to just be blindly brand… I guess they’re not going to have blind brand affinity, like they might have in the past.

05:05 AUSTIN: Yeah, and I think you’ve seen Apple slip across multiple product offerings lately.

05:12 PAT: Apple Home.

05:13 AUSTIN: We’ve talked about the Apple Home. Which it may seem like a small thing because it doesn’t drive that much revenue towards their bottom line, and it is not a product like the iPhone. But it’s just a sign of a company that’s slipping up and maybe not understanding their customer base as good as they once did.

And they’re leaving big gaps in just the various products for their competitors to fill with other products themselves. I mean, just price-point wise. They’re just starting to create a massive gap between them and the rest of their competitors.

Which they want to be seen as premium, but at some point you become almost luxurious to the point where you drive away your customer base.

Which is just a lack of understanding of who they are and what they can afford.

05:54 PAT: I agree. And I think that this also comes down to new leadership. So when iPhone sales typically saw the most growth and when Apple technology saw the most innovation was when Steve Jobs was CEO and at the helm. And he’s a mind that will never be replaced in the world of tech. He’s a visionary.

But you have Tim Cook comes in. He comes from a little bit more of tactical role. He was Chief Operations Officer. And I think that what we’re seeing–I’ve tried to break it down a little bit–but really I think kit’s the difference between Steve… Apple consumers are used to being told what they want in a product. Because that was something Steve Jobs was very good at pitching.

And I feel that with Tim Cook what we’ve seen is a lot of, “Why don’t you tell us, what you’d like?”

And I think that that’s something that Apple consumers are just not really used to. And the product releases as of late just haven’t hit the mark for that reason. So there’s a lot that’s still going to be coming out about this. We’re going to be continuing to follow Apple trends as we go here. But again, something very interesting and kind of confirms some of the conversations that we’ve had earlier.

06:55 AUSTIN: Definitely pay attention to the second quarter. They’re expecting a 15% increase year-over-year in revenue. Which is going to be very pivotal. To make sure that they hit that. And then they get that share price that they want.

So definitely keep an eye on Apple and see what they do sales-wise.

07:11 PAT: Absolutely. Cool.

Moving into the next piece of news here. Amazon Prime. Another one of our favorite topics.

07:16 AUSTIN: So Jeff Bezos is at it again. As he continues to take over the world, he’s deciding to charge people more for the product that’s made him such an icon and Amazon such an iconic platform of retail and e-comm. Our understanding is that he’s moving from the $99 right now for Amazon Prime annually to $119 now. So it’s about a $20 price hike. And what’s the deal with this?

07:44 PAT: So I think this is a little bit two-fold. But it fits Amazon’s game plan. Any time you see Amazon going into a new market or doing anything that’s a new venture, their first objective is to seize market share. And that’s what we’ve seen.

And Amazon Prime was a big catalyst for that. And once they were able to do that, they continue to raise the prices. We saw them do that with Whole Foods. We’ve seen them do that in the retail space a little bit.

We’re seeing them come in, undercut competition, seize market share and then increase prices to help with their margins.

And, you know, Amazon Prime is the biggest driver of recurring revenue for Amazon. It just is. I think they passed 100 million subscriber count 2 weeks ago.

08:25 AUSTIN: That’s right. And it looks like–in the past they went from 79 to 99 which to them was really cheap. So that was almost economical is what a couple of analysts are saying. So that 79 to 99 gap was honestly just to keep their revenue on track for pacing on what they need to do for growth every year.

And now this bump is a little bit different. This seems to be a little bit more advantageous for them. They don’t necessarily need to because they have the demand. But they’re just looking to grow… of course, their revenue. And then they do see that their customer base will react fine to this. They will take in that cost and be okay with it.

09:03 PAT: Because it’s still worth it, if you really think about it. It’s still worth it from the consumer’s perspective. And when you’re paying on an annual basis, you kind of forget that price hike. If they hiked the price even by let’s say, $5 a month for every month. That resonates more with a user because they have to make that payment 12 times in the year for it to be completed.

09:19 AUSTIN: And it just says so much about what Amazon has become in the last 5 years, even. That they can continue to increase their price and feel really good about it. Like, there’s not too much of a worry.

Where with Netflix, that’s not the case, right? They’re definitely been a little bit skeptical. They are doing that but they didn’t do it for a long time. Because they were so worried.

And something like Spotify. Another company… it’s going to be very difficult for them to raise their price.

With Amazon, they’re not like them. They have such a strong hold on the market who uses their product and loves them as a company that this won’t necessarily affect them.

09:52 PAT: And I think this is interesting too. Because we talk a lot about the new ways and the new verticals that Amazon wants to get into. They want to get into smart-TVs. They’re going to be partnering with Best Buy for that. They want to get into the international markets. They’re already launching in China and other highly populated Asian countries. That’s going to extend through Europe as well.

And they need capital in order to be able to do that. And Amazon estimates if you take about 100 million Prime subscribers, multiplied by that $20 price hike, that’s 2 billion dollars in incremental revenue that they can use to achieve those goals. So again, what they’re going to do is reinvest that money into the company to continue to seize market share. Grow that user base at the higher price-point. And maintain market dominance which is what we’ve seen for the last 5, 6 years already.

10:36 AUSTIN: The game plan with Amazon for the next 1 to 5 years is simply to take over the globe. From an e-commerce standpoint. That’s what they see. They want to drive away Ali Baba, right? China’s biggest e-comm, online warehouse type of situation. Wholesale powerhouse. And they see that as their biggest competitor now. So they’ve pretty much dominated the US market from a standpoint. There’s no one larger than them in terms of what they give you. And their subscription based model is the real reason for that.

So now they’re going to take that international. Will that resonate with an international audience? To be seen. But we’ve gotta think that everyone’s going to feel the same way that we do as consumers that I’m getting a lot for not that much. I’m cutting down on the amount of time I wait for a product. I’m cutting down on how much I pay for that product to show up at my door.

And then the price-point of the actual product is much cheaper than anywhere else I’m seeing it.

11:29 PAT: True. And you’re cutting down on how much time you have to spend browsing. If you’re online shopping from online retailers that are not Amazon, you’re going to be clicking around to different websites–finding the best offers.

Amazon has the widest SKU variety in the world available right at your fingertips with the one-click checkout. So all of that kind of comes together to make this perfect scenario for Amazon, and they’re really doing a good job of capitalizing on it. I think that really what is going to be the test of Jeff Bezos in particular, but Amazon’s ability to execute in new markets isn’t taking over verticals within the United States, but is going to be gaining traction and market share in international markets.

12:09 AUSTIN: Absolutely. So look for Amazon to continue to take over the world, by increasing their Amazon Prime subscription based model. As always, Jeff Bezos is up to it.

12:19 PAT: He is up to it. All right.

Next piece of news here. On CNN money it came out this week, T-Mobile and Sprint are agreeing to a merger.

12:27 AUSTIN: This is huge.

12:28 PAT: Yeah. This is very, very big. So if this were to go through, the agreement would leave only 3 major wireless carriers in the US. And is going to be kind of worrisome for anti-trust regulators.

12:39 AUSTIN: I think so. I really do think so. It really minimizes the consumer’s ability to choose. We don’t have much… and there’s also the point the Sprint and T-Mobile, not the best service. Really, not. And I think that that’s a big issue here too. Is 2 of the companies that maybe are on the back burner of maybe what people choose to go with–of course, AT&T and Verizon are the big ones. Now they’re trying to combine forces to basically become as large as the other two competitors.

But that doesn’t make them better connection wise. Just because you’re combining your two connections doesn’t make that a better connection. So I think with this one, it is a bit worrisome from an anti-trust perspective. And then from a service perspective.

Like what are you really going to be able to guarantee for your customers at this point?

13:24 PAT: Exactly. And I think that there are some definite concerns from an anti-trust perspective with this. If this were to go through you would have T-Mobile–that’s going to be the name–so T-Mobile and Sprint, the merger is going to be just called T-Mobile. And then you’re going to have Verizon. And I believe AT&T.

So if you look at it though, T-Mobile and Sprint I think are two of the smaller wireless carriers, like we were just talking about. Even when they combine forces, they’re network capabilities are not going to be able to match those of the other 2 in the market.

13:57 AUSTIN: Yeah. And I think that this is a common them in the Trump era of what we’re seeing. And this is big business. And so just to put this in perspective and context, during the Obama administration, there was an attempt for these two companies to merge. This was back in 2014. It did not go through. It was stopped under the Obama administration.

Now, today, in Trump’s administration it’s going to go through. It’s been approved and I think that it’s just pending a little bit of regulatory situations. But it’s looking really good. So that just shows you where we at from an economic standpoint and what are we going to do in the next 2, 3 years as a country. And the big emphasis is really on the tax dollars.

So this must be a very good tax situation for the government to make a good amount of money back.

14:41 PAT: Agreed. And I think that really the only that they’re going to face in getting this cleared is going to be convincing the Justice Department that circumstances in the world have changed so drastically since the time of the Obama administration to now, that only 3 providers is necessary. What is the point of having a free economy if it’s going to be consolidated by 3 powerhouses?

15:02 AUSTIN: It’s a little bit of a capitalist take on our entire market. Which hasn’t really been the case in the last 8 years. I guess it hasn’t been as capitalistic. And I think with the influx of cash into a lot of large American companies that are doing very well at this point… And our economy has really rebounded. That makes that a little bit more okay. Where the administration is saying, “We can allow capital to take its place and be its part in a natural standpoint. Because we’re in such a healthy position as an economy right now.”

Whereas on the flipside, maybe in 2008, 2009 you really wouldn’t want to do this as much, because it might have profound effects on the entire market. The entire cellular market. Or maybe the longevity of the market.

So I think that this is a pretty murky area. And we truly don’t know how this is going to play. Probably we won’t know for 5 years to 10 years, honestly. And to how this is truly going to affect the market.

And from a consumer standpoint, the product that we’re getting. Cause they’re going to need to develop… redevelop pretty much their entire offering of a company. Of what kind of phones they give us.

16:08 PAT: Yeah. I think there will be a benefit though. So we’re talking a lot about the negatives. Market consolidation, less options for the consumer.

On the flip side of that though, one point that you raised up… more tax dollars going to the United States to help build infrastructure. But then also, right now we are… like China and South Korea are the leaders in 5G development. That’s what this article is stating and that’s based on a report from a firm called Analysys Mason–it’s a research firm. This merger is going to… in order to sustain this they’re going to need to hire thousands of people. Which is going to help with the unemployment rate. We talked about that new era of corporate social responsibility where you’re supposed to help with economic aspects, kind of like inflation rate and unemployment rate.

So there are going to be a lot of people from the United States that are hired. And what they are trying to achieve is make the United States the leader in providing 5G connectivity. And I think that that’s a good mission statement, but again, it’s going to come down to how it’s implemented and how it’s actually practiced. To see whether or not this is just a bid to consolidate market share and mitigate losses. Or if it’s really trying to achieve that 5G connectivity goal. And that’ll remain to be seen.

17:14 AUSTIN: Yup. And then just another quick note. They’re not the only ones acquiring in a telecom space. AT&T is in talks to acquire Time-Warner. So that’s going to be another massive merger.

I know on the other side, also we have Disney and Fox merging too. That’s pending. 2019 that might go through.

So a lot of big companies that you and I know are becoming one entity. Very interesting time as an economy and then just for business.

17:40 PAT: Yeah, totally. I think if you look at kind of the broadcast world too you have a lot of networks that are going to fall under that Disney umbrella also. Right, you have ABC, ESPN…

17:51 AUSTIN: This would be a really great whole episode for us to do. I think that’s a main discussion, because I really would like to dissect this. Because you think about Disney, and you think maybe animated movies. But it’s not. It really isn’t. It’s literally media.

18:01 PAT: It’s a conglomerate.

18:02 AUSTIN: They own an entire section and maybe very soon all of it… is media and entertainment. Hold your thoughts on that one…

18:09 PAT: Save the gold for the main topic, shall we?

All right, moving on to our next piece here. We have news that came out this week that the WhatsApp co-founder is leaving Facebook. Another piece of fantastic news for Facebook. Of course, I’m kidding about that.

So this guy–his name is Jan Koum–he is the co-founder of WhatsApp. He said in a Facebook post–ironically enough–that it’s time to move on from Facebook and do things outside the technology world. Interesting tactic.

A few things that he wants to get into are going to be living the luxurious lifestyle a little bit. He also wants to spend some time just with his hobbies. He likes to fix up cars. Things like that.

But what I found that was really interesting about his statement… he didn’t really give a reason why he’s leaving.

18:52 AUSTIN: I think he… I kind of looked around LinkedIn a little bit. And there was somewhat of a quote it looks like from him that says the over popular messaging services strategy and Facebook’s attempt to use personal data and weaken its encryption was possibly a reason why he did this. So that was from a report.

And so honestly, I think this was just a good time for him. He’s like, “All right. There’s a lot of shit going down at Facebook that I really don’t want to be a part of. This is a bad time to be at this company. I’m super-rich. I sold this company for 19 billion in 2014.” That was 4 years ago. It’s probably valued at such… his shares–which is what he would have been issued–is worth so much. So this guy… you’re kidding me. This is it. He’s living the dream man.

19:36 PAT: He is. And I think that this is the right time for him to tap out. We’ve seen a lot of obviously, scrutiny with Facebook. The Congressional hearing went as it went. A bunch of Congressmen trying to understand how the internet works. And Mark Zuckerberg explaining it to him in his best human being impression.

But at the same time, I thought that it was interesting timing. Because this is amidst a lot of other news that people are exiting Facebook because of ethical concerns. And I wonder how much of that…

I think that there’s 2 reasons why he would leave. I think that obviously there’s a lot of turmoil. And the future of Facebook is a little bit murky, a little bit uncertain. There’s still pending some kind of FCC sanctions that if come down could total 10s of billions of dollars in damages that are going to have to be paid out.

And second of all I wonder how much of this is tied to an ethical dilemma that was exposed from the Cambridge Analytica data breach.

20:28 AUSTIN: And we know Cambridge Analytica was just shut down this week.

20:32 PAT: Yeah. They’re fully shut down.

20:34 AUSTIN: Yeah, I don’t know if anyone listening has a little bit more information on this. I don’t have an article pulled up, but just my understanding is they’re owned by another, larger company. And that larger company just shut their entire division down. So Cambridge Analytica is no longer.

Which, of course, what else would be the outcome of this? You’re now known as the company that exploited hundreds of millions of individual’s private data. And now created this massive issue in another country that you don’t work in.

So there you go. That’s the outcome.

21:04 PAT: So that’s a reason.

21:05 AUSTIN: The ethical dilemma is the thing to focus on here. The guy’s rich and he’s going to leave the company, but think about Facebook as a whole. Which you’re doing and saying, “Why are so many people leaving?” And this issue, will it go away? And are they going to fix it?

Because clearly the people inside the company are not okay with that ethical dilemma of the data breach, and it poses a long-term issue.

21:29 PAT: Yeah. And I think that it’s more of a vote of… it’s like staying at Facebook is a vote of confidence. Thinking they’re going to figure it out, and everything’s going to be fine.

And the fact that people are leaving amidst what they’re calling ethical concerns, well I think there are a lot that probably are. I think people are also seeing this as an opportune time to get out. Because they don’t think that Facebook is going to figure this out in the right way.

And so it’s going to be interesting to see how Facebook can rebound from that. Side-note, we did see that Facebook is going to be releasing a dating app. That’s like Tinder. So, again, Mark Zuckerberg who just found out what emotions were last week…

22:04 AUSTIN: Really?

22:05 PAT: Yes. Is going to be releasing a dating app on the platform.

22:08 AUSTIN: Does anybody know what it’s called?

22:09 PAT: No.

22:11 JOHN: It seems to be that he’s really starting to like emotions.

22:15 JOE: I think it’s called Human Love.

22:17 PAT: He’s starting to love in human way.

22:19 JOE: It’s going more in the direction of actually exercising those emotions.

22:23 PAT: It’s crazy. AI man.

All right. But at any rate, we’ll continue to bring you guys those updates on Facebook. The story is going to unfold. Did you find something Austin?

22:29 AUSTIN: No. I was trying to get the name of it. But they’re saying that the dating app just looks a lot like Hinge, which is another dating app I guess. So they’re just stealing…

Oh, what do you know? Zuckerberg’s stealing other people’s ideas again and just making them better.

22:42 PAT: Yeah, the Winklevoss twins make that one too?

22:48 JOE: Anyhoo.

22:50 PAT: Yes. Anyhoo. So we’re going to be going into the main topic now. What we wanted to dive into with you guys is a little bit of a current state of affairs of the digital marketing landscape. And agency life in particular.

What we’re seeing… and this came out on Ad Age this week, a lot of data is showing where the demand is leaning and how those agencies are performing. And what I’m talking about specifically, is that growth is slowing a bit in terms of your service line agencies. You have agencies that just execute on the work, and we’re seeing that growth rate start to stagnate after seeing a big boom in the last few years.

But where the agencies that are succeeding are doing well. And this is evidenced by how they’re hiring–are when they are consultancies.

And we want to dive into why that’s important, and why when you as a business owner are vetting agencies, you need a consultative partner, and not someone who’s just going to do what you say.

23:41 AUSTIN: And why we’ve ended up here, at this point. And why these consultancy type agencies are the ones winning out now, is a lot of bigger brands that are investing a lot of capital with agencies, they’ve been to 2 or 3 agencies at this point. They’ve established themselves digitally, because all their competitors did in the last 5 years. Which has become one of the biggest things that a brand needs to do to be relevant in this day and age.

So they most likely started and knew that they needed someone to do the production. They didn’t really understand what the work was. And why they needed it. Except that everyone else was doing it, so I have to be a part of it.

So now we’re 5 years removed from that, where it’s not new to them. They understand the digital frontier and they also are wanting to keep up with what their competitor’s doing. Cause their competitors have gotten a lot better at it too. So at that point they’re looking for these professionals, these individuals. This agency that can really dictate the general direction of their entire digital marketing strategy. It’s no longer about, “Oh, I just need a little bit of SEO done.”

It’s “What is my SEO going to do to drive new business for me in this year and in 5 years? What is my long-term goal? And you as an agency need to tell me that.”24:50 PAT: Yeah, exactly. And I think that it comes down to a few things. But the biggest to me is the need for your agency to understand business. You can’t have an agency working with you on your marketing efforts, just driving towards whatever you tell them your goals are.

You need to have an agency that knows how to leverage the data they’re accruing from their channels to create new strategies that are business-wide. And what we see a lot too–especially with lead gen. clients, let’s say–you have to be very in tune with the sales process. You need to understand how the sales cycle works. What lead time the sales team needs. What the cadence of follow-up looks like. How to navigate a CRM. What a qualified lead looks like. What an SQL is.

Because if you don’t know those… what average order value is… Because if you don’t know those things, you’re not going to be able to provide any real value. And you’re not going to be able to optimize your channels–the tactics. Based on the information that you’re getting.

25:45 AUSTIN: And when we’re talking about these agencies that are getting “fired” so to speak, it seems to be the ones that are the typical ad agencies. So they don’t bring a lot to the table besides maybe creating your ads, and then curating and managing your ad network.

But for a company that’s real dollars and cents every single day. So they’re probably getting fed up with those 2, 3 years where maybe they aren’t seeing a ton of growth, but they’re seeing the cost on a daily basis.

And where a digital marketing agency consultancy service can kind of come in, is you really create a massive cushion for yourself if you’re an agency. If you have a plan of attack that’s coming from a lot of different ways.

So you’re not just an ad agency, right? I also am going to develop your entire social strategy. I’m going to do a full web development redesign that’s going to take 6 to 8 months. I’m going to curate an entire SEO strategy that’s site-wide.

So you have all these different offerings, which makes you much more of an asset to this client than just your typical ad agency.

26:44 PAT: Right. Because you also have a strategic understanding of how the tactical channels need to cooperate with one another to achieve overall business success. And that’s the biggest thing.

And here’s some numbers for you guys too. So we can see the consultants are up. Madison Avenue is down. So the biggest agency companies–like legacy agency groups that are in this index that was found by Ad Age. They declined by about .1%, right.

That being said, the five major consultancies and tech firms including Deloitte Digital. Price-Waterhouse Cooper Digital Services. IBM IX. They surged by 32% in 2017. 32%.

And that’s because the market is dictating the need for consultancy and not just an agency.

And I’m a firm believer. You can’t put a premium… You can’t have a price ceiling when it comes to the agency that you’re contracting. You know, everybody can do PPC ads. Everybody can do SEO.

but only a select few agencies can do those in a way that are going impact your business, because if you’re a business owner, you need to understand how that’s happening. You can’t just look at click-through rates and conversion rates and think things are fine.

27:58 AUSTIN: And as an agency, it’s our job to explain to you the client on what our impact is. And how it’s changing your business.

So as digital specialists on the digital frontier, it truly is our job to educate you. So if your agency that you’re currently with is not telling you where you’re at as a business, as a whole. How your entire business is doing and what their impact is, then that’s not a great fit. They’re not doing they’re job. Because you’re hiring an agency to be a specialist on this front and dictate business strategy, not just be this vendor.

28:33 PAT: Exactly. And it comes down to a few different things like we’re talking about. I think the biggest thing that an agency can consult about, and offer assistance from a consultancy perspective. Is letting you know what audiences are performing the best. Because that could be a very good indicator as to where you should be focusing your business as a whole. Not just on the digital side.

We’re past the age where people that are on the internet act completely differently than people that are… that you deal with in person.

People that your cold prospecting on the phone, have the same needs and wants and a lot of the same demographic traits as the people that are innately attracted to your business online.

29:12 AUSTIN: And the agencies that are doing well… These consultancies that we’re talking about that are doing very well, are ones that are well-positioned to talk to C-suite individuals. So whether that be a CEO or a Chief Marketing Officer of a company, you need on your digital team someone that can go nose-to-nose with them. And understand what they’re going through in their shoes. And how their trying to understand their entire business, and not just this small sector or a service line.

And those are the agencies, the consultancies that are sticking around. And having their business grow. They’re able to understand where a CEO is coming from with trying to decide where to take their business. And you have to be empathetic to that, and then also you need to come to that guy and go, “Hey, this is the game plan that you need to look at for your business to grow.” Not just be like, “I will get that done.”

30:00 PAT: Right. And you’re not there to just tell it like it is either. You’re not there to just be like, “This exactly what we’re doing. Buy in or not.”

You’re there to say this is what we through data have found to be the best course of action. Let’s talk about it and make sure that we are all aligned on it. And make sure that we are all moving in the same direction. Because, yes, we’re experts on the space. We understand how to leverage the insights we get from our space to help with your business goals. But you know your business, and you know your industry better than a lot of agencies ever will.”

So that’s why it’s crucial to hire somebody that you collaborate with. As opposed to somebody who’s going to execute and be a yes man, because you’re never going to see the results that you’re paying for otherwise.

And another thing that I wanted to bring up also. You can see that the trend of growth has been stagnating for the last few years with digital agencies. But the percentage of agency revenue that comes from digital is increasing.

Which means that it’s not an issue with digital, it’s an issue with the way that people are using the channels to achieve business success. And that’s the biggest thing that stuck out to me, and it really just shows why consultancies are thriving. And why that reputation behind… here’s why for these channels. Here is the why for this strategy. It makes more sense.

And I think that an issue that the digital world has had for a long time is that you have bad agencies that try to confuse their points of contact with the strategy, because it makes them not ask any questions.

And that is not the right way to go about doing it. If you had a management consultant come in and tell you “This is exactly how the strategy works.” And they have it be so confusing that you can’t understand it or act on it, why did you pay them? You need to use that same litmus test for your digital agency

31:40 AUSTIN: Next time you talk to your agency, if you’re working with one, really pay attention to what they’re telling you. Are they breaking down individual metrics and maybe pointing to one little area and then walking away? Or on they on the flip side, explaining to you how their work has impacted a certain channel and why this is going to have an effect on your business for the time being. What goal they’re working towards to have your business grow in certain areas.

Those are 2 completely different conversations. I can tell you the little things that are occurring or I can explain to you how the work that my agency is doing is impacting your entire business.

32:15 PAT: Yeah. And that is the more important thing. If you’re a C-level, if you’re a CMO. As an agency, you know, we deal a lot of times with the Director of Digital Marketing, as our main point of contact. And the way that we demonstrate our campaign’s success to that person is going to be different than the way that we demonstrate it to a C-level, because they have 2 different priorities.

The Director of Digital Marketing is going to care about engagement rate. They’re going to care about audience performance. They’re going to care about impressions and clicks.

But a CMO cares about, “Okay, let’s take that top of funnel metric and see how much of that is actually impacting my bottom line.” And if you have an agency that doesn’t know how to communicate that, if you as Director of Digital Marketing are looking to vet an agency, you won’t be setup for success. Cause you can’t go to your boss and show the great work that you’re helping to facilitate either.

So I think there’s a lot of reasons for the change. I think that people’s personal goals are definitely a huge factor. A Director of Digital Marketing want to demonstrate to his CMO that they understand it. And agencies want to show their points of contact that they know what they’re doing.

But there’s a disconnect in the way that you’re trying to communicate those goals all the way up. And at the end of the day, the tippy top is where the decisions get made anyway. So why are you spending your time and spinning your wheels showing engagement rate and click-through rate just to the CMO, when you should be showing them how many sales qualified leads you’re driving. How much revenue you helped attribute to your campaigns.

Things like that. I think that this is really a trend that we’ve been seeing in general. Just being in the industry. But getting some data behind it was really interesting to see.

33:55 AUSTIN: Yeah, the growth of digital in itself is truly impressive. Just year over year. The amount of jobs that are being created because of digital is growing super-fast as well. So that’s really exciting to see.

But with all this new agencies to choose from it really does boil down to what they’re doing for you. So definitely ask those questions, and go ahead and give Pat a call. He’ll tell you what to ask.

34:17 PAT: Yeah, go ahead and give me a call. And we’ll point you in the right direction. But either way it needs to be your biggest priority. All jokes aside, especially if… I’ll tell you right now, how about this… If you are a retailer getting ready for your Q4 and you don’t have a partner right now that you think is actually going to effectively drive your strategy after hearing this. And is only going to tell you how their channels are doing.

You need to get rid of them now. And get a new agency up to speed that will consult you on the direction to take.

Because Q4 is where you generate 70 to 80% of your revenue anyway. And if you’re not ready for it, you’re not set up for success, you’re going to have a bad Q4. So that’s why it’s imperative and that’s why the market is completely dictating it.

34:58 AUSTIN: Absolutely.

Well said, Patrick.

35:00 PAT: All right, you guys. That just about wraps up everything for us here on episode 34 of Flip the Switch presented by Power Digital marketing. Join our forum. It’s the Flip the Switch podcast forum on Facebook. It’s a private page where we post polls, questions, understand what you–the listeners–want to hear more about.

So join it. It’s a great time. Sometimes Austin will even hop on and toss your comment a like and a comment back.

All right, you guys. Thank you so much for joining us. This has been Pat Kriedler, Austin Mahaffy, John Saunders and Joe Hollerup. Signing off.