How to choose a marketing agency that will make you money

  • 2009-01-08
  • Dennis Razzhigaev

The level of marketingdevelopment in small and medium sized businesses in the Baltic States isshockingly old-fashioned. It's quite unbelievable that within the past 20 yearsof free enterprising this field has stayed so underdeveloped. Companies fromthe region with a yearly turnover of 10 million euros and more have recognizedthe true role of marketing in their business 's the main role. In businesseswith a yearly turnover of less that 3 million euros, the situation is totallyopposite. 

The purpose of thisarticle is not to persuade the owners of such companies to invest in marketing.A businessman, who sees his business not just like a tool for making everydayliving to his family, has to understand it by himself. Toothless marketing iswhat makes Baltic companies so impotent in export markets. Using "marketing asthe least important action" principle is the reason why people can't createadditional value to their products and a profitability of 5 percent isconsidered to be normal in the Baltics, and not an absurdity.

In developed markets,besides creating a talented and creative marketing team inside ones business,there is a habit of finding outside specialists and outsourcing. What's so goodabout that? Comparing who ("us" or "them") is better, more bold or hungry 's isnot considered to be right. Teams do not compete. Teams merge. Everyone isoccupied with the task that is in his best competence.

But what if the"outside" marketing people are not better than the "inside" people? A questionarises 's how could you evaluate this objectively? And even if you could, themain strength of outsourcing is a fresh look on the task and a big quantity offinished marketing projects.

Every businessman withenough mental capacity understands that reasonable marketing investments arethe key for long-term profitable development. But if all this is depending onan outer company 's a marketing agency 's how should we choose the right one?Marketing agencies must earn you money and not throw your marketing budget intothe wind. This article addresses that question and offers you followingcriteria:

Choosing criteriano.1: specialization

Which one of these two candidates would youchoose to be your next sales manager:

Andrew

Education: business management, bachelor'sdegree.

Courses: around 20 various courses and seminarsabout sales management, business negotiation, customer care.

Working experience: sales manager incompany "А" (works in a branch, similar to yours) 's 2 years;

Sales manager in company "B" (works in yourbranch) 's 3 years.

 

Alexander

Education: jurisprudence, master's degree.

Courses: around 10 various courses inaccounting, bureaucratic procedure, taxing, courses for foreign languages(Italian, French), around 10 various courses and seminars in basicenterprising, finance management, sales and marketing.

Working experience: lawyer in company "C"(works in your branch) 's 2 years; financial specialist in bank "D" 's 2 years;sales manager in company "E" (works in your branch) 's 3 years; translator incompany "F" (works in your branch) 's 2 years.

The main problem with candidate no.2 isthat it's not clear in what field he could be called a specialist. He is moreeducated and has big working experience, but keeping in mind that we arelooking for a sales manager 's we will choose the candidate who is not so welleducated, but who has "specialised" in our area. It's common knowledge that aperson, who claims to be excellent in many various subjects, is wrong anddoesn't evaluate his abilities correctly. It's not possible to be on top ofevery theme. Even the best lawyers are hardly equally good in civil, criminaland international law. The best cardiologist can't be the best dentist.

Unlike lawyers anddoctors, many people who work in the marketing industry are "multitalented."They can offer services for branding, creating an advertising campaigns, mediaplanning, marketing surveys etc. It's quite possible that in one agency one canfind highly qualified specialists for all those fields.  But its out of question that this agencywould work with poor marketing budgets of Baltic companies, who's yearlyturnover is under 3 million euros.

By the way, unlikelawyers and doctors, lots of people, working in marketing, don't have anyspecific, suitable for one area only, education. On one hand, marketingtraining in the Baltics is limping both legs. On the other hand, formersecretaries, sales reps and even radio DJ-s can't put up a professionalplatform in marketing, based on which the businessmen could make theirmarketing investment decisions.   

Make certain thatthe marketing agency is specialized on the tasks for which you hired itin the first place.

Choosing criteriano. 2: experience

Every specialist inevery branch has had victories and downfalls. The same goes with marketingpeople. The main question is: has the specialist learned a lesson from hismistake. One delicate moment 's marketing people don't pay with their own moneyfor their mistakes, the client pays. That's why its not easy to understand how"personally" are those mistakes taken and are those "free lessons" consideredto be "fearful enough" not be repeated in the future.

The practical meaningof the word "experience" has become blurred. What do you value in a marketingspecialist: 20 years of marketing experience in general or 5 years of marketingexperience in your purview? Maybe the amount of years isn't so important afterall? Maybe it's more important to see the companies and brands list, themarketing person has worked with? Or to look at the growth of sales resultingfrom his work?

It's very importantfor the client of any marketing agency to understand what exactly are his needsand expectations. And the client has to come to that decision all by himself.The marketing agency could and should join in when establishing real andachievable targets during the co-operation negotiations. The agency, whichoffers the most adequate vision of targets and how to reach them, takes theupper hand. 

After determining thetarget and finding the quantity indicator, it's easy for businessmen to decidewhat kind of "experience" they need from the marketing agency and how toevaluate its correspondence to their company's needs. For example, if youexpect the marketing specialists to increase your company's monthly turnoverfrom 10 000 € to 100 000 €, you need an agency with experience in bringing anew company to a turnover of a 1 000 000 € per year. In case you want toincrease the recognition of your brand name inside your target group from 25%up to 40% during the advertising campaign, you need to look for similarachievements within the similar timeline and budget.

It's a common beliefthat "field experience" is very important. So if you are interested in developmentproject, it's quite likely that you give the contract to a company who hasalready succeeded in the real estate business and turn down the company with nofield experience.  When we take a look atFMCG (Fast Moving Consumer Goods) market, which is quite specific, we see, thatthe advertising campaign of a new cookie trademark is hardly given tospecialists who have not proven themselves, maybe not with cookies, but withother groceries, say meatballs.

The knowledge ofspecifics of the subject is recommended. Unfortunately it's really rare whenmarketing specialist have more than average knowledge about this or thatsegment or further more are experts in the field needed. But the client of themarketing agency is an expert in his field. And this is why the lack ofspecific knowledge of the marketing people will be "backed up" by thepeople of the client-company - that is a part of teamwork. Inexperiencedspecialists (in this certain field) are able to generate fresh ideas, not usedin the field before, but proven successful in others. A perfect example of aprofessional's viewpoint - banks have used the marketing instruments ofretailers and insurance companies copied the software developers actions.

How does themarketing company reach the goals put in front of him and what are its groundsto presume, that your goals will be reached also?


Choosing criteriano. 3: complex approach

Many people get stuckon details and loose the big picture. Organising a Direct Mail in newly housedarea or publishing an advertisings in a ladies magazine could be efficacious ornot. And the reason of polarity of the outcome is often not connected to theactions carried out as the project is still in the planning phase. Planningcould have been done poorly or not done at all. For example if a company triesout an approach and gets negative results, a decision is made that this kind ofapproach "doesn't work for our company" and it will never be usedagain. But the way of promotion (leaflets, printed Ads) cannot be the mainreason for failure, as the hammer cannot be the reason for a crookedly hammerednail.

During the planningphase (conceptualising the strategy) it must have come out that our potentialclients, although living in newly housed areas, rarely read ladies magazines.Their attitude towards nameless advertising scrap paper in their mailboxes isclearly negative, so we should use envelopes with correct names and addresses.Besides that we should use printed posters on the entrance doors, elevators andunderground parking lots of the new buildings. Also the advertisement could beplaced on the other side of the monthly invoice, dwellers get for their housemanagement. And these were only promotion methods and communication channels -we haven't touched the content of the message, design, graphics, the name andlogo of the trademark...

An agency, which hasno complex approach to solving the task and relies on one-time actions, cannotguarantee systematic positive results. They can happen only by chance. Tacticalactions, even if they are correct 's they are just tactical actions, which isdetails. Sending a jingle to radiostation, creating a company calendar for agift, putting up a light box to the front of the shop 's all these are tacticalactions. One can just throw money away with those, but it's possible to useyour money wisely and on good targets. In the first case nobody plans anythingand the outcome will be what it will be. In the second case 's we know what wewant (we have a target and a strategy) and we just create a task, evaluatingthe results based on input data.

Big companies likeMaxima, Tele2 and Hansabank in the Baltic countries use a specific formula foradvertising: creativity + repetition = recognition. The idea is that if youspend a lot of money, lots of people see you, remember you and you will get aresult. But if the same formula will be used by a middle- or small size companyfrom our region without the help of unlimited marketing budget, they can'tdifferentiate from the advertising clutter and their message will be unheardand the results need improving. One cannot win the «War of Budgets» if theirbudget is many times smaller than the other budgets. That's why one must notstep into this type of war. It's wiser to have an accurate and specific planfor reaching the goal without military actions.    

Does the marketingagency understand that the pie must be eaten and not "nibbled" on?


Choosing criteriano.4: values created

If we take a lookaround, we can see that a huge amount of advertising slogans are focused oncheap prices and discounts. Lots of people believe that buyers want only thecheapest prices. Offering the cheapest prices will be indeed noticed by acertain group of buyers, the most disloyal ones. Should the company be able tooffer the cheapest prices in his market segment, there is no need to hire amarketing agency 's the strategy is clear enough, the position for the company 'sa discounter 's is chosen de-facto. But there can be only one company per marketcategory, as the cheapest price can be only one. That said it's clear that allother companies need marketing, which helps them stand out of the crowd andcompete successfully.

If a marketing agencytries to build the marketing of your product or services on the base of cheapprices or discounts, stop all negotiations with this agency and forget aboutco-operation. It's a dead end and doesn't give any additional or real value toyour commercial proposition. But that's exactly the additional value that givesthe business 15-25% profitability. If you are not interested in working likemost of the Baltic businesses 's with a yearly profitability not exceeding 5%,you have to find a marketing agency, which hates cheap prices and can sell forhigh prices.  

Let's take a look at abusiness with the lowest profitability 's gas stations. Two of the strongestbrands in the Baltic market 's Statoil and Neste 's have different strategies.The first one offers fuel for a higher price, but has additional value in theform of shops and services by its personnel. The second one offers fuel forlower prices but doesn't have any own shops. Positioning of Statoil 's highquality fuel and additional services for high price. Positioning of Neste 'squick fill up for cheaper price and self-servicing. Statoil has additionalvalues, Neste doesn't. In the year of 2007, in the Latvian market, Statoil hadthe turnover of 283,5 million LVL and earned profit was 8,2 million LVL(profitability 2,89 %). The same year, Neste, in the Latvian market had theturnover of 202,9 million LVL and earned profit 3,6 million LVL (profitability1,77%, which is 63% lower than Statoil profitability). Statoil had 67 stations(average profit of every one of them 122 000 LVL); Neste had 48 stations(average profit of every one of them only 75 000 LVL). Maybe the example wasnot the most correct, but one can decide which of the strategies enables tocreate more profit.

Choose a marketingagency that is determined to increase your profitability.

 

Choosing criteriano. 5: who will take the risk?

The vast majority ofmarketing-, advertising- or PR agencies will invoice you for the execution of aproject, based on the hours spent, priced by their specialists. By doing this,they refuse to take any risks in case the project appears to be a failure. Theposition of those agencies is: «We don't risk with our money, but we risk withour reputation». But if the reputation is good (based on achievements) and theagency believes in the success of the project, why doesn't it take some of therisks for itself? But if the reputation is not so good or not based on formerachievements, the risk of loosing something you don't have in the first place 'sit's not a big risk. In the Baltic countries, not so many agencies have goodreputation. And those who have, try to work with companies which yearlyturnover is far over 10 million €.

Marketing consultantsmust take a significant part of the risk. If they are good in their field, theywill be motivated by the bonus, percentage program and partnership (businessshare). Don't ever hire a specialist or agency if they are not willing to changethe financial terms of your cooperation concedering the responsibility. If themarketing agency always asks for a fixed price (100 € per hour for example),they are more than capable to lower the price to 70 € per hour and uponreaching some fixed margins during the process of the project, they would getadditional 50 €. That makes the hourly fee of the agency already 120 €. Thatmoney would be an honestly earned fee.

Marketing agency mustcarry some of the client's risks.

 

Conclusion 

A marketing agency inthe Baltics, in order to make money for the client and not just spend it, mustbe specialized in its field and have enough experience to solveall the arising problems. It must approach the project complexlyand keep the big picture in mind. Creating additional values tothe client's product or service 's it's the duty of the agency who isresponsible for its work and carries a part of the risks. 

 

Dennis Razzhigaev

CEO, Razzhigaev & Company MarketingAgency

www.raz.lv