5 Challenges to Overcome Scaling a Digital Agency
The COVID–19 pandemic brought a variety of challenges along with it. Although not over yet, many digital agencies haven’t been affected too much. They are looking into opportunities to scale their company safely.
Up until the pandemic, getting new clients was the number one challenge for agencies, as reported by a WordStream study. That being said, there are other challenges any digital agency might encounter. We’ll list them below and give a few tips on how to combat them.
Setting the right pricing structure
Agencies looking to scale their business need to answer a difficult question: can I keep the existing pricing structure, or do I need to modify it?
Let’s look at a few pricing principles agencies might be using:
- Value-based pricing: While this pricing strategy requires a lot of work, it also brings many rewards along with it. Agencies have to research their market, dig into their competition, and successfully establish a customer profile. Only then will they be able to set their pricing so they don’t compete on price alone, but instead offer a good value proposition.
- Cost-based pricing: This pricing method works well if agencies can compete on pricing. To accomplish that, they need to combine outsourcing in low-cost countries with well-optimized processes.
- Competition-based pricing: Those who are looking for a shortcut might try to copy the pricing models of their competition. The issue is that those companies have already established themselves in the market, some of them as leaders. Without offering anything special to potential clients, it will be hard to convince them of your services.
Besides the above-mentioned pricing models, another aspect agencies need to look at is how they present their offerings. For instance: many SaaS companies heavily rely on a recurring revenue model. They offer services that are billed monthly, quarterly, and yearly. Agencies have realized that they can adopt this pricing model, and offer recurring services with the help of a client portal software.
The recurring revenue model brings a variety of benefits with it. The most important one is that agencies can easily plan ahead, and make investments based on quarterly/yearly recurring revenue. This should allow them to expand their business by hiring new team members, and even offering exciting new services.
Successfully productizing services
Those who have successfully priced their services might still struggle with productization. While most services can be turned into a product that is easy to purchase, not all of them bring a good ROI. Before agency owners decide on which services to productize, here are a few questions they should ask themselves:
- Which services are being requested the most?
- Which services offer the best ROI?
- Which services require too much back-and-forth?
- Which services could be better automized?
Let’s look at a concrete example of services that can be easily productized:
- Content agencies: Anyone who offers writing services can easily productize them, either as one-time services or as recurring subscriptions. Most agencies allow clients to purchase blog posts directly by choosing the word length. Once purchased, an intake form asks relevant information, such as topic, keywords to be used, etc. A recurring service could allow clients to receive a certain number of blog posts each month for a fixed monthly rate.
- Design agencies: There are a few notable agencies offering so-called unlimited graphic design services, Design Pickle being one of the most well-known. The tricky thing is to make the scope of the services very clear while also keeping an eye on the ROI. Agencies wanting to compete with Design Pickle need to come up with ideas that set them apart from the existing offering.
- Social media agencies: These agencies often rely on monthly recurring retainers which are used to manage entire social media profiles. For a monthly fee, a social media agency could take care of a couple of profiles on Facebook and Twitter, post engaging content, and boost the social footprint.
Another important aspect while trying to productize services is to think about niching down. Many agencies already focus on a specific niche, for instance, they only work in the B2B segment. They could niche further down and work exclusively with clients in the automotive industry. Not only does it make it easier to generate leads, they can also structure their pricing and language around the needs of this specific client group.
Generating leads and converting them
As mentioned previously, agencies often struggle with lead generation. Some of them grow successfully for years, but hit a snag that they can’t overcome. Their business stagnates, and without growth, they start to question their business model.
One important aspect of lead generation is to take a look at the current customer base. More often than not, an agency should be able to find a pattern. Ask yourself the following questions:
- What defines the current clients?
- How did they find the agency?
- What are the services the clients cannot live without?
Once you understand how your clients found you, and why they chose you, it’s easier to find similar prospects. For instance, someone looking for a content marketing agency might search for “content marketing agency in ny” on Google. Local SEO is more and more important for agencies who have an office in a large city because many prospects are interested in local companies. To get their attention, they can optimize their website, but also target prospects with ads on Google, Facebook, and LinkedIn.
Retaining existing clients
Client churn has become an increasingly difficult task to handle for business owners, especially due to COVID–19. A study published by ProfitWell shows that SaaS companies were especially affected. While digital agencies aren’t explicitly mentioned, those offering recurring services might’ve seen an increase in churning customers.
How can they handle these without them making a big impact on their recurring revenue? Here are a few ideas:
- Most businesses have strict cancellation policies, so they might not process any refunds. However, clients will most likely be very upset, or even worse, initiate chargebacks. Instead of letting it come to a dispute, it might be best to find a solution. For instance: offer a free month on a quarterly billed subscription to reduce the financial burden for the client, or downgrade them to a lower-priced plan.
- Keep an eye on soon expiring subscriptions, and launch campaigns that explicitly target customers. Work on your value proposition to ensure that the subscription renewal is guaranteed. For instance, you could show clients that all your recurring services now include a free new service in them at no extra cost.
- Have a look at failed payments, and try to understand if there’s a connection between them and churning customers. More often than not, expired cards lead to canceled subscriptions without clients noticing it. Ideally, you’d have email campaigns in place to remind customers to update their payment methods. It’s also a good idea to think about using bank direct debit options that reduce the risk of failed payments.
While pandemics are an exception, reducing customer churn should always be a priority for digital agencies. Customer acquisition is and remains a hard, expensive task for any agency.
Making onboarding painless
Productized or not, many digital agencies haven’t figured out an easy way to make their client onboarding easy and seamless. Some make you watch hour-long videos, others want you to create dozens of app accounts. While that might make their processes easier, clients will most likely feel overwhelmed of having to track a variety of new things.
Successful digital agencies have realized that they need an agency management software with a baked-in client portal. This kind of software not only allows them to charge for their (one-time and recurring) services, it also has an integrated order management system. Another great feature is the client portal, which allows clients to log into a website, manage existing orders, place new ones, and submit tickets.
A modern client management software can be fully customized to fit the needs of the agency, either via Zapier, or native integrations. Fully white-labeled solutions might not be even recognizable by the clients because the client portal solution will have the agencies’ branding.
Scaling a digital agency has become an even trickier task thanks to COVID–19, but also an increasing amount of competition. Following the tips in this blog post, agency owners can think of how to overcome them early on, and plan ahead accordingly.
If they cannot accomplish the scaling process themselves, reaching out to established growth hackers might be worth considering. These individuals usually specialize in scaling agencies and have successfully done so in the past.