Why are full service agencies dying?

When I first started my agency I was closing deals and pricing based on value, relative to quantifiable results. I could do this because I wasn’t being undercut by thousands of lookalike firms.

Myself and my team had special training. We had special skills.

I got scared in August 2012. The day I realized I was replaceable. It was Hubspot Partner Day. 

If you’ve ever been a  “channel partner” or “value added reseller” for a marketing or sales technology company, you’ve seen it too. Partner day was a sea of lookalike agencies, a galaxy of indistinguishable stardust, an army of marketers trained to sell and service clients just like me. 

The replacements

Took me four years and way too much money to understand the concept of REPLACEABILITY.

A college degree used to stand out. It meant something. Today you spend four years becoming a specialized, sought after resource, then sit shoulder to shoulder with thousands of people on graduation day ready to do the same job for less and probably work harder in my case.

The system survives on belonging, comfort and confidence: confidence in the process, a proven system. It has to work. It works for everybody! 

In reality we accept lower pay than the next graduate and we’ll overwork ourselves to keep whatever job we get.

This is exactly what “partner day” feels like... if you stay sober.

Serious money is going into training our replacements. 

The first bubble was marketing software: new tech to drive business growth. 

The software bubble caused a brief labor bubble.

Software companies needed an army of button pushers to sell their products and provide services that aligned with the products’ features. They needed service partners, so they dumped millions into training programs. This money was always meant to make us replaceable. It only took a few years for for these training programs to go mainstream: now people graduate college with these skills.

Every lookalike agency, “certified” freelancer and digital marketing grad increases supply and decreases the price we can charge.

Competitive dis-advantage

My first hire as an agency owner was a former editor of a local newspaper. Content was king, and I wanted a secret weapon, an in-house writer.

When the writer couldn’t handle any more work, which took about a year, we looked for another. It was freakishly easy this time. oDesk, eLance, Upwork, all of these online forums with thousands of freelancers that can do writing, that can do design, that can do marketing automation had popped up seemingly overnight. The freelance gig network had exploded across every corner of marketing services. 

Upwork alone has 12 million freelancers.

The Bureau of Labor Statistics (BLS) called the freelance gig network the “industrial revolution of our time”. 

From my perspective I saw my biggest investment to date go from a competitive advantage to a competitive dis-advantage in the same year.

The truth is when clients think they can pay less for the same work, they will.

The owner's cousin just graduated

How could they bring it in house? How could my client be so naive, so stupid to think that the owner’s cousin who just graduated college can do what I can do. They can barely find their way out of the bathroom. I have years of experience, I’m special!

That’s the way we all feel the first time. The second time we question ourselves.

Clients are bringing the work in-house: design, SEO, copywriting, social media. It's like standing behind someone on a diving board knowing they can’t swim but they sure as hell know how to jump, and that makes them dangerous.

You can't stop them. Clients WILL bring what you do in house. Why? Because they can. The specialized labor, the limited resource we could charge a premium for  is now a commodity.

A race to the bottom.

Decision Makers and Order Takers

I think every professional marketer would agree that we are strategic partners in our clients’ businesses: decision makers.

But what do clients think?

Do they see us as a decision maker or an order taker? There’s no grey area.

We start out decision makers. During the sales process our prospect will ask for our opinions and ideas. We analyze their pains. We come up with tailored solutions. We create a plan. We coach their team to see what we see and think how we think. If we get the business it means we were a decision maker in that moment. 

My official title at the agency was ‘Lead Strategist’. During the sales process prospective clients would introduce me to other members of the buying committee: 

“This is Max, he will be helping us with our marketing strategy”.

Yet as time went on each client would refer to me differently. I've been called a blogger, website developer, designer, social media specialist, email marketing guru… all of it.

Whatever I was doing at the time was how they introduced me.

It’s A Slippery Slope

When it came time to be strategic again, to be a decision maker, they would fight me. I had lost control. 

They didn’t see me as a strategist anymore. I was demoted to an order taker.

This is built into business culture: the hierarchy. There are three levels:

The top level makes decisions

The bottom level takes orders

The middle makes sure the bottom follows orders

Our clients have been culturally trained to put us into one of these buckets and we can only be in one at a time.

We are relegated and seen as the lowest value task that we take on. It’s easy to go down, extremely hard to go up.

If we want to charge a price premium we have to be in control, we have to be decision makers. We can’t say YES to everything.

Strategy, consulting, planning, this is where decision makers live. This is where price premiums survive in even the most saturated of markets.

Value AND Replaceability

Value is the key to price premiums. 

Replicability is the enemy of price premiums.

To charge a premium we need to sell what is most valuable and difficult to replace. 

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