Episode Transcript

Hi, everybody. Welcome to Agency Unfiltered. I'm your host Kevin Dunn and Agency Unfiltered is a bi-weekly web series and podcast that interviews agency owners from around the world about agency operations, growth and scale. Episodes can be found on Spotify, Apple podcasts, or wherever you listen to your podcasts. And you can find our videos and full transcripts on agencyunfiltered.com. Doug Davidoff, founder and CEO of Imagine Business Development comes on the show to talk about his team's new pricing strategy, where he organizes his team's programs into three levels, services, solutions, and outcomes. We talk about how agencies tend to price for services, but promise outcomes and how that misalignment sets the engagement up for potential failure. Learn how to align your prices, your promises, and your results with Agency Unfiltered starting now.

KD: Doug, welcome to Agency Unfiltered. Welcome to Cambridge HubSpot HQ.

DD: It is good to be here. Thank you for having me on and as a memorial for this, I brought you a gift. Welcome to the Sales Genius Network.

KD: Wow, thank you so much. Am I supposed to wear this for the whole episode?

DD: Absolutely man, c'mon. I know you got the hair thing, but it'll still work out for you.

KD: How's that?

DD: There we go.

KD: We look good? Does that look all right?

DD: Yes.

KD: Yeah, all right, sweet.

DD: We are good.

KD: You've already won me over with swag. I think you're the first person to bring swag in. So now you've set the new bar for anybody else that wants to come on.

DD: There we go.

KD: All right man, so, thanks for the hat, but we're here to talk about like, maybe like a re imagining or a reorientation at your agency in regards to pricing, packaging and maybe how you align certain service offerings to different types of clients. I don't want to butcher it, so maybe the best way to start is to explain the discovery or what you guys have rolled out at your team.

DD: Yes. So we, let me talk about the problem that we had that led to the discovery. Because I think that might be what a lot of agency people feel with. I know I saw it a lot every time I came up the Partner day. I'd always go back and share with my team. A, we're sharing and having a lot of the same problems other people are, and in some cases, like hey, let me tell you what, you think it's bad here, you should talk to these guys. Right? And, you know, the agency experience is really interesting because we're delivering a set of deliverables and that's, you know, and those deliverables are really tangible, but we're also really being brought in to do something far more intangible and ambiguous. And things are always changing and so there was always this disruption and there was always a lot of turbulence that I felt like we were always managing. And frankly, for me, it was getting exhausting. Right? I mean, I would get stressed because, you know, why isn't this client doing what we want them to do? And what about this and where's that? And the other problem that I saw and I think this is a problem, you know, for a lot of us, is we were coming in and we were pricing one way but we weren't able to resource, to deliver what the client expected or to some, in some cases what we inadvertently were promising.

KD: Resource allocation versus expectations with pricing being the friction point in the middle there.

DD: Yeah, like, you know, I learned this really interesting lesson in services businesses, is people actually have to do things, and people can only do one thing at a time. Who woulda thought that? That was, I thought that was a major discovery. And so I started looking at it and I really started thinking about it and I said, you know, I actually look at HubSpot as the example and I see you know, HubSpot provides a really great solution. I said but here's the thing that's interesting about this solution. There're some people out there that say, "HubSpot changed my business. We would not be where we are if we didn't use HubSpot. HubSpot is an amazing product." And there are other people who say, "Yeah, we used it, I mean, yeah, it was nice. It didn't work, it didn't really do anything for us." And here's the fascinating thing about it. The product was exactly the same for both those people. Right? And HubSpot's promise was, we're going to give you a product that works, we're going to give you a product that will enable you to do this. They learned that the promise was not we're going to give you a product that will do this, we're going to give you a product that will enable you to do this. And I realized that's what a solution is. A solution says, we're going to enable you and you're going to use it how you think you should use it. Right? And by the way, the onus of results and the onus of direction, that's on you. And I realized that we were pricing as we were providing a solution but we were constantly being brought into, you know, why isn't this working? Or why? And it wasn't even like we're hired to do content, it wasn't that the content's not good or even that the content's not working, you know.

There's the age old, you know, we generated 162 marketing qualified leads, and then we got fired because the salespeople didn't turn it into sales. And it's like, well, wait a second, I didn't get hired for the salespeople to turn, I brought you, and we would have these conversations regularly, I would say, did the marketing qualified leads, did they meet the criteria that we set? Are they legitimate leads that you should be doing business with? "Oh, yeah, yeah, yeah." I said, well, I don't understand how your business is going to be stronger, if you don't use us, and they're like, "Well, you know, it won't be stronger, but at least I won't be paying for something that's not paying off." I said, wouldn't it make more sense to figure out what's happening after the handoff? Like, there's obviously something that's not working there, maybe we should fix that. And so I realized that there's really three levels of program that we bring. And we dubbed it a services level, a solutions level, and an outcomes level. So services level is someone says, "We need some stuff." Someone says, "Hey, we need a playbook. I hear you do really good playbooks, can you help us design our playbook? It needs to do this, this, and this. We need a playbook and..." Or, "Hey, I hear your, you know, you guys write really good blogs. We need somebody, you know, we need, you know, 22 blogs every quarter.

KD: Smaller scale, repeatable work, yeah.

DD: Yeah, and you know, it's, you know, very, and I don't think people get into a whole lot of pain, like nobody hires a company to do a logo and then they say, "Well, you know, the logo didn't translate into."

KD: Sure, yeah.

DD: Right? So that's services, right? And your job there is to do whatever you're doing well. And for the most part, defining what needs to be done is the job of the customer or the client, right? The solutions program is more of what we think of as the typical inbound retainer and it can apply to non-inbound situations, but that's a, you're typically providing some level of ongoing services. And what I realized is, you know, the outcomes program is very similar if you look at a list, very similar to a solutions program, but the onus is on us to make sure that it's working. The onus is on us to read the patterns, see what's going on, you know, zig and zag, and be at the front and think deeply, and identify all these different things. And to have the influence so that what you see, can actually be implemented. And I always joke around sometimes, I'm going to write a book one day about my experiences working with companies, and especially with sales leaders, it's going to be called, "Change my Company, but Don't Change Me", right? And that's where the problem would kind of always come in. And, we would have conversations like, look, if you want us to be able to drive these types of results, you gotta be willing to listen to us, right? Which we all have those conversations, but it hit me as I was doing that. You know, we should probably have that conversation before they sign the agreement. Right?

And so we realized that, you know, an outcomes program has far more real strategy. An outcomes program also means that, like, how many times have you priced a retainer where you came in, and you recommended a $12,500 set of services and the client said, "Well, we can't afford that." And so you narrowed the scope down. You said, okay, well, we'll not do this, we'll do this and they said, "Okay, yeah, we can do that, it's now $7,000." Right? But what you're doing, it might be good, but because you're not doing these other things, you're not going to be able to achieve the outcome that you want. You're not going to get there. And because you didn't bring the full force, for lack of a better word, you know, it's failed before it begins. And what I began to see was, and I know this for a fact, people will pay far more for outcomes than they'll pay for solutions. And the problem was, I realized we were doing this and I believe that this is actually endemic in advisory, but certainly in our agency community here, is we price for solutions and services. And sometimes we do that to win the business. But we price for solutions and we promise outcomes. And so the problem, the fault of you've generated 185 marketing qualified leads and they didn't turn into sales, you promised revenue. You said this will grow your business. We promised we're going to generate the raw material that will enable you to grow your business, right? And so when the marketing qualified leads didn't turn into sales, we had less of that issue because we did communicate that more clearly.

KD: Expectations were set at the forefront.

DD: And it was a lot of like, you know, let's understand how all this works. There's a lot of things that go into what creates a result or not, and someone's gotta be in charge of a result. My mom taught me that a camel is a horse made by a committee, right? And so part of the problem is I realized we were wrestling with clients, because, you know, their chief marketing officer wanted to do something a certain way or their VP of sales wanted do something a certain way. They wanted us to provide services or solutions but they wanted to do it a certain way. We didn't always agree with what they were doing. Sometimes what they were doing was, you know, definitively not working. It's what they wanted to do. We felt like it was our job, it was our mission, to get them to change what they wanted to do. We started working with a company, it actually had a really good chief marketing officer, and they wanted to do something a certain way and I actually thought it wasn't going to work, and it actually worked really well. And I'm like, hey, let's add that to our playbook. Marketing is just copying other folks that do things well. And it's like, wow, I didn't like, I see why that worked when it didn't and I'd said, you know what, we maybe have to admit something, maybe we have to get some humility. Maybe our customers, maybe there's some customers out there that actually do know what they should do. And they don't need us to manage that direction, and sometimes the best thing we can do is just enable them to do that. Because I can tell you your way might work, my way might work, but your way and my way conflicting with each other, that definitely won't work. And so we realized that's a solutions program.

KD: So solutions versus outcomes, let's pick the path that we're going to prescribe.

DD: Correct. And so when we do outcomes, we also, not only do we talk about, you know, typically a bigger overall fee, which is driven more by by the total services, it's not like we charge you know, x plus, we charge x at solutions and for the same thing, x plus at outcomes.

KD: Sure, okay.

DD: It tends to be a broader focus, there's more strategy involved, which doesn't show up on a scope. And the other part is we talk about the role of influence. And we're up in Massachusetts, Bill Parcells, famous guy. When he quit the New England Patriots at his press conference, he gave one of what I believe the greatest quotes of all time was he said, "If you want to hold me accountable to the quality of the dinner, the least you can do is let me shop for some of the groceries." And so if you're going to hold us accountable to achieving an outcome, then you have to upfront agree that we're going to have a level of influence. We're going to have a seat at the table. Not, "You're going to do what we tell you to do." That's not realistic. But you have to commit that there's going to be the influence, like, you're going to treat us as if we were a member of your senior team at the board room table.

KD: Right, you have a seat at the table, yeah. Let me ask you this in regards to the categorization. How does that manifest itself in the communications or in the conversations you have with prospects? Are these externally facing? Do they know that you categorize as such? How does the sales process change when you've been able to identify one category solutions versus outcome? How do they manifest?

DD: If we do the sales process right, the client never has any idea that that's a piece of—

KD: —Of how you're thinking about it.

DD: Right. And so, you know, we're coming in with an outcomes program, we're focused on identifying, you know, what's the cause of the problem? What's the value of the outcome? What's needed to achieve that? What's the minimum to be able to achieve that? And so forth. Or if we see it as a solutions program, we go down that road and we don't necessarily call it out. I had a situation, and this is where we really began to formalize it. By the way, we have this on our website, we have a page, you know, our pricing pages, our philosophy on pricing. And we actually talk about eight dials that impact what the price is going to be, and the first one is approach, which is what we're talking about here. So a client that we had put a $15,000 proposal in front of, $15,000 a month, who, you know, really liked our approach, liked that we did things a little bit differently than the typical agency was saying, you know, "Doug, I really want to work with you but, I mean I just need to be candid. I see agents all the time. They do this for like $8,000. And, like, I don't have a problem paying you more than somebody but—"

KD: "Double?"

DD: "But yeah, but double? I mean, I got..." And I said, oh, would you like us to do these services for $8,000? We can do that. He knew me well enough to say, "Okay, but what's the catch?" And I said, well, what you've told me to this point is, you need these things to happen and you're hiring us to lead that effort and to guide it and to think through it and to identify when something works, how do we take more advantage of it? And when it's not working and, and the whole ebb and flow, and so we're going to be leading that effort and managing that effort. You're telling me that you wanted outcomes. Now, if I misunderstood that, and what you're telling me is you need good raw inputs, and you're going to be responsible for determining the direction and you're going to drive that, and your team's going to be thinking about these things, then we can certainly provide that, you know. And we're going to be much more in line with what you're used to. And he said, "Oh, okay, I understand that now." I mean I'm short circuiting it a little bit. "But, I understand that now." And, you know, that's how I tell the story. That's how a $15,000 retainer didn't become $8,000 retainer. And I can tell you three years ago, we would have taken that client at $8,000 and we would have said, "Guys, let's do a really good job, and we'll do a great job. And then they'll see the value of what we do, and then they'll increase the retainer and you know, on and on and on."

KD: You probably would still would've done the outcomes approach.

DD: Of course.

KD: At half the price, right?

DD: Correct. And it would have killed us, it would have, you know, the client would have been with us for 12 to 30 months, and it wouldn't have ultimately gone anywhere, and they certainly wouldn't have upgraded. Last year, two thirds of our clients upgraded their services. And the thing that's interesting was we paid no attention, like upgrading clients was not an initiative for us last year, and it had been an initiative every other year, and we failed at that every year.

KD: The one year you de-prioritize it, all of a sudden, it happened.

DD: And the reason was we priced for success, we resourced it correctly, we did the right things, the conversations got deeper, the conversations opened up areas. And because we priced it for success, we were successful, which made the upgrading of it natural as opposed to, "let's subsidize year one or year two to try to prove...", and I've come to the basic conclusion that I don't think that ever works. So we had this, like, magical surprise at the end of that upgrade. But where it's had the biggest impact for us is the disruption in the office is so much less. When we're wrestling, where we used to wrestle with a client, or I've got a team member says, "Why won't they listen to us?" I'm able to say, look, they're in a solutions program, right? Our job is to share what we know and enable their track. So if they want to do it that way, then just say, yeah, you know, let them know if we see something that conflicts. But once we've informed them and they make the decision that they want to stay on that road, just go, "okay boss, what do I need to do to help you go on that road faster?" Right? And our senior strategist spend less time on it, and we're not digging deep to identify and, you know, hey, let's diagnose where this is and what's the unknown because in all candor, they haven't hired us for that. And in many ways, you know, when we talk to them about it, because we almost always started in outcomes, we think out outcomes—

KD: You open up every. Yeah, of course. 

DD: When we talk about that, you know, that's us. Now, I'm not saying that the agency should start at outcomes. I think that there's a huge market out there for solutions, and what I would say to agencies that are listening is if you're going to sell solutions, and by the way, in some ways solutions are more, by the way, these clients that used to not be profitable at the solutions level, are now like really profitable. They're a hell of a lot less stressful than our outcomes. Like we lose sleep on our outcomes clients. Our solutions clients are like... We had one client that we were wrestling with, they love us more than ever and, you know, because we're not fighting with them anymore. And so they're more profitable and you know, all those things have come together to work really well. So, you know, to me, it's about finding what's the right place for you and then you know, the way you're going to operate and price what you promise. And that's going to get us outta this just kind of treadmill that I see more and more agencies struggling with.

KD: Besides just the higher price tag, are there any other differences in the way they do business with you for an outcomes program versus solutions? Are any other terms or nuances to the contract, is there anything else that's different besides the price tag?

DD: So there's the influence piece you know, there's the commitment of influence that we talked about.

KD: In what shape or what format does that manifest? What does that look like when you position that to them?

DD: It's more just a stated agreement. And so when that resistance comes up, what we get to say is, remember, when we first started talking, you know, we talked about this and we talked about, you know, we all agreed that to get where you want to go, you're going to have to do things that you're unfamiliar with or uncomfortable with. Which, you know, sounds really good when you say it before you start doing anything. Now you're uncomfortable with it, so you're pushing against it. And so we're able to say, you know, look, if you're not going to do this, look, it's your company, it's not ours. But understand that is going to influence what that outcome is and it becomes just a... in the past that was a defensive conversation. Now it's just a, it's the conversation that a VP of sales has with their CEO. It says, "Hey, you know, if you want me to take this track instead of that track, look, I work for you but that's what this decision means.” And then, for some of our programs, we do have success fees. So like, especially if we're doing any of our outsourced sales development, or if we're managing or running their sales development team, we'll have success fees associated with sales qualified leads that are created. And as we move down the road, I think we'll move into the place and we've done this at times with people where we get certain participation based on certain metrics. And then the, you know, the uber opportunity down the path is, you know, potentially part of what you're providing from a services perspective, you get, you know, an equity piece, things like that. A core principle, I've seen a lot of companies, who do what we do, who go bankrupt on that on that basis. Because first off, if you subsidize your fee for the upside; what happens is you say, “hey, you know what, you know this works, it's going to be worth millions of dollars, etc. So, you know, I'll take this and then I'll get to participate in the upside.” The problem is, and I've seen it, you get to the point where all of a sudden, you say we're going to get, you know, 5% of sales above $10 million. And now they're on course to do $100 million. And you're like, you know, 5% you, $4.5 million, right? I'm sorry, $450,000. And what happens is they look at you and they go, "what we see where we're going, you know. Hey, Doug, I get it. We're not paying you $450,000 for this." So you're basically put in this place where you either get fired because they fire you before they have to pay you that upside fee, or you end up, you know, you don't let them fire you, you negotiated down and you took all the downside risk, and they have that flexibility. So we will always price for profit, right? And so if we can't deliver the service to you on the fee that you're providing, then we're not going to let upside participation blind us.

KD: Interesting.

DD: To go ahead and do that. Cause again, we only have, we have a very limited influence on what the actual result is, you know, the funniest story that I can tell is the most successful engagement I've ever had in my entire business life. The company was 52% below where they were the year after working with us than the year before working with us. They were down 52%. And you go, well, how's that a success story? Well, it was a distributor of concrete and aggregate materials to road and home builders in 2008 going into 2009 and 2010. They were down 52%, their industry was down 80%. The CEO said to me literally, "Doug, if we hadn't started working with you when we did, we would probably not be in business."

KD: Right, we would have had to close up shop.

DD: Now, what if I had priced on upside? What if I had priced on results? And the thing that was interesting is when the proverbial, you know what, started to hit the fan, that's when we had to dig deep, that's when. I mean I had three hour phone conversations with the CEO. If they had been priced for upside, we woulda just stopped paying attention to them because hey, we're not getting upside. And it's interesting because when you need me most is when it's not working, when it's at its worst. And so, you know, understanding that, it sounds really good in theory that it aligns our interests.

KD: But you have to understand the philosophy against it. I see what you're saying.

DD: Yeah. How many people hire employees? Like you have stock options here, right? But that's not the only thing that you're paid, right? You get a salary. And if your salary didn't cover your, you know, your lifestyle and enable you to do what you do, you know, the stock options wouldn't be anywhere near as attractive. Right? So what the stock options do or what the stock does is it says, on the upside, on the outlier upside, if you do your job and we do great things and really big things happen, then you'll participate in it cause we think you can be part of it. That's where our interests are joined. That's where we would bring that upside participation to an outcomes program.

KD: Final question for you. So, we close every episode with this. What is the, not necessarily related to the topic by the way, but what is the weirdest part of agency life?

DD: Wow! The weirdest part of agency life.

KD: Besides impromptu trips to Boston every once in a while.

DD: Besides impromptu, yeah, you shoulda warned me with that question. Wow, I'm usually better—

KD: See, I like to catch folks off guard, you know.

DD: You know, it's the weirdest part of agency life and in some ways, it's the most enjoyable part of agency life. And that is, I get to wake up every day and say, what business do I want to be in today? I've had interactions with people, you know, with senior people at my clients' and I go, they're very frustrating conversations, and they happen, right? And I go, I'm not working for you today. And it's like, I remember when I, you know, when I had to report to my boss, and I'd have one of those conversations, and I'd be, you know, angry and it was unfair, and that's not right. And I, you know, have to slog through it. And now I go, you know what, I'm going to put Karen over here. Let's focus on this one, you know, today, and I think that that aspect, combined with, you're deeply involved in the business, but you're not of the business. This really weird, kind of symbiotic relationship of you're kind of in there and you're not in there at the same time. That's probably the weirdest part.

KD: And also one of the most exciting it sounds like too, sure.

DD: And I talk, I actually speak to college students regularly and I talk to them about the fact that you gotta decide, do you want to be a marketer or do you want to work at an agency? If what I just talked about, if you find that intriguing and entertaining, then you'll love agency life. If you find that frustrating, which is totally legitimate to find that frustrating, then be a marketer and--

KD: Go in house—

DD: —Go in house, as opposed to go agency.

KD: That's the right answer. Cool, well, that's it for me, my friend. Thanks for coming on and thanks for the gear. And that's it. This has been Agency Unfiltered. 

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