This post was written based on the lecture given during the Social Media Week held in São Paulo in 2018.

If you’re reading this post, you probably own or work at a marketing agency and already know that the agency market is active.

For a long time, a digital agency’s business model could be summed up as: offering various digital marketing services to other companies that wished to position themselves in the online marketplace. 

However, this type of solution always considered agencies as outsourced services, and therefore, most of their revenue depends directly on third parties.

With the increased demand for online courses, agency owners realized that this was a new market to exploit. To do so, they just had to adapt their knowledge to a new reality and start investing efforts into a business that can be truly lucrative.

Would you like to understand this scenario better?

From now on, we’ll show you how it is possible to change a marketing agency’s business model and get into the distance education market once and for all.

How is the scenario for marketing agencies nowadays?

As we mentioned before, digital marketing agencies are responsible for inserting third-party companies into the online market companies that don’t provide this type of service in their businesses.

The solutions offered range from, the creation and management of social media to the analysis of competitors and data, in order to understand the actions that are working, and propose new strategies.

Basically, another company hires an agency, which provides this type of service for a certain period of time and for an amount agreed upon even before the deliveries being.

Actually, if you have your own business, you know that leaving your profits in the hands of others isn’t safe. You need to steer your business in the direction you want it to go.

Not to mention that always depending on contracts with third parties is very risky and not very scalable. After all, contracts expire and you might end up without any clients.

In addition, there are 5 very common mistakes that we can observe when analyzing several communication companies:

1. Create communication based on interruption 

This type of communication solution is an invasive model, i.e., very aggressive for customers.

Most of the communication suggested by certain agencies is done without context and doesn’t generate the engagement that is required nowadays.

Consumers nowadays don’t want to be bombarded with ads that don’t speak to their current moment. Those who are creating the communication need empathy in order to understand the audience and talk to them at the right time with the right subject.

However, if you aren’t completely inserted in the business for which you are creating communication pieces, it might be hard to clearly understand the audience you wish to reach.

2. Remuneration by established business models

You have probably heard of the traditional fee. This is the most common way that advertising agencies use to generate revenue.

Basically, those who hire such services, pay a fixed monthly fee for a certain period of time to the agency, or else pays an initial planning fee plus this monthly fee.

Regardless, the important thing here is to understand the amount charged is fixed. And why is this a mistake?

Nowadays, the majority of entrepreneurs have noticed the need to work with a variable remuneration model, in order to increase profits and have a scalable business, but most agencies still rely on the old model.

This occurs mainly because many brands and companies research their competitors who work with this remuneration model before they hire a marketing agency. Therefore, agencies that wish to innovate need to adapt and use the old model so that they don’t lose clients.

This type of remuneration makes everything a little constrained and doesn’t allow you to try something new.

3. Think of communication as an intermediary 

This is the logic of a marketing agency that works with television.

This type of communication already has a well-established business models regarding commissions, the bonus for the volume of work delivered. In other words, the agency works depending on media placement.

As a result, the communication created isn’t seen as an important part of the entire company, but as just another service that has been hired and must be delivered so that the agency can receive a certain amount at that moment.

After the delivery, there is no continuity of the communication work that was started, which we will cover in the next topic.

4. Distribute communication centered around media broadcasting

Many agencies only develop the communication up to the moment it is broadcasted. This is the logic of offline advertising.

However, when you finish a graphic piece, release the ad on TV, inside a closed format, the communication has only started. But actually, for the service provider, that’s where the communication ends and it goes after another job to do, probably from another company.

5. Not adapt in order to go head to head with the competition 

Have you heard a rumor about a market crisis? We can’t say for sure it’s true or if it’s only a new work model that makes us think of new forms of remuneration and prosperity models. 

The crisis isn’t actually in marketing agencies, but in the business model, which is being rethought.

Those who monetize on older models won’t be able to prosper because of the changes in the market.

For example:

Consulting companies are beginning to enter as the main marketing agency competitors for their clients’ funds (brands that for years entrusted their communication to agencies are beginning to realize that consulting companies can be more strategic partners).

As a result, instead of adapting in order to keep up with the market, many agencies believe that this is merely a crisis, which at some point, will blow over.

Why do brands prefer to hire a consultant? 

Do you remember that we talked about the marketing agency crisis?

The consulting companies have been blamed for this crisis, since brands prefer to hire consultants to handle everything involving the company’s communication with the public.

And why is this happening? 

Because consulting companies have a unique knowledge about the company. It’s knows its pricing, business model, processes, business practices, i.e., the company’s whole life. 

As a result, it is no longer a service provider working on a local and specific problem, and begins to understand the entire process to create solutions that involve communication, advertising and technology to solve these companies’ specific and mapped issues. 

Consulting is more comprehensive, more complete area within the companies, which is able to analyze all the communication problems that may or may not be related to marketing.

Based on this analysis, the consulting service works with its team inside the company, in order to solve these issues. In other words, it doesn’t have a limited scope or form of operation; it operates in a more holistic manner. 

How can marketing agencies react? 

The first step that agencies need to take is to understand that this isn’t a crisis, but a market movement as a whole. And within this movement, there are several business models to which you can adapt.

Agencies can create a course to teach their skills to other people, they can start selling as Affiliates and make money with third-party products, or even develop a digital venture (even if it’s a subscription app, for example).

Regardless of the model chosen, it is necessary to reflect on the services provided and business partnerships. 

Providing services 

A marketing agency that provides services has a restricted role within a scope of closed contracts (setup fee, initial planning to later receive a monthly fee, within x months).

This means that, in this case, you’ll have a fixed and limited fee, i.e., an x amount that might be adjusted after 12 months. 

The scope is limited and within a short-term relationship.

What was your biggest contract and what is the average term of your contracts? 

Reflect on these issues and ponder if your business model is perpetual. 

Business partnership

On the other hand, business partners have an unrestricted aspect regarding the needs of the company, digital product or even Producer. 

This means that you can work better in favor of all projects developed with your partners. 

Remuneration is variable and unlimited. In practice, you come in as a partner, i.e., the more you sell, the more you make. 

If your agency chooses Hotmart’s platform, for example, these values are set aside by its own co-production tool.

The truth is that you do lose your fixed income, but you also don’t have a revenue cap. And what does this mean?

It means that if you do a good job, this will obviously be translated into financial results for your company or producer, and also for you. 

Constructions are medium and long-term. They are an enterprise.  

The good agencies and co-producers in this market diversify their portfolio of Producers and products within these producers’ portfolios, in order to have a medium and long-term construction with more expensive or cheaper products, according to the complexity of the investment.

In other words, they develop several forms that set up a company, a digital enterprise with these partnering Producers.

How can my agency overcome this barrier?  

There is no magic formula to stop being a service provider and becoming a partner: a change in mindset and a lot of studying is required.

But in spite of this, it’s important to emphasize a few points.

If we were to give a message to the marketing agencies that still haven’t realized, or haven’t adapted to these changes, this message would be: communication professionals who already work with this have everything they need to develop well in the online course market. However, we still have a few tips in terms of updating your knowledge and changing ways of thinking. 

These new market players and the new mindset structure are heavily influenced by protagonists, new entrepreneurs and network partners. 

Network partnership is focused on removing the constraints from structures, which is very important.

Agencies that are already agencies for digital products:

• Update those who are partners (Producers);
• Think of communication as partners and protagonists, as owners of the business also;
• Create communication based on connection and reputation, and not only on the purchase of media. Of course, there are those who do this, including within the digital product market, but we know that this affects the cost of acquisition negatively, and all metrics that show that selling and marketing that product is healthy; 
• Develop the communication that starts when it is broadcast. This is very important in our market. Basically, it means understanding that the issue isn’t with your marketing plan, but with the client, who is the user. Many digital products are created after listening to the audience;   
• Distribute communication centered on the translation of the purpose of proprietary, shared, acquired and only then, paid channels. Proprietary channels, for example, means working with what is yours. You have total control over the list regardless of the email listing platform, and from where you are broadcasting your media. With this list, you build an asset that belongs to your, your products and your partnerships. The people on these proprietary channels truly develop. In order to boost the message or product that worked on these proprietary channels. This is the point where you begin to really invest in and test the paid channels;    
• Remunerated on multiple fronts of performance that is true (authentic), unique (originality), relevant, consistent and measurable. There’s the matter of the digital entrepreneur that works with a fee plus a percentage of the product, and there’s a possibility that you’ll see so much value in the Producer and the product that makes the risky proposal of even sharing the media with the Producer and work as the product’s agency.

As a result, marketing agencies are now being seen as the new digital entrepreneurs. Therefore, they have the entire concept of the products’ marketing process.

In addition, they are responsible for the constant monitoring and optimization of the enterprise, especially regarding the following tests: copy, campaign and landing pages, for example. 

You’ll notice that embracing rework is part of the business. This is because this is a market where you work a lot with numbers to understand who performed better and see what you can improve to increase that point, and then create another test to improve even more, and so on. This helps in the optimization of operations.

There’s also the building of close relationships in your own channels. And finally, the management of B2C (my customer’s customer) channels as the business owners. The new agencies create teams and also develop the B2C channels, for example, to answer the questions of your customers’ customers (buyer support).

How do I adapt my knowledge?

Despite already working with online communication, marketing agencies need to adapt in order to enter into this new market.

We’ve selected the top 3 tips to help you do this:

1. Communication focused on connection, persuasion and influence

Don’t be ashamed of selling! 

The advertising editor isn’t the same as copywriting, which focused on sales. 

Sometimes, it’s easier to explain copy to a salesperson than to a journalist or advertising editor. 

We’re used to thinking that good advertising is one with a great insight and that sells without your noticing it. It sells through a well-developed concept and thus, we feel shy about making a more direct and emphatic sales pitch.

However, it shouldn’t be like this. 

Use your writing talent, look at copy as a structure and add your knowledge to create copy that is more direct, without feeling embarrassed about selling.

2. Embrace and value reworking as part of the job 

We’ve talked about this more than once, and we’re going to talk about it again, because reworking is an important part for those who work with digital products.

You cannot feel lazy about reworking anything. 

The answers lie in the customers and not in the communication plan that you’ve outlined.

After conversations with your customers, you will readapt what you did. Nothing is finished; everything can be improved and redone.

3. Align your business development mindset well with your partnerships and work with your best skills 

From then on, embrace the skills you master the most, i.e., those tasks that you will develop in order to make it clear for your partnership that you can deliver.

Show your Producer the value of your work. 

In addition, make it very clear that you are also buying into the enterprise, that you’re taking the same risk and are putting in the time to develop the project.

The truth is that there is a close proximity between this new business model and with what your agency already has.

Extra tip: Where is your agency losing money? 

There’s a movement happening every day, and for a while now, from influencers who already have a large follower base and want to develop other sources of revenue. 

Marketing agencies end up losing money because they’re stuck in processes that are too commercial and hiring proposals that have fixed and strict models, for example:

• Monetization for the use of image rights and the purchase of editorial spaces: When you hire an influencer for x days to make x number of videos or x posts, without any continuity. This type of contract is as if you merely leased the image rights from the influencer. 
• Strict contract models, focused on the delivery of hired content formats and fixed remuneration: For example, the influencer writes a testimony with a pre-established number of words. This type of contract foresees an exact and fixed amount for the use of influencer’s image rights.

Many influencers have already noticed that building is better than leasing. In other words, when they have an audience that believes in them, they can build something focused on this audience and it will be engaged (but only as long as the product is really focused on this audience). 

As a result, there’s the possibility of working with these influencers in a different manner: create a digital product for the audience they already have and the marketing agency can go into partnership with the influencer.

This means that the influencer will be the face of the product, and you will be the face behind the course’s operational part. This is a great idea, isn’t it?

The truth is that, the digital market is huge and is growing exponentially, and it’s still very young. In other words, there’s a lot of room to develop and a lot of content is yet to be shared. 

The digital product market needs experts like your and there’s a real business opportunity here. So, check it out, get to know this process better and see how you can enter into this market in the best way possible.