The digital revolution changed the marketing landscape quickly and profoundly. Traditional agencies suddenly found themselves challenged by highly specialized shops, skilled in newer areas from digital design to mobile app development. Yet, even as many struggled to master the tools and services of a new digital marketing era, additional factors made competition even hotter. For instance, according to a HubSpot survey:
Only 30% of agencies now work solely on retainer; shorter engagements have placed a greater emphasis on constantly winning new work. Also, 78% of respondents noted they’re using freelancers; a way to compete despite talent and skill shortages.
Yet, project-based work and freelancers can complicate capacity, utilization, pipeline forecasting – and tighter control is more vital than ever for growing a digital marketing agency. When I spoke with marketing influencer and consultant Karl Sakas last February, he detailed how critical it was to set revenue goals that continually move an agency in the right direction. He urged leaders to plan for the unexpected, so when it does hit – and as we’ve seen, it will happen – you’ll know exactly where you stand and can counter effectively. While it’s easy to share tips on how to increase networking time or enhance marketing and business development processes, these are no easy feats to accomplish on a consistent basis for any sized agency. So instead, we’ve provided five tried-and-true ways to help you grow your digital marketing agency with data and insights you probably already have at your fingertips, or could easily acquire.
One of the key metrics for growth is determining your customer churn rate. Simply put, this means you’ve lost a customer: an account walks and they no longer buy your products or retain your services. It’s inevitable that you’ll lose some, often for reasons beyond your control, but you should shoot to keep that churn number in the neighborhood of 5% to 7% a year according to insights from CoreDNA.
It’s important to understand customer attrition rates and their impact, including revenue changes, and existing churn and acquisition costs.
That said, take time to answer the following questions:
How much have you won or lost over the past quarter or year?
How much have you grown your existing client base?
How much repeat business are you generating?
How much does it cost to acquire new customers (business development, marketing and networking costs)?
Then look at your existing customer revenue growth rate.
In other words, you want to measure how much more (or less) you’re generating from current clients. If you’re getting more money from existing accounts, you’re doing something right. Keep it up. If revenue is flat or declining, that’s a warning sign. There are a few other metrics to use in your analysis. Repeat purchase rate gives you a useful measure of customer loyalty. If clients are buying more of your services, they must be satisfied. On the other hand, if there’s an uptick in service cancellations, it’s not good. Delays in payment are another red flag. If clients are taking longer to pay you, it could mean they’re dissatisfied. You need to find out why. One way to determine customer satisfaction is to ask whether a client would refer you to a friend or colleague, a metric called the net promoter score (NPS). Companies often use a 10-point scale to measure NPS, with 10 meaning extremely likely and 0 meaning no way. Obviously, the higher the better. If you’re seeing a lot of scores below 6, there’s something wrong.
Create a customer retention strategy
When you’re in a services business, customers are everything. Landing new accounts is essential to growth and it’s easy to get caught up in the thrill of the chase. But holding onto the clients you have is every bit as important, if not more so.
Look at the numbers.
Reports routinely show it’s five to 25 times more expensive to acquire a new customer than to retain an existing one. Granted, that’s an enormous range, but even the most conservative of those estimates is eye-opening. Forrester Research says adding a new customer requires five times the expense. The short of it is, if you lose an account, it will cost you a bundle to replace them. That’s really not surprising when you consider the time and resources involved in cultivating and winning new business. Even so, if you have doubts about the value of client satisfaction, consider this data point from Frederick Reichheld of Bain & Company (inventor of the net promoter score):
Increasing customer retention rates by just 5% can increase profits by 25% to 95%.
Find out how engaged your clients are and ask yourself a few key questions. How strong is your relationship? Are you leveraging your customer base to help you expand with existing clients or land new ones? Undoubtedly, you’ll find creating a strategy for keeping existing customers is worthwhile. After all, they not only keep the lights on, they’re a beacon for attracting others and the brightest hope you have for growing revenue.
Follow the money – repeat successful work
When looking at growth strategies, it’s a good idea to evaluate what you’re offering and how profitable your projects are. Are you doing too much for too little? Creating services that no one wants? If you’re spread too thin or have too many offerings, you could be wasting money or not capitalizing on your most lucrative opportunities.
Find out which services are the moneymakers and repeat, often.
To do this, review projects and clients to see which are most profitable. While marketing has changed drastically over the years, the most important consideration remains unchanged: Time is money and that’s especially true for the many digital marketing shops working with billable hours. So, identify which projects had the highest success rates from a team utilization perspective, as well as which ones maximized billable time. Other costs come into play, too, such as travel, software, media and so on. Weigh the expense of all the resources you’ve invested, including time, against the revenue you received. This will tell you how much profit a given project or account yielded. And beware of scope creep — it’s all too easy for projects to expand over time, resulting in a broader scope of work without additional revenue to cover those extra costs. Armed with this analysis, you can decide which types of projects and services to pursue, which to scale back or discontinue, and how to best deploy your staff and resources to meet your revenue targets.
Cultivate team happiness and empowerment
Metrics are important, but the greatest asset of any services organization is its people. Customers aren’t the only ones to keep happy; you want employees to enjoy their jobs, especially with an industry-wide talent shortage. As you consider your growth strategies, don’t exclude your employee retention and satisfaction.
There are direct correlations between engaged employees and happy customers.
Recent statistics from Harvard Business Review highlight the strong connection between team happiness and customer satisfaction. Achieving strong employee engagement is hard work for any owner, but there are approaches and data that can help – resource utilization rates being a good example. Your job as an owner or leader is to determine whether employees have the bandwidth and resources they need. Analyzing and tracking this data not only helps with growth but also can alert you to any potential signs of employee burnout. In addition to analyzing your team’s time and utilization rates, talk to your employees to find out what they’re thinking and how they feel. Are you stressing out your team with too much work, monotonous routines, frequent meetings? Are you offering them too few chances for creativity and autonomy? Do they understand the company’s vision and are they encouraged to participate in it? Your team needs to know you’re on their side, and that you want them to thrive. Ask them what problems they’re facing, what solutions they’d suggest and what they’d like to change. You might not agree with all of it, or be able to act on everything, but it’s a good start. What’s more, empower your staff to succeed. One way to do this is to give them access to data that’ll enable them to do their jobs more efficiently and successfully.
Give individual team members a way to own the results.
If they’re allowed to prioritize and to reset these as the situation changes, they’ll own the critical, profitable activities that bring about growth.
Simplicity breeds growth and success
Follow technology developments and investigate tools that keep track of the critical components of your operation. That may seem like a lot, but to narrow it down, you want to focus on ones purpose-built for professional services organizations (PSOs) – like VOGSY. Effective platforms need to encompass project planning, time tracking, hours and utilization planning while providing operational visibility, reporting and control. Solutions should also include a centralized spot for project profitability data and personnel resources, so you can remain up-to-speed at a glance. The key is to make it easy, similar to Google Workspace, with a user-friendly dashboard. You want this to be used agency-wide, so intuitiveness is essential. The message is clear: constant vigilance is vital to successfully growing a digital marketing agency, even in the most highly competitive of markets. Simplifying your insight and processes will breed growth.
Increase Productivity and Profitability with Data Transparency More tools do not equal higher productivity. Learn now to streamline your tools, regain visibility into your data and capitalize on actionable insights across your organization. Get the eBook