Marketing Agency Exposed Podcast: Ep 30: Media Buying is Broken (Part 2)

Ep 30: Media Buying is Broken (Part 2) - Rethinking the pricing model

Jul 22, 2020

Summary:

In our last episode we started to unpack the current media buying model and discuss why we believe it’s no longer effective. In this episode we start to practically discuss what a re-engineered advertising model could look like for our agencies. We all know there is no perfect model, but there is a better one. One that takes into account the various platforms skills required, creative refreshes, budgets and more. The way we market has changed in the last 70+ years, with more platforms than ever the service structure of media buying needs to change as well.

Top 3 Curtain Pulls in this episode:

Are your fees really covering the work required to be successful? Can you decouple ad spend from your fees?
Make sure you’re only responsible for what you can control. There are many factors that are part of the success of a campaign that you do not control. Educate your clients on this reality.
Consider creating (or hiring) Holistic Marketing Team, consisting of a Strategic Marketer role, Creative Role, an Ads Engineer, and an Analyst. This way, your business can operate out of several perspectives at once and work together to provide the most value for clients.

For more tips, discussion, and behind the scenes:

About The Guys:

Bob Hutchins: Founder of BuzzPlant, a digital agency that he ran from from 2000 -2017. He is also the author of 3 books. More on Bob:

Brad Ayres: Founder of Anthem Republic, an award-winning ad agency. Brad’s knowledge has led some of the biggest brands in the world. Originally from Detroit, Brad is an OG in the ad agency world and has the wisdom and scars to prove it. Currently that knowledge is being applied to his boutique agency. More on Brad:

Ken Ott: Co-Founder and Chief Growth Rebel of Metacake, an Ecommerce Growth Team for some of the world’s most influential brands with a mission to Grow Brands That Matter. Ken is also an author, speaker, and was nominated for an Emmy for his acting on the Metacake Youtube Channel (not really). More on Ken:

Show Notes:

[2:26] Bob introduces this week’s episode- Part 2 of Media Buying. We’re talking about pricing, current models, and how to evolve your pricing within the ever-evolving world of digital marketing.

The real question circles around the traditional 15% commission in media buying
Bob asks: “Let’s peel back and be real transparent. What have you done, what are you currently doing, how do you make money on placing media right now?”

[3:58] Ken: “It’s my opinion that people see ad buying, media buying as a commodity. And so we don’t try to compete on that.”

You have to spend enough to be able to support them really really well. Depending on the agency, that number is different. You have to stay on top of the platforms that change constantly, and you have to be a really really good marketer.

[5:10] Ken continues: “If we’re talking pricing, we separate out each platform because they’re different, they take different skill sets and there’s different intent.” The purpose of one platform may not be the same as the next, and so your philosophy behind each is going to be different.

Starting fee per platform- manager fee of $3K per month baseline, with increased percentage as the projects get larger. They would like to move away from that increased percentage, but ultimately that $3K baseline is not enough to manage platforms correctly on a daily basis.
Setup fee included for each platform, to allow for tracking and getting correct data in the very beginning.

[7:42] Ken: Speaks about different clients and the different parts of the process they dip their toes into. “There’s a certain amount that I believe has to come from the brand. So the heart and soul of the message has to be there, whether we do it separately or the brand has it… I don’t think you can just come in and start writing for the brand and have it feel authentic and work.”

Images, creative, videos, photography- all these have to come from the brand then Metacake layers strategy on top of that.

[8:58] Ken: “There are certain factors that really drive cost, and reporting is one that no one talks about, but is very important and time consuming.”

Metacake has a basic version of that and a plus version of that. “Once we get to heavy levels of budget, 10, 50K a month… you really need to have that expertise in analyzing and knowing what’s going on.”

[10:12] Brad speaks about the importance of agreeing with your client about which indicators you’re going to work from. Often as you share information, the client will want to know more and you dig into that information and before you know it, you’ve double the hours you originally agreed to spend doing research and not getting paid for that work.

Define what you’re measuring against early on, and that any additional information or strategy will be an additional cost.

[11:00] Ken speaks about Metacake’s model away from that specific issue- we’re trying to adjust our model based on role.

A holistic marketing team means you have the strategic marketer role, creative roles, and an Ads Engineer. Most technical mind that REALLY knows the platform well.
You need someone who can just think about the customer from their perspective and then work with someone who really knows how to take that and translate it into the nuts and bolts of how we get the most out of the platform.
The last role is an analyst- who’s reading the data and gleaning next steps from that information.

[14:15] Brad: Some clients at Anthem are still being rebilled after the agency fronts the bill for the media, but they are trying to move away from that, as it is such a high risk.

“We are definitely going to a model where every customer that we set up controls their own ad account.” Either they use their own credit card to pay for digital space, or they pay upfront before any work is done.
Working with a startup is difficult here, because often they don’t have credit cards with a high enough limit.
“We’re going to take away the commission and we’re goin to solely start building a model on expertise... And management costs.”

[17:00] Brad continues: There is a LOT of work done upfront for most clients, a deep understanding of their brand and customers. Educating clients on this process, explaining that ads are just a small part of a strategy (the pitcher in a baseball game, but we need ALL the players to win!) and there is so much more to their growth and customer journey.

Defining the customer’s emotional level of engagement in different parts of their journey is SO important to building an appropriate customer funnel.

[20:25] Brad speaks about how some clients don’t have an appropriate understanding of Customer LTV or Lifetime Value. And if they can’t understand the importance of that, there is a LOT of education ahead of you to work with them and be successful.

[20:40] Bob recalls meeting with a local agency recently, and he asked how many of their clients were aware of their customer’s lifetime value. Even decent-sized, older companies still don’t know what a lifelong customer relationship looks like.

[22:00] Bob continues: “Logic says, if I put in a dollar, I want at least that or more out… Understanding lifetime value gives you a whole wide range of what success looks like.”

[25:49] Brad talks about common blind spots with new brands. “They haven’t priced into their model the cost of customer acquisition properly… let’s say I’m selling widgets for $10. And my cost of goods is $5. They think that they should only spend 20cents to get a customer.”

Actually, the opposite approach is true- you should think of your customer acquisition as the biggest cost.

[29:40] Brad continues: “We do have a minimum, and it does fluctuate… our minimum would definitely be $2K a month but it really does depend on the work and it depends on the short term scope.

As the campaign evolves, the pricing has to evolve as well, it has to scale up.

[33:11] Bob: “I think it needs to be handled on a case-by-case basis, just as you would the creative, the packaging, the development, the way you treat everything else.

[35:34] Ken talks about how your message and advertising needs to be the same across all platforms- but doing this on several platforms is a lot more work. So Metacake charges around $10-$15K a month for these multi-platform, broad scope campaigns.

“You’ve got to take into account the whole customer journey to really get the most effect out of it.” This is why Metacake has moved towards a coaching model.
For clients who are doing their marketing themselves, don’t have the money to hire an agency full time, coaching is a great option for these clients.

[38:40] Bob introduces another model we haven’t covered yet- a model where clients don’t pay unless the agency produces.

[39:21] Ken’s experience with this model has shown that it requires a LOT of trust on both ends. There needs to be proof of trust for both, and it is more of a partnership than a client-agency relationship.

[40:00] Brad: “If my payback is based on their decision that I have no control over, then I’m just a silent investor.”

[43:20] Ken: “I think that the mentality, if there’s not maturity around what it takes to take on investment on your company and what it means for someone to be invested in your company, then I think that it’s probably going to be a slippery thing.”

[50:56] Ken: “There’s two parts to basic business success- and it’s one, having a great product, but that’s no good if you don’t have a great brand, which inherently means people know about you and care about you.”

On performance-based pay model: “What I think might be better is maybe have a performance incentive versus being paid on performance.”