Friday, 7 November 2014

Unfolding the mystery behind the death of digital marketing agencies

With a decent response to my previous post, I am all charged to narrate another story... At the onset let me tell you this is not my story... I am just a silent spectator to the brutal murder of the digital marketing firms... Some of these firms died prematurely while others died with suffocation... Suffocation caused not by dearth of air but by lack of enough funds to keep running.

Although other fellow spectators pitied the firms and blamed the industry... I couldn't help but find fault with the agencies themselves. What killed these agencies is their own policies, their approach. Surprisingly most of them were aware of the fact that... to sustain in the first place and grow in the future, they need oxygen and water... I mean proper talent and enough funds.

If you see it the way I do... These two live savers are related and are affected by the pricing policy of the agency. Let me explain this, the digital marketing agencies are not able to find/ hire good talent because they can't afford to hire and retain them. They can't afford to hire and retain the talented professionals because they don't have enough money.. their margins are small. The small margins and the insufficiency of funds is because of their product/ service pricing. 

So the weapon in the mass murder of digital marketing agencies is the pricing policy. Yes, the pricing policy is only the murder weapon and not the murderer! We can't blame the murder weapon for the killings... I mean we just can't do that.. right? No court will allow you to do so... Reason being...Ummm... Do I have to pen down the reason????

I mean the weapon, in this case pricing policy could have been used for betterment of the agencies. It had the potential...after all pricing can help the agencies outperform competition, improve margins, hire talented individuals and what not? But it was unjustifiably used for slaying the marketing companies, especially the online marketing ones.

These agencies cried, shouted while they were being destroyed and their existence was being wiped out! No one came to their rescue. No one was able to extend a helping hand... No one could for the problem lied within... within the agencies..

"Pricing in essence has the immense power to make or mar your existence and your growth dear agency".. Let me recap those pricing policies you implemented that caused your demise. Initially you would produce a long menu of services offered and the price you would charge for each item. A price tag for each item on the menu and the client had the option of choosing based on their budget and/or taste.

It was't a bad approach since it provided clarity to the clients about what they will be getting for shelling out the said amount. However,  the menu based pricing model is nothing but a form of cost based pricing. And what you were telling to the client was, listen Mr. Client, It takes me a certain amount of effort to do a certain work, it costs me something, I need to add some margin and here is my price. 

This is how you effectively priced your inefficiencies – Your labour cost, your overheads, your pricing, etc. None of which was of interest to the client. The client cared only about the service you offered and the results it generated.. and if the same service was available in the market for lesser price, the client went ahead and replaced you... yes I said REPLACED YOU..! This is how you were thrown out of the market and were ditched by clients.... Shunned by the market and with the fast depleting funds, you took your last breath.

However, some of you managed to deceive the death angel and escape the murderer  for the time being with the re-packaged offerings and pricing. Well, you tried to fool the market with packages named as basic, pro, enterprise or smart smarter, smartest.

All these packages did was segmented you prospects and offered them a bundle of services. You presumed a certain segment needed at-least the basics and a few others (who can afford) will be given the special extras.

The good this pricing policy did was it made your clients pay a certain minimum value. Remember the menu based pricing,  where the client had the option of opting for the least priced dish???? This approach eliminated them. But this approach was also cost based and it also suffered from "one shoes doesn't fit all" phenomena.In a way it did more harm than helped the agencies. Here again the agencies said this my cost, my price so you Mr. Client please adopt.

The only way the agencies could have survived was by burying the billable hours. "Billable hours plus margins" is equal to price of the product. This approach killed numerous marketing agencies, the actual culprit.

Billable hour, time sheets, time tracking.... these are cost-accounting tools and not pricing methods. If you know what I mean.

So, how a lucky few survived and how they escaped the bullet of the murderer??? Were they plain lucky or they had a clever plan to escape death. Let me know if this story interest you and I shall be back unfolding another mystery.... btw I feel like James Bond now.... :P or Charlie's angle

1 comment:

  1. Hmm nice thought!..However, I'd partially agree with you. Partially agree because, yep even I felt that it was the pricing who was/is the culprit. But in my view the murderer is not the pricing model, instead the way in which the prices were calculated. The Agencies, missed on the basic cost concept of cost + profit. In which the cost include both your recurring and non-recurring expenses. As, there are various other services which have successfully used this already existing catalogue based pricing model and have succeeded. Why go far, even the traditional Marketing Agencies have been doing that..Therefore I believe that it's not only the pricing which create the problem but also the placement..The Agencies died because they made the customer believe that they are CHEAP!

    That's what I believe is killing!

    Keep writing..Love looking at the world from your eyes!