Easy or Effective - Should B2B companies take their marketing in-house or outsource to an agency
About Common Sense - About John & Ed
You've met Ed here on the site.
For many years John and Ed have enjoyed talking about thorny issues around B2B marketing & sales, and recently we've started to record those conversations/debates. We're calling it "Common Sense" based on our shared love of history, and the perspective we hope we bring.
You can follow our musings on Common Sense at:
Does anyone know your business as well as you?
Most traditional B2B companies in the industrial manufacturing space focus the overwhelming majority of their resources on development and sales. Marketing is often limited to trade shows and industry journals. So when they decide to embrace industrial content marketing, a key question is whether to manage that in-house or to outsource it to an agency.
This episode includes:
- The appeal of the agency model - expertise, manpower and best practices
- Manufacturers like building things themselves
- Agencies can never understand your products & services as well as you
- Real business experience and clarity of strategy are often missing from both
- The role of consultants and advisors
John and I tackle those points and others as we discuss the pros and cons of two different approaches to B2B marketing.
Transcript Follows:
Ed Marsh: Hi, I'm Ed. Welcome to Common Sense.
John McTigue: And I'm John. How are you doing Ed?
Ed: I'm good John. How about yourself?
John: Had a great weekend and we're back on track.
Ed: Absolutely.
John: All right. Well as most of you probably know, at least the ones that know us, both Ed and I have been part of the HubSpot Partner Agency community for quite a few years, so the topic we're going to talk about today is something we're intimately familiar with, and the question we're posing is whether it's better for companies to outsource digital marketing to an agency or to bring it in-house possibly with help from consultants or freelancers. We're both coming from this from different perspectives. You've been for quite a few years a consultant to mid-sized and up industrial manufacturing companies I believe, and you specialized in strategy and revenue growth planning, coaching and that sort of thing.
I'm the recently retired co-owner of HubSpot Diamond Agency, Kuno Creative and Kuno is still in business and develops both high-level strategic plans and executes them, so different perspectives. We're going to come at today's topic not so much as a debate, but really as just sharing perspectives from our backgrounds. What I'd like to do I guess is get started just talking a little bit about that, give us a little more detail on your background and how you go about working with companies.
Ed: I came to this with the realization I had run businesses, I had owned businesses, I started to ran a company in India, I've been partners with a German company always in the industrial space, but I was tired of dealing with the personnel hassles, it's not something that I enjoy. Some people really like it and I didn't, so I deliberately wanted a model where I'd work essentially by myself with clients and so I built at that. When I work with B2B companies, mostly industrial, often manufacturers, these are companies ... I've been on floors, I know the smell of cutting oil.
I know what it feels like when that press crumps and you feel it vibrating through the building, and the kind of clients I work with are the ones I like making stuff, they build stuff, that's the way they look at the world. Traditionally, they haven't spent much time on marketing, certainly not compared to typical software and service companies. It's helping them understand how to go about it as well as how to do it. In many cases, they've got at least some a small internal staff that it's not a big marketing department, they got some staff. They've often tried to do a little bit of digital.
They instinctively understand that's where things are going and they tried to do some of it, but they may wonder if they've really been successful, if they're getting off the more results. I always start with strategy. Sometimes that means helping craft it. In some cases, it's not as refined as it ought to be. Other times they've got a very strong strategy and we just need to use that as a base that we build on, and then build the frameworks for success around that.
Then there's a lot of coaching and advisory that goes on as they execute and if I need other skills from people, web development or Facebook ads or stuff, I work with other people that are really specialized in those areas, and that means that I don't have to have a staff that I don't want to manage, I don't want to have to worry about covering the payroll and finding projects that aren't fit just to pay them stuff. That's my approach, that's my perspective, and that's why I started that way, but you came from a purpose-built inbound marketing agency. Explain that piece to us and why Kuno has been so effective.
John: Sure. I joined Kuno in 2003. Kuno Creative was founded by my partner, Chris Knipper in 2000, and they started as a traditional branding and marketing agency, serving mostly well a variety of different industries, but mostly healthcare companies in the Cleveland, Ohio area. I joined actually as a contract web developer after a long career in the oil and gas industry, so my specialty was IT and I quit the oil industry and got into building websites back when it was just getting started, especially in B2B. Kuno over the years became more and more digital. We did a lot more websites than ever before and that allowed us to really spread our wings into the rest of North America, other industries like manufacturing and technology.
We had a variety of different size companies everything from a start-up all the way through big enterprises through both North America and Europe and Canada too as well. We're pretty well, pretty rapidly based on just the popularity of website building and people starting to go digital in the marketing industry. About the mid 2000s, we started to branch out a little bit more into lead generation because that became more and more popular. It was something the companies wanted, and that's when we discovered HubSpot. HubSpot was coming up with a new strategy for lead generation that they called inbound marketing, and that was really the combination of blogging, SEO, social media, email marketing, and so on, all collected under one software platform for analysis.
We got really interested in this. We became one of the very first inbound marketing agencies, one of the first to join the HubSpot Partner Program, and that really allowed us to scale up very rapidly because it was really growing, a new thing, a growing inter level among all kinds of companies. We were able to leverage that into fairly rapid growth to about I guess at the peak, we were about 50 employees. We got to be a good size small agency, let's put it that way. Then I think in recent years, the whole industry, the digital marketing industry is moved in the direction of demand generation and paid media. Kuno has made of another pivot and a strong move in that direction as well.
Then I retired last year to move on and teach the world what I've learned over the years, so that's how we got together. Yeah, that's the perspective on my background.
Ed: Obviously two very different approaches, but it makes sense. Every company has different philosophy and different management and different character and different culture, and they want different things. Not everybody wants the same services, so I guess then the question is, is there any maybe metal level change that we can identify and talk about that would explain trends in the industry as opposed to why one company might want to go one way or the other, and I think there are some. I saw recently Ad Age released a report showing that agency revenue and employment were falling while consultancy revenue and employment were rising, and you see a lot of articles about how the big consulting firms are adding digital marketing capability to their to their suite of services.
I think it makes sense if we're going to talk about strategy a little bit later on, but the bottom line is the strategy is key and informs the activity consultants are often very good at coming up with that, and so that has to precede some of the work. Many of the tools that are part of the digital marketing landscape used to really take very specialized experts. You came from being a data scientist and geologist and understanding big sets of data and analyzing those, and you're kind of the person that was normally what developer used to take a real expert, saying with even just running email a marketing automation, but now the tools are setup so even a guy like me can figure out how to do stuff on website.
It's much easier for people to do it now. Content marketing is a process. It's really well-documented. I mean every person with a briefcase is an expert on content marketing these days. I mean there's so much information out there. There's not a lot of mystery about it, but it means that it's getting really hard to to excel at it and to succeed using it, and it's getting tougher and tougher and tougher. Five years ago, an agency just by virtue of cleaning up some bad code in the background on a website and doing some consistent blog posts could basically generate results. I mean they were heroes. They understood the mystery of it all. Today it's a lot different. I mean it really takes very substantial expertise.
While I see that B2B companies love the idea of trying to hand off to somebody to do the work, they want to concentrate on their core competences as everyone talks about. It'd be great to just have a marketing agency do everything for them. The reality is that most of the time they end up so involved in the content creation because it's technical stuff and what seemed like insignificant differences to an outside or a layperson are critically important to people in the industry. These companies have to be really, really involved on it.They say, "Wait a minute if I'm spending so much time doing it, helping these people that I'm paying, they're supposed to get it done, then geez maybe we're better off just doing it ourselves."
That's some of the high-level changes that I see. What do you see from your perspective?
John: Well, I agree with you. I think that there is a trend towards alternatives to the traditional agency retainer model having an agency of record, especially among enterprise level companies that's undergone a lot of rethinking because it's so expensive. Companies are spending so much money on digital advertising and not necessarily seeing the return on that investment, so they're rethinking it how else can we do this. On the other hand, I think it'd be worth just considering why people hire an agency, especially with the smaller companies. There's really two main reasons. One, they don't have the internal staff as you mentioned.
They might have a a marketing director, they might have a couple of artists, graphic designers, they might have a web development person on the IT team, but they don't have the complete breadth of tools available and knowledge to do everything so they reach out to an agency to fill the gaps essentially the talent, yeah. The second reason is often that they have special projects that they want done and they don't want to hire full-time staff as a design department, for example, to do brochures and that kind of thing. They'll outsource one-off projects to either freelancers or consultants or agencies, and that particular one is one that we started out doing almost exclusively was website design projects and design prod, other types of design projects.
The problem with that approach that most agencies have recognized over the past few years is that it's unpredictable. There isn't any predictable revenue stream and it's almost impossible to scale your organization based on that lack of knowledge of what's coming at you. Then if you're constantly chasing your tail to get work done on time and you're arguing with your client about hours, it's just not a very productive relationship and I've seen it lead to breakups between companies and agencies.
That's one of the most common problems that you see between an agency and a company is that they don't agree on expectations on how they should be working together, and really it's in the interest of the agency to have a retainer or a nice predictable revenue stream, but it's in the interest of the company to minimize costs and really only use outsourced labor when they need. There's an inherent struggle there that needs to be worked out. With all that said, I think there's still a good market for agencies. They just have to figure out exactly what's needed and then really work out a good relationship with their clients, delivering exactly what's being asked and not necessarily just being an on demand in a partner.
Ed: Right. All that being said, I mean that makes sense, and again for some companies that's a perfect a fit that the piece that I see missing often whether companies are trying to do it themselves, in-house or whether they bring in an agency is that the strategy piece is often too weak, and it's so critical and really underpinning ineffective marketing program. It's got to be done right, so there's this perception because content marketing is so widely discussed and there's so many ultimate guides and checklist infographs and all the other stuff, all right so all we got to do is follow these 17 steps, we're going to be successful. Well, it's not just about the activity.
You got to be doing the activities in a certain way and in order to do that, the context becomes really important which is driven by strategy and with content, the devils in the details and very small differences will make the difference between something that's quite mediocre or something that's quite excellent. The business goal is the strategy have to drive it and many companies are actually selling different products, different kinds of product lines, different kinds of services to different kinds of buyers.
They're not equally profitable based on what they're selling, so even before you start talking about marketing and selling something, there's got to be some basic business analysis of should we be, what's the lifetime value of somebody we get in this product line, and what's the profitability and how many repeaters do you get. Rather than just say okay great, let's get started, let's start writing blog post and do social media and start marketing and selling more other stuff, do you even want to be selling more of it? That's a very basic example of other strategy pieces is often missing. Also I mean disruption. We've talked a lot about disruption and some of the technology changes that are coming and even the question of technology itself, how that's not changing business.
What it's doing is enabling different buyer expectations behaviors, and all of that stuff has to get shaped into it before you even start executing anything. I would argue and I compete against agencies in this way, and sometimes I win and sometimes I don't. I would argue that in order to be able to bring that perspective, you have to have carried a piano, you have to have sold, you have to have made procurement decisions, you have to have run businesses and dealt with the kinds of stuff, the kinds of issues, the kinds of buyers that your potential clients are dealing with. Otherwise, it's an academic exercise.
The fact that you buy Adobe software and Mac computers for your office doesn't mean that you understand how businesses, industrial companies buy their stuff, and that's a combination that's almost never found in agencies or in house. I think that's what's driving the trend to Ad Age report and that's why I believe and obviously I mean I'm biased. I say that completely up front. I've got a model I believe is it's best, but I believe that companies, particularly industrial manufacturing companies that like to make their own stuff are better off doing an in-house program but having a consultant guided. Not many agencies are good at weaving it together.
Obviously Kuno has success doing it and when they do, I mean I'd love to hear more about how they do it, but also what's the downside to trying to work with an agency to bring all of it together in one piece.
John: Well, I actually really agree with you on all of that. I've seen it at Kuno and elsewhere that weak strategy or lack of experience at the account manager level, but the person that's communicating one-on-one with the client. That's one of the main reasons why agencies get fired, is it's just not good enough and it's not consistent enough, it's not innovative enough, there's not enough new insights coming at each meeting. They're more like you said just delivering on a list of things they're supposed to do each month.
The problem is that it's really hard for agencies or anyone else to find that top-level talent, to come in at the account manager level, get up to speed fairly quickly, and usually in my experience takes at least three months to do that on what your services are and who your clients are. There's a delay, so you're losing money on that proposition. Even if you can find good people, again it takes a while to get them up to speed. I think and I've seen some of this done is one of the smart things you can do as an agency is to partner up with a good consultant who fits your culture, understands your clients business, and is willing to work along with your team as a combined-arms.
That way you get the best of both worlds. You get the high-level consulting, you get very efficient execution of the plan, you get good talent across the board for all the different disciplines. It can work really well if you do it that way. Another way you could do it which is often difficult, but with the right kind of training, you can bring off your less experienced people up to a higher level at least. Maybe not the level of a 25-year consultant, but certainly better than they were before and able to even meet the immediate needs of the customer. Well, those are two ways of doing it, but yeah there are challenges for sure, for everybody.
Ed: No client wants to hear that they've got the rookie, and we're going to talk in a minute about some of the issues associated with managing workload and staffing and profitability. I mean running an agency it's really hard. I mean in terms of running the operation, my model is much easier to run, and keeping up with the latest techniques in some of these very rapidly changing disciplines. I mean it absolutely makes sense to go outside and find some of that kind of stuff, and that's exactly what companies do. Even if they have in-house counsel, they draw on outside experts ... The in-house counsel handles the slip-and-fall stuff and the outside experts are providing IP expertise and international expertise and GDPR that everyone has been hearing about all lately, that kind of thing.
This question of staffing agency and running it profitably is one that perplexes me watching it from the outside, and my impression is that the retainer model is essentially a bet on the agency being able to be more efficient, so that they can keep a slightly bigger slice of that retainer, while balancing that against the staffing levels. The engine of agencies, not having been in one the way you have, but my outside observation is that it's really inexperienced talent that might instinctively understand how to market the products that there are consumers of, but certainly not going to understand complex B2B products, but that's where the financial arbitrage basically is building the agency model.
You can charge clients hire retainers and get a bulk of work done by these very energetic bright but inexperienced people. I mean I guess as I think about it, there's got to be a huge piece in how agencies manage themselves built around that question of business model and profitability.
John: No doubt. I mean profitability is by far the most important issue to an agency owner and it's the most difficult thing to accomplish because you're always back filling talent as you grow sales, you add more clients, you got to hire more people to meet the demand. If you do it the opposite way, if you hire out in front of demand, that's a quick way to kill your profitability and if you happen to lose some clients to churn, then suddenly you're underwater. The number one thing you have to do is make payroll every month, but the thing you want to do is drive more sales, so it's really a difficult for most owners. Then the other problem as you mentioned is that companies are becoming far less inclined to commit to these long term retainers.
That's the solution for an agency is to nail down these long term retainers, so you have that predictable revenue, you can plan out scale up, all those things. Most go away or you can't get any new ones, you're in big trouble and you've got to think about scaling back instead of forward. It's interesting, it's a big dilemma, it's been around for a long time, but I think things are starting to change a little bit. I'm seeing more agencies reinventing themselves and turning into more specialized services, so they'll focus on one product or one way of doing inbound marketing or one type of client. They're becoming more picky about who they work with potentially, but they're also really scaling back on the deliverables and becoming highly expertise experts at one certain thing.
Then clients have to think of them in a different way and maybe they have to hire a consultant to herd the cats of all these different specialized people.
Ed: This kind of business trend, it always goes back and forth, but you're right. I mean we're seeing amongst our group of folks that we're regularly in touch with. There's some one that's really focused on conversational marketing chat bots and that kind of stuff, one that really has doubled on his business on websites and how to really create websites that are optimized for conversion, not just that look good and some of those kinds of things. That's a great point, but then it leaves the clients wondering okay well, are we managing it, maybe an agency should manage, so it's a hard question.
John: Yeah.
Ed: Go ahead, I'm sorry.
John: I was just going to say, I mean as it always does in our conversations, it comes down to what are the customers want. You got to figure that out and it starts with a conversation about goals. That's no different.
Ed: Right.
John: Customer has to figure exactly ... They have to figure it out too. They can't just think about hiring an outsource agency to just do marketing anymore. That just doesn't work. It doesn't work for them, it doesn't work for agencies either. There has to be a lot more creative and flexible way of thinking about, there's inbound services or marketing services as a whole, what can be done, how can it be done, and who should be involved. I really don't think it's an either/or. I think consultants, freelancers, agencies all have a place in this ecosystem.
Ed: That's probably a great point and as we talk about what our customers want, the other aspect of that is that in some cases they may not be aware of what they should have, and that's not meant to be condescending toward them. They're experts in doing what they do and it may be based on experience from 10 years ago they think what they need is a big AdWords budget, and somebody managed AdWords when in fact there's a number of other things that are probably more important for many particularly the B2B complex sales kinds of companies rather than that. There is no right answer.
I guess we often end up reaching this middle ground in our debates and this was an interesting approach because it's more of a conversation than a debate, but interesting to understand those high-level trends that I think are going to be important for people to watch. I think ...
John: We brought up budget, so that seems like a good topic for next time, what's the right marketing budget for your company.
Ed: Talk about no right answer.
John: Really.
Ed: Cool. Well, I look forward to that conversation, it sounds fun in the meantime. Thanks very much everyone for joining us today, I'm Ed.
John: I'm John, take care.
