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How Much Do Marketing Agencies Cost?

  
  
  

Are You Paying Too Much for Content?


paying for marketingHere's a toughy: Most PR and marketing agencies still benefit from the fact that business don't always track the true value that their marketing efforts are driving. They can tell their clients that they're investing in "branding" or equally vapid terms. It confuses their customers enough that they simply accept that marketers shouldn't need to prove that they're actually driving value for the business.

For example, I recently wrote an article where I generalized that you can get good content for as low as $30-$40. One commenter - obviously a writer alarmed that anyone would think that you could get valuable content for that price - asserted that articles should go for at least $250-$700 for 500 words. Now, the purpose of that article was to argue that the market would self-regulate the value of staff writers upwards as their value to businesses became more evident and trackable. However, her singular focus on the validity of my example data brings up an interesting question: As a business owner, how much should you pay freelance writers and marketing agencies?

Is Your Business Really Benefiting?

To walk you through the math here, the way that businesses can start to examine whether or not they're investing enough in content is to look at the amount of traffic that their blogs drive, look at the number of leads they're generating, look at the conversion rate of leads into customers, and examine what the average life time value of their customers are. If you know those four things - traffic, leads, customers, and value - then you can use analytics software like HubSpot to know whether or not traffic from a certain source is actually driving revenue and whether you should invest more or less.

Let's use that writer's math instead of mine: If your article costs $700, and you get 400 views per article, and you convert 5% of those into leads (20), and 5% of those into customers (1), then your COCA (Cost Of Customer Acquisition) is - not accounting for any sales reps or other pre-sales infrastructure - obviously $700. The 5% visit-to-lead and 5% lead-to-customer rates I used are really optimistic, but they make the math easy as an example. If your conversion rates are lower, your cost of customer acquisition will be proportionately higher.

Numbers Count

If you don't have the ability to track this kind of data, then you have no way of knowing whether or not you're investing too much or too little. Think of it this way: If I said to you "Give me $700 and I'll give you an average customer" and you were happy, then perhaps you should be investing much more in content. If you wouldn't be happy, then perhaps you should invest less. The point is that you've got to know. Otherwise, unsavory freelancers and agencies can charge whatever they want and you'll never know whether or not you could be growing your business faster.

Ask your marketing agency or freelance writer how they measure their success. If they say "comments" or "tweets", ask them how those correlate to your business's revenue. Most likely, they'll say nothing at all. The worst nightmare for many freelancers and agencies - just like used car salesmen - is an educated business owner armed with real numbers.

If, rather than employing a marketing agency or freelancer, you have a marketing team in-house, how are they measuring their success?

Measures of Success

To get you started, I'll walk you through how we here measure our success for our clients as well as our in-house marketing team. This isn't to say that this is the only way to measure success, but it's a way to get you started. Actually, it's quite simple:

  • We start with the sales goals for the organization. Marketing, after all, is just the beginning of the sales relationship and should be as accountable to the sales organization for their performance as the sales team is to everyone else. Let's use an example here, and say that the company sales are currently at $100,000/month and the goal is to increase to $112,000/month by the end of the year.

  • Second, we look at the LTV (Life Time Value) for the company - segmented by Buyer Personas if necessary. Let's use $1,000 for this example. This means that we need 100 new customers every month in order to maintain our current performance, but we need to grow by one customer every month to hit our growth goals by the end of the year.

  • Then, we look at the lead-to-customer conversion rate. If it's 5%, that means that we need to generate 2,000 new leads per month for the sales organization to maintain our current performance, and grow over the year to keep pace with our end of year goals.

  • Finally, we look at the visit-to-lead conversion rate. Let's also use 5% for this number, which means that we need to 40,000 visits to maintain current performance, and again grow that number throughout the year.

All of these numbers are very trackable, and all of these numbers are re-calculated monthly so that if a client's lead-to-customer conversion rate goes from 5% to 10%, we can adjust the amount of traffic we need to drive accordingly.

Fill the Pipeline

These numbers all form what's called the "Pipeline Revenue Service Level Agreement" (PRSLA) with our clients. The goal of our agency services team is to fill the client's "pipeline" with enough traffic and leads that their sales organization can be successful. Of course, given the fact that there are four variables here, the formula is very fluid. The client's sales organization may miss quota one month due to holidays, or a change in pricing or a new product may cause the average LTV to go from $1,000 to $2,000. The graph below demonstrates our tracking of PRSLA over the course of one month:

fill your pipeline with revenue measured over time

 

 

 

 

 

 

 

 

 

 

 

 

Any one of the many possible changes may cause our PRLSA to inaccurately reflect recognized revenue in a given month, but we're firm believers in the "Moneyball" movie idea that - in the long run - if you're honest with the numbers you're tracking, your success will average out to be right over the course of the year. We align our employee's incentives with the PRSLA, so that our employees are motivated to surpass the customer's actual goals and drive a higher level of actual revenue.

It All Comes Down to ROI

We love this metric, because if we - to use the previously mentioned commenter's number - charged $700/article for each of the at least 5 articles a week we'd love to produce for each of our clients, we'd be charging them $14,000/month just for the content writing services. I'm a believer that if you're going to charge someone that much money, you should be able to demonstrate that you're driving a reasonable return.

If your marketing agency, freelance contractors, or even in-house marketing team can't - or won't - track and show how much value they're driving for your organization, then perhaps it's time for a change.

In fact, we want writers so bad that we're giving away prize money to writers who enter our contest just to give us a chance to make them a job offer!

Image credit: freedigitalphotos.net/renjith krishnan

Comments

I agree that it's important to show real numbers when justifying the value of writing/marketing services, but I don't understand why freelance writers should be punished because a client's blog isn't generating many views/conversions. You could put the most mind-blowingly awesome content in the history of content on a no-name site and it might never be read by human eyes--does that mean the content is worth nothing? Is it the writer's job, then, to also market the crap out of the content they write on behalf of the client, and is that the real way they earn their paychecks? So not really by writing, at all?
Posted @ Friday, November 16, 2012 11:13 AM by Kim
That's a really great comment, Kim. The harsh truth is that the business owner shouldn't invest so much in content if it's not driving value. For example, spending $1,600 on a blog article for my local pizza place would be a really bad investment. 
 
The writers are part of the team that drive success, it's true. It's one of the reasons I'm trying to attract as many great writers as I can to this agency. They're a super critical part - but not the only. When I combine them with a team it's much easier to justify their cost because the business sees much greater results than if they were just writing. The leads generated are a function of the calls to action and landing pages, and if a freelance writer's client doesn't have those critical features then, no matter how good the article is, their client won't see results and will eventually determine that it's not worth the investment. You're right that there's more to it than just the article quality. 
 
It's really a great point and it's sad that something is only worth what someone is willing to pay for it. If you say your house is worth $1M but you can't get any offers for more than $250K, it's actually worth $250k. It's part of why I think writers should focus on finding work in the B2B lead generation space, for example, where the customer values are so much higher that they can justify much higher content investments.
Posted @ Friday, November 16, 2012 11:34 AM by Sam
What if I know I could get $1M for my house--the problem is just that no one knows it's for sale because my agent hasn't advertised it very well? I guess I should find a new agent...or, like you're saying, find work with a company that's already naturally getting more traffic. :) 
 
Like I said, I can appreciate both sides. And you're right, the real problem is just that what you should pay for content, as a business, is not necessary equal to what that content is "worth."  
 
I'm just saying that maybe the problem is not that you're overpaying your writers but that you're under-marketing your site. 
 
Thanks for the reply! I've been really enjoying your articles!
Posted @ Friday, November 16, 2012 12:20 PM by Kim
All makes great sense . Do you have a client (s) that you are generating 40.000 visits per month?
Posted @ Sunday, November 25, 2012 6:40 PM by Gene Moorhead
Hi Gene, 
 
We do! We actually follow a vetting process for nw clients here based on a number of factors including average customer value and current marketing funnel to ensure that we don't sell to people who would be better served with free resources or basic consulting instead of agency services. It's no good for any business to sell to bad fit customers if your focus is long term value per customer. 
 
Thanks for reading!
Posted @ Monday, November 26, 2012 7:18 AM by Sam Mallikarjunan
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