Agency Unfiltered - John and Lucy from ESM Inbound

Why We Began Productizing Agency Services

John and Lucy, Directors of ESM Inbound, have built out a unique structure to their pricing, billing, and contracts: their services are productized and available a la carte and without any retainer commitments. Learn more about their motivations, successes, and lessons learned in making the pivot to productizing their services.

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Episode Transcript

Hi folks, my name is Kevin Dunn and welcome to Agency Unfiltered, a bi-weekly web series and podcast that interviews agency owners, around agency operations, growth and scale. Nobody knows how to scale agencies than those that are already doing it and they're happy to share an unfiltered look into what has worked and what hasn't. Joining us today is John Kelleher and Lucy Seymour Directors of ESM Inbound, a London based agency. Using the adage "how you sell is why you win”, ESM Inbound made a move to productize their agency services. Clients can buy individual services and products a la carte with no retainer commitments and frictionless cancellation. Learn more about their decision to make this pivot, their early successes and their lessons learned in this episode of Agency Unfiltered.

KD Well guys, thank you so much for joining Agency Unfiltered. We're super excited to have you both.

JK: Thank you for having us.

KD: This is going to be a great topic. It sounds like you're doing some interesting things in the way that you build your contracts and you communicate your services out to clients. You could probably explain it more eloquently but, if I say productizing your agency services, what exactly does that look like for EMS Inbound?

JK: Yeah, it's looked like a lot of things over a long time. Originally we were like many of our HubSpot partner agencies with 3 sets of retained packages. Those retainers were 12 month arrangements and with maybe 6-month or 90-day break clauses in there, sometimes even 30-days, and then we started listening, probably at partner day last year, and we really first heard the message of the flywheel and the whole “sell how you want to be sold to” thing. I thought, there's nothing I buy where I am signing up to a 12-month retainer. And, of that magnitude and at that cost, that feels like that's how I want to buy. So we thought, how do we buy stuff? What we buy stuff on low commitment on subscriptions, on easy cancellation and stuff like that. Is that possible to take to an agency model? Well, we gave it a go and it’s worked, so now we offer people the ability to buy a blog post, or a landing page, or a workflow without any commitments or retainer. They can buy a retainer if they want but if they do buy that retainer then they can cancel anytime before their next billing date. There's not even 30-days notice. It can be one day's notice.

KD: So I would say, as compared to a traditional agency retainer model, this seems like a pretty drastic pivot, right? When did you realize that it was time? Was it just this idea of us, as buyers, we know how we want to be sold or how we want to buy but how did you know it was time for the Agency to roll that out?

JK: So, I think the idea for it had been simmering in the background for quite a while. So, um, we had been listening to the freemium model and looking at the way Hub Spot was positioned for freemium and even suggesting its agencies and there's even a case study of us on the Hub Spot website of how we had to use freemium before. We weren't really using freemium with our services or even that low commitment level. So the idea had been bubbling for a long time and as we were finding it harder and harder to sell longer retainers, we thought we needed to take some drastic action to make it much easier to win a bid and to reduce the sales cycle.

KD: You felt the friction in the sales process. “How do we solve for this?”

JK: Absolutely, yeah so we wanted to cut down the days to close for working with us; we wanted to to make it so it was easier to get started and start seeing results. And that would, in theory, lead to longer term commitments, and I think it's safe to say that it has done as well.

KD: That's great, happy to hear that. What does the roll out process look like? Right, I would assume that all of your sales documentation, your proposals, your conversations, I would assume a lot of aspects had to change to accommodate, like, well, what assets in particular do you want, like, developed and here's kind of the new contract terms. How did you go about rolling that out? What does it look like now?

JK: The first thing that had to change was our pricing page and we added the new page to the website that was a task request page.

KD: Task request page?

JK: Yeah, absolutely. So instead of it being, “here is what you would get if you signed up for this package”, it was, "Oh! You want this? Fill in this form. We'll just send you a bill and then we will do it" It was a paid up front thing so, again, just like a product, if I go to Amazon, I have to pay before they deliver it to me in a day. And you have to pay before you get your blog post delivered to you in 4 days. So we had that task request page there to really signify that change overall. And it's only once they go past that form on the page, that they see any reference to an option for a retainer at all. So, we just had to go back to, as you say, the sales documentation and our marketing collateral, and start rolling that back into what would a component deliverables, that we were talking about, and putting that at the front and center of our sales and marketing collateral. And that's what lead to having positioned it and having put it out there for people to see, and that's why I think it lead to getting increased inbound inquiries and people actually, rather than actually coming to our website saying “can I talk someone about this?” Having people coming to our website and saying "Can I have this?" And it wasn't a competitive process. Wasn't a bid. It wasn't a pitch. It was "I want this!"

LS: And it was a real opportunity for people to try before they buy as well and to build that trust and then to have a completely risk free way to see what it would be like to work with us. And to build up that relationship from there.

KD: That's great! Do you know what percentage of folks that initially came from a task inquiry have moved on to a full retainer? How does that feel in comparison to what your traditional or old retainer business was like? How does that compare?

JK: So, I think the volume comparison—there isn't a comparison. So few retainers were coming in, we had enough to keep an agency going and to build an agency, but we didn't have enough coming in that can compare to non-per tasks. So the volume would make a percentage comparison very different but, in terms of people who come in and request something, and then go on to request something else, I'd say that that's more common than not. So people very rarely come and say, "Oh, I want you to design these templates for me" and then say "I don't want anything else from you ever again. We've made it easier to work with us so they come back again.

KD: So the volume of task inquiries coming in drastically outweighs the total volume of retainers you have? But you're also saying that the majority of these inquiries go well enough where they continue to request additional work or services.

JK: Yeah, it's definitely recurring business not necessarily retainer but definitely recurring revenue.

KD: What did it change from a revenue forecasting perspective? I would assume that there's now a layer of uncertainty that you didn't have. How does that, how did you manage that or how did you accommodate that?

JK: So our predictable revenue is still based on retainers by and large, but we do know what we expect as a minimum in from task-based or project-based work. So we work on the assumption that it's that worst-case scenario of X many tasks worth X amount. We work from there. We build the infrastructure of the agency around that minimum worse case scenario and, typically, we will exceed that. And I don't think we've actually missed that minimum number, ever.

LS: Our forecasting has been pretty spot on.

KD: So there's like you, going back to timing, right, you knew, like, okay, you have the retainer business that supports the kind of foundation of the agency knowing that that's in place, we have the ability to know that there is a layer of uncertainty but it sounds like, again, you're meeting and exceeding sales goals as they come in. And to your point, too, the task inquiry form sounds like it continues to grow, and its a lever for repeat business. That's great.

JK: And its fair to say, as well, I think that those retainers that we had before we moved into this model have come to a close, in terms of the original, um, the original contract. We haven't sold them onto the same contract that they had in the first place. We've moved them onto these 30-day retainers where they can cancel up to any day up to the next one. And they love that and I think that, by and large, the values of those retainers have actually increased because people know that if they need to, next month they can cut that down to zero or to half or whatever it might be.

KD: So you have actually seen it help the revenue coming in from those retainers by moving, transitioning them to the new cancellation policy.

JK: Absolutely, our retained business is now worth more than it was before we did this model.

KD: Obviously, this whole idea is behind we want to sell the way consumers want to buy. So what has the feedback been from clients—anecdotal or otherwise. How have they communicated, or how do they define working with you guys under this new model?

LS: I think they're a lot happier with how open the relationship is. And there is definitely a lot more trust just coming back, again, to this idea that you can cancel at any time it's absolutely fine. We're not locking you in. We have nothing to hide. And that's really driven our processes as well with customers. The turn around times for a task are as predictable as they can possibly be, if we say that we're going to deliver something in a certain amount of time, it is because our processes support that.

KD: From that perspective of delivery and process, I would assume that there's a huge time tracking element here? So like walk me through, how much time tracking, where do you need to be from a time tracking perspective to feel confident rolling out this, sort of, new productized model?

LS: So we, over the course of about 2 years, would you say 2 1/2 years, we religiously toggled every single task that we did—whether that was something we did for ourselves, for our own marketing internally or for customers and kind of found that average time for each deliverable and we then used that to figure out our pricing. From there, our turn around time so, typically, if say a blog post is one point worth of work, that would be four times the number of points that we could realistically expect to turn that around for the customer. And then, behind the scenes, we have all of the processes that are in place to support that and, so, we have a really tight QA process which means, ideally, 9 times out of 10 I would say, that we keep revisions to an absolute minimum. We include a certain amount of revisions, of course, and again that goes back to the trust factor.

KD: So you communicate a cap on revisions?

LS: Yeah, a maximum of two revisions in total. I mean, we don't even start on a piece of content for example, until we've had a conversation about it which scopes out very clearly exactly what that piece of content is designed to do and what the CTA will be, how it fits into that customer’s wider strategy, and what they don't want to include. Every single detail is covered off in that conversation. We then go and write a plan and we then complete our research and make that we've covered every single possible base and, its only at that point that we will ask whether the customer approves the plan or not and if its a thumbs up, that's great, we go and create the content and, if not, we have to go and have another conversation.

KD: So the time frame for the delivery, you said it's always 4 times the point value. So if the blog post is one point, it's going to be 4 days from there. But, you don't start counting, and the clock doesn't start ticking, until you've got the sign up on that plan and research has been conducted.

LS: Exactly. And obviously, then we have processes in place to complete all of the previous steps as quickly as possible but there has to be some leeway there because, obviously, customers don't always have infinite amounts of time. They may not want to be that involved in the process and that is fine too. So we can go away and confidently produce the plan that we know they'll be happy with and they can take sign off and we go from there. It's really kind of molded to what the customer wants and how involved they want to be.

KD: That's great. Um, obviously we've mentioned points a couple of times, I assume that some folks watching are familiar with points. Maybe others aren't. What motivated your decision to incorporate, like, points based pricing for the productized assets.

JK: So our journey in pricing and packaging has been a very, very long one overall. So when we very first started, we didn't really have any sort of meat around what we were doing. We had different packages that had different deliverables. But we didn't actually, originally, have time tracking or hourly tracking in place. We just did stuff. We didn't really realize that we were losing all of our money.

KD: I feel like that's a growing pain that many agencies go through.

JK: Well, yeah. Exactly. We didn't move over to hourly billing. We moved over to points based pricing. Very much inspired by the PR2020 model. And that worked pretty well for us for a long while. But we would often find that people would quibble with us over, “oh in this case, I don't think it's 5 points for this blog post, I think its 4 because I'll do this bit for you”—and stuff like that. So that quibbling over that point value we found, didn't help us deliver the greatest experience. It lead to people just trying to make it much easier for them, etc. And that came from points not equaling an hour, but being starting point is like an hour, you know, one point is roughly an hour. So we stood back from that and thought what can you really do in an hour that's a productized deliverable? You might be able to do, I don't know, a very quick CTA or something like that, but not a lot. Certainly not including 2 revisions within that. So we took points and zoomed right out and said instead of one point being roughly one hour, one point is roughly one day. And that means that you can say, okay, I will do the design of a landing page in one point for you. And that means that people don't go “no, actually is two points.” A point is so clear in its size, that its not that quibble-able—new word! And that meant that we now charged in half a point, one point, two point, three points. Nothing else.

LS: And obviously if people want something turned around faster, we can get more people on it but obviously, that's going to triple down on the points.

KD: And that's for points for particular assets or products, but I can imagine them the agreement might be worth more points if they want a collection of certain things.

JK: Yes, so, we will obviously give preferential pricing on our points if they are signing up for a retainer. And they're not going to be hooked in to 3-months, 6-months. You'll still be on that up until your next billing date arrangement but, the price per point will reduce if they're purchasing 4, 8, 16 points.

KD: There is incentive to have larger agreements.

LS: Absolutely.

KD: Imagine we have successfully sold somebody on the idea to replicate this. “I'm going to go home and I am going to build a tasking request form.” I'm going to start deliver work in this sort of model. Have you encountered any pitfalls, potholes, things that, like growing pains, in trying to roll this out, which others may potentially be able to learn from?

JK: Yeah. I think it's the scope of work factor. So we thought by what we were doing in the first place of productizing, and saying you're getting this blog post, you're getting this workflow, that that was clearly defined. And that kind of was the scope of work. Until you start talking to customers who have completely different definitions of what those words mean. So one might be we say “landing page” and they see that as “7-page micro-site” or something like that. But the more common one was workflow so we were saying okay, we'll build your workflow with X many emails and in X many branches. To them, the emails pointed to a landing page or pointed to the pricing page of their site or whatnot. They would see that as, therefore, you should be building that page for me as well. Well, no, that would be an extra point. And that led to misalignment of expectations around the scope of work. So we've had to accept that when you are productizing, especially if it's worth multiple points rather than one point, like if it's 2 or 3, then we need to itemize the details of that product. So, looking at it as if something is one point, then it’s kind of that is the scope of work. But if something is 2 or 3 points, we need to look at it more as a bundle. So you're going to say "Great you've bought our workflow package" with this many emails, this many branches, it does not include blah.

KD: So you call out exactly what it doesn't include?

JK: Yeah, exactly. And that's allowed us to keep a much better handle on the scope of work. And to make sure that that's communicated in the very first notification that the customer gets, when they fill in their task request form bang this is what's included, this is what's not.

KD: What's next for? Do you have any future state to where you want to take the productized asset delivery? Where's it going from here?

JK: So what we're working on at the moment—this service is working really, really well at sort of mid-market and small business level. And we do have corporate, multinational companies on this sort of service, but they do want more time to brainstorm, to just be able to say I want to just pick up the phone and brainstorm with someone for a while.

KD: A strategy element? Consulting?

JK: Exactly, and what we've always looked to include that sort if you're buying 8 points, you can have a monthly strategy call—we will plan that out and how you're going to use it. Some of those larger organizations want that custom time. So, for the first time ever, we are introducing an hourly billing system that is, literally, if you just want blocks of time, then you can buy a block of time from us, we'll work up to that amount's time just like a traditionally hour arrangement, but then if you want us to do anything it will be on this task driven productized system. So we won't charge you hourly for doing a landing page or what not. We'll help you strategize on an hourly basis and from there, every deliverable will be tasked based.

KD: Final question for you. I ask this of all the guests. What would you say is the weirdest or strangest part of agency life?

LS: Oh gosh...

JK: I think it's coming back to that scope of work. It's realizing that, up until a certain point, you might have been speaking a completely different language to the person you're working for/with. And being really proud of what you've delivered, knowing it's going to hit all of their goals but it doesn't do it how they were expecting and, therefore, there's been a miscommunication somewhere along the line.

KD: We speak different languages, while all speaking the same language sometimes. That's really interesting. I honestly appreciate you guys coming in so much, this has been fun, but I think that's it for us. So I appreciate you taking the time.

LS: Thank you very much.

Thanks for tuning in for another episode of Agency Unfiltered. If you like what you saw, heard or read make sure to subscribe to our playlist on YouTube. Our podcast on Spotify or Apple Podcasts. Or our newsletter on Alongside episode watch notifications, the newsletter also comes a ton of helpful, strategically curated agency content from yours truly. If you want to keep the conversation going, or provide a counterpoint to this episode's discussion tweet me @kevin_dunn. I'll see you again in 2 weeks but in the meantime, keep it unfiltered And let's all grow!

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