Raising prices by moving clients to higher-value services (with guest co-host Karl Sakas)

How to pursue more strategic engagements with the right clients.

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Karl Sakas of Sakas and Company fills in for Gini Dietrich as Chip Griffin’s co-host on this episode of the Agency Leadership Podcast.

Chip and Karl discuss how agencies can raise prices and increase revenue from clients by moving them along a continuum toward higher-priced (and higher-value) services.

Quotes

  • Karl: “If you lead with strategy, if you lead with the think activities, you’re positioning yourself as more of an expert, and you can charge more, get paid more, you and your team will be happier, ultimately getting paid more, with fewer hours.”
  • Chip: “Start thinking about it, what are the kinds of activities that I can start to shift and empower my clients to participate in, as opposed to having to do for them, it really allows you to think much more broadly about the value that you can deliver to that client, which at the end of the day is how you continue to get and retain clients by showing that you’re delivering that value.”
  • Karl: “If you’re using teach services to make your clients less dependent on your agency for the really low level stuff that your team hates doing, that sounds like a win.”
  • Chip: “it takes time to be able to move up these tiers, and do it well, because nothing’s going to expose you faster than if you pretend to be an expert in something that you’re not. So really make sure that you have that close alignment between what you’re targeting on these tiers and what you can actually deliver on.”

Resources

Transcript

CHIP: Hello, and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin. And once again, Gini Dietrich has a scheduling conflict. So I am fortunate to be joined by another excellent guest co host. This time it is Karl Sakas of Sakas and Company. He’s a fellow agency consultant. And Jay Baer has described him in probably the most entertaining way that I can think of. So I’ll just use his line, which is that Karl is the Dr. Phil of agency owners and managers, one part confidant, one part ass kicker. So with that, Karl, welcome to the show. Thanks for joining me.

KARL: Hey, Chip. Great to be here.

CHIP: So what did I miss in that intro? Other than that you are the Dr. Phil of the agency world? What should listeners know about you before we jump into the topic du jour?

KARL: Yeah, well, I’ve been involved in marketing, digital marketing, since high school, starting building websites back in the days of dial up. As a consultant, my focus is making agencies sustainable, you know, typically, for most independent agency owners, their agency is likely their number one or number two financial asset. And so ultimately, when I’m working with clients, it’s not just helping them, but it’s helping create a more secure future for their families and less of a roller coaster for their employees and their families.

CHIP: And that is, that is obviously something that a lot of folks can use help with in the the agency space. And frankly, in the the overall business community as well. Lots of small business owners have similar challenges. I love that you mentioned dial up because I have had to explain dial up to so many people in the last five or 10 years that it’s it really makes me feel old. So it’s it’s always nice to talk to someone who I don’t have to explain dial up to.

KARL: But you know, I have friend posted, you know, thinking back to school time, that seeing her classmates, you know, she’s in her early 30s now, seeing her classmates posting about their kids, you know, their kindergarteners, first graders, going back to school, and that it makes her feel old. And her younger sister chimed in who has two kids now. And she said, Imagine how it makes us feel?

CHIP: Right, right. Well, you know, not not too long ago, my wife and I were in a hotel with my teenage boys. And we had actually gotten two rooms in it, we weren’t able to get them adjoining, so the boys, the boys were in one room. And so obviously, normally we communicate by cell phone, but we figured you know, let’s explain, you know, you can call from room to room, too, if you need to reach us for something. And so, so I went down to their room and made a test call to show them how you use that hotel’s dialing system. And so my son was on the phone, he was I think 13 at the time. And so the call was over. He says, What do I do with this? because it was a corded phone. And he had never seen a corded phone. He didn’t know you had to hang it up in the actual slot. That was rather depressing. But… for me, at least not for him. He just thought I was an old fart. So any case, enough of that, and and let’s jump into the the topic of the day. You know, having talked with a lot of agency owners over the course of my career, and obviously more recently now as a consultant, one of the key topics that is often on the plate is how do I raise prices? How do I get more revenue out of my existing clients, existing prospects? And this is something that you’ve given a lot of thought to, and you’ve, you frankly, you’ve created a lot of great content in general, but in particular, on this topic, you have a framework that you use to think about it and encourage agency owners to think about so I thought this would be a fantastic topic for us to jump into. So if I’m an agency owner, and I’m thinking, you know, how do I raise my prices by delivering higher end services to my clients? How should I be thinking, what should I be doing?

KARL: Well, it starts by thinking strategically about your services, and what are your clients buying when they pay for each of your services, and ultimately, in my work I’ve identified, that every agency service fits into three categories. Those three are: think, teach, and do. Think is about strategies, your clients are saying, I don’t know what to do. Tell me what to do. Teach is about training and empowerment, that’s where a client is saying, I want to do it myself, do it in house, can you help me learn how to do it and or help me find people to do it? And then do is about implementation where the client is saying do it for me.

CHIP: I think this, I mean, this really is a great way of thinking about it. And I think too often clients see the agency more as someone who just does stuff as the implementer. So at the wrong end of that list to charge the premium prices that a lot of agencies want to charge. So how do you break out of that perception? How do you as an agency owner, or an agency executive, convince your clients to think of you differently?

KARL: It is hard to convince your existing clients. So I would recommend focusing on new clients first, you know, if a new client sees you primarily as a strategic agency focusing on think services, and to an extent teach as well, where you’re doing training and empowerment, it’s a lot easier to focus there and then doing implementation is sort of the secondary thing. They’re like, wow, the strategy is great. Can you help us actually make it happen? And the answer usually is yes, you know, so I’m not saying don’t do any implementation at all. But if you lead with strategy, if you lead with the think activities, you’re positioning yourself as more of an expert, and you can charge more, get paid more, you and your team will be happier, ultimately getting paid more, with fewer hours.

CHIP: Right and just about every agency that I’ve ever worked with claims to, to be most interested in and most focused on the strategic and that’s really, you know, where they want their, their attention to be. But oftentimes, that doesn’t play out in the way that they actually operationalize things or the way that they’re, they’re working with clients. And I think one of the ways that from your framework that you can use to help bridge that gap, is that teach portion. Because I think most agencies are doing the think, or they’re doing the do or maybe they’re doing both. The teach is one that I think is underutilized by a lot of agencies, because it can be a good way to shift some of the less profitable work over to the client and allow you to spend more time on the strategic piece that you can demonstrate real value from

KARL: For sure, I would agree that out of the three- think, teach, do – teach, training and empowerment is definitely the the undersold underused opportunity. And here’s the thing, if you, if you consider what your agency is doing now, you’re probably doing some degree of training already, you know, certainly thinking PR firms with, say, media training, or if you’re doing web design and development, you’re training clients, in how to use the website that you just buitd for them, and things like that. So you’re probably doing at least some teach activities now. But you may not be charging enough for that, you know, you may be just throwing it in, it’s okay to include things, you don’t always have to charge for everything. But if you’re going to deliver value and not charge for it, I recommend framing it to clients as what I would call strategically free. So you could say, you know, we had some extra time this week, normally, we would have to charge a rush rate for that, we like working with you, we had the extra time we were able to waive the rush fee, and charge the regular rate. Or you know, might say, because you opted for the higher end package, we’ve included this training, which is normally a $500 value, thousand dollar value, $3,000 value, however much, we’ve included that at no additional charge, but it’s normally a such and such value, they’ll be strategically free. The other opportunity to consider with teach activities is around building residual income. You know, if you develop a training for one client, odds are you can deliver that training to other clients, obviously scrubbing any identifying information, so that there’s a residual income opportunity, whether it’s delivering live training, or if it’s in eventually building out products, of course products don’t directly fit into think-teach-do it’s a services framework. But you know, it’s a good opportunity to grow your agency.

CHIP: Absolutely. And I think I think one of the reasons why agencies tend to shy away from the teach or, the training piece is out of fear. They’re afraid, in some cases that if they educate the client, then the client will become less dependent upon them. And so they could end up sort of training away their business. But that’s really not the right way to think about it. Because it is the way that you can transition to the higher value for the client and the higher margin for you as an agency, if you’re able to use this effectively.

KARL: For sure, you know, if you’re using teach services to make your clients less dependent on your agency for the really low level stuff that your team hates doing, that sounds like a win.

CHIP: I would think so. I mean, that’s, you know, and particularly because so many agencies get bogged down in simply becoming arms and legs for clients. And there’s, there’s certainly a role for that. But ultimately, if you as an agency, are simply being arms and legs for your client, first of all, the margin on that for you is not going to be very good. The return on investment for the client typically isn’t all that good, because they could probably hire someone to do it more cheaply, because you have to make your margin in the middle. And so if you start thinking about it, you know, okay, you know, what are the kinds of activities that I can start to shift and empower my clients to participate in, as opposed to having to do for them, it really does, it allows you to think much more broadly about the value that you can deliver to that client, which at the end of the day is how you continue to get and retain clients by showing that you’re delivering that value.

KARL: Yes. And here’s the thing, you know, with trends around clients taking things in house, if a client has decided to take certain things in house, you’re not going to stop them. Why not position yourself as a trusted partner, help them make the transition and get paid to help them make it happen? And the other piece is that move in house usually does not go quite as smoothly as your client has promised their boss, it’ll go. I was at an agency where we had recommended a client shift some of their web development work in house, we’ve been doing it for a while the workload was such that it made sense for them to hire, in fact, several people, and we’d been recommending it for a while. And we ultimately help them recruit people help with strategy as they were bringing in some lower level people to do the implementation. That process took two years, it wasn’t an overnight thing. And we were getting paid in the meantime. And we were also developing new skills, for instance, around recruiting and screening people. And ultimately building a pool of candidates where not everyone was a match for this specific client. But some people might be matches for others.

CHIP: And I think that’s you know, one of the values that you can have as an agency working with clients is to make sure that you’re continuously evolving the relationship, because the client’s needs are going to shift over time. Your agency is going to grow in it’s experience. If you’re doing the same thing for a client today that you were doing three years ago, chances are they’re perceiving your value to be diminishing, chances are you’re over servicing them more and more. So if you can make adjustments to the kinds of services that you’re delivering, that will be better for both parties over time as well.

KARL: Yes.

CHIP: And I think you know, one of the the other interesting things that you’ve written about is essentially that not all strategy is created equal. So you know, we’ve talked about strategy generally, so far in this conversation, but really, there are different kinds of strategy, and some of it has much higher value than others. So why don’t you explain your philosophy around that? Because I think that’s something that a lot of agency owners need to be thinking about, don’t just use strategy as a catch all think about it in terms of different types of strategy.

KARL: Exactly. Well, there are in my work, I’ve identified five tiers, different levels of strategy work that your agency might do. And the value of understanding the tiers is that if you know what tier or tiers you’re delivering at, you can identify ways to up level and start selling in a higher value tier, you also may decide that you don’t want to move up, that’s okay. So here are the the five, the very top would be business strategy. And this is again, from primarily the client’s perception, business strategy, is what is the strategy that is running their entire business, not just marketing, not just PR, it’s their business as a whole. Then the next level, if we’re focusing on marketing, there’s different areas of the business have have different areas here, you would look at integrated marketing strategy, you know, across the entire business, then you would look at, it could be digital marketing strategy, it could be public relations strategy, They’re digging in deeper.

CHIP: Much, much more tactical.

KARL: Exactly, exactly. Below that would be channel strategy. So for instance, SEO or PPC or social, you can even get more granular into say organic social versus paid social, things like that. And then at the very bottom would be campaign strategy that is at a campaign level, what is the strategy for making it work? So business strategy at the top, then integrated marketing, then digital or otherwise marketing strategy, channel strategy, and then finally campaign strategy.

CHIP: And I think part of the trick here as an agency leader is to understand, you know, we’re on this continuum where in this, this tiered structure you should be focusing, and, and where you can make sure that you’re delivering the most value. And so let me explain, in particular, you need to understand what it is that you are able to do well. So you know while we sit there and say business strategy is at the top tier, it has the highest value. I’ve seen a lot of agencies say, okay, yes, we, you know, we can jump right into that business strategy, but they may have neither the business background nor the levels of expertise in their client’s business, to do that effectively. So you, you want to make sure that you’re you’re playing in the right sandbox, that doesn’t mean that, you know, even if you’re not ready to do that today, you couldn’t be ready to do that down the road. But it takes time to be able to move up these tiers, and do it well, because, you know, nothing’s going to expose you faster than if you pretend to be an expert in something that you’re not. So really make sure that you have that close alignment between what you’re what you’re targeting on these tiers and what you can actually deliver on.

KARL: Make sense. Fake it till you make it only goes so far.

CHIP: It does not tend to work too well on the retention side of the equation. Where you tend to have a lot of churn amongst your clients, which is generally not real helpful in any business, but particularly in the agency world where you tend to improve your profits over time as the relationship goes, at least for a period of time before as I talked about before it starts declining again, as you start over servicing. But that’s a topic for another show. But I do think you know, one of the one of the things I would underscore here is the value in agency owners learning more about business strategy, generally. So it frankly, will help them in their own businesses. So if you’re listening to this, there’s a good chance that you are an accidental agency owner, you started out as a freelancer, and all of a sudden, got enough work that you could sub out some work to have some contractors, and then you said, Well, look, I can just start hiring people and, and it just kind of went from there. But you didn’t necessarily come into it with a business background, or really even set it up with a business mindset. And that’s come to you over time. The more that you learn about business, the more you can do on your agency. But more importantly, the more you understand about business, the more effective you can be in translating the PR, the marketing, the digital, whatever strategies you have to your client’s goals and objectives. And if you can make that tie in, and if you can really demonstrate how you’re helping, that will make you much stickier, and it will allow you to sell at that higher price point we were talking about.

KARL: Absolutely. And I think that also underlines the importance of specializing by industry. You know, there are plenty of agencies who are generalists. They’ll work with anyone on anything. This has a tendency to go badly. You know, you’re reinventing the wheel. Every time you work with a new client, you’re basically learning their industry as you’re doing work for them, which clients eventually will notice. And it also leads to saying yes to things that aren’t a good fit, aren’t going to be profitable. A friend was at a digital agency as a project manager, one of their long term clients said, Hey, we love the work you do for us digitally, we want you to do the interior decorating for our new office. Hmm, the digital agency had no experience in this, the PM happened to have an interest in interior decorating. And that is how she found herself one day at the fabric store looking at upholstery swatches. This was not a profitable project. They didn’t…It was okay, but not certainly not their targets. And it’s also not something they can really use in their portfolio because no one’s going to come to them out of the blue and say we hey, digital agency, we’d like you to do the interior decorating.

CHIP: Right. And probably the first tell us when she went to the fabric store and asked for some color swatches by hex code. And they said what? Wait a minute.

KARL: A little head scratching. You know, and think about the the industry piece. You know, for instance, if you focus on hospitality related clients. You know, a few years back with the Marriott and Starwood merger or acquisition, you know, that’s the kind of thing where you need to know immediately, what are the implications of that? What are the potential implications? You’re not going to know everything. But if you’re working with clients who are in hospitality, and aren’t Marriott and Starwood, they’re going to want to know and is your agency positioned as the firm that can advise them? Or do they see you as just the people making press releases and updating their website?

CHIP: Right, and part of the challenge is that more often than not, clients come to an agency, with the tactical in mind with the do the implementation, they come to you and say, I need a website, I need you to help me put out press releases, I need your help marketing this event or you know, things that are, you know, that are really down that end of the spectrum. And that, you know, one of the things that you need to do as an agency owner is we’ve talked about understanding business, generally, we’ve talked about understanding the industry in which you’re specializing, but you also need to make sure that you really understand your clients. And that means don’t just be an order taker, if someone comes to you and says, I need a website, or I need press releases, really ask questions and then thoughtfully listen to what they’re saying, try to uncover what they’re really trying to achieve. Are they doing this because, you know, they’ve they’ve got a lead generation problem? Are they doing this because they’ve got a reputation problem? You know, what is it that you’re trying to solve for them? Because the better you understand that, the better you can match up your service delivery offering to solving that challenge. And, frankly, I’ve seen so many agencies go off the rails because they didn’t get to that truth early enough. And somewhere down the road, they find out Well, the reason why we’re doing a website has nothing to do with lead generation. And instead it’s more about reputation, but I built a site all about lead generation. Right? That doesn’t that doesn’t do any good. Because you made assumptions, You need to really unearth, what it is that’s moving people and and frankly, some of that goes to the other challenge that I’ve seen is if you can find out what the incentives are that your client contacts have. So you know, for example…

KARL: example, and personal. Yes.

CHIP: Exactly. Yeah. And, you know, I’ve had cases where I’ve been working with agencies, and they find out somewhere down the road that their client is being bonused on a certain metric. Well, if you know that, then obviously, you’ll make sure that you are focusing on that as one of the pieces of the puzzle that you’re addressing. Doesn’t mean that you do it to the exclusion of everything else. But certainly, if I know that my client contact is going to be bonus on data point x, I’m certainly going to be tracking data point x really closely, right? Because it’s probably going to control whether they’re going to renew my contract.

KARL: Yes, I think a lot of agencies focus too much on… there’s a model warmth and competence from the book, The Human Brand by Chris Malone and Susan Fiske, really good book. And competence is basically are you doing the job? was it done to specification? was it done on time on budget, that kind of thing? And a lot of agencies focus on competence, you know, did we do the job we were supposed to do. And sometimes they will miss out on warmth. Warmth, is basically making your clients feel special, that it’s not just an entirely transactional relationship. And so you might have a situation where you know, the client doesn’t remember that you delivered, you know, deliverable number three on time. But they do remember that you embarrass them in front of their boss in a meeting, because you didn’t do a pre meeting to discuss what was happening. A lot of people are like, oh, pre meeting, the meeting about the meeting, and then the meeting after the meeting about the meeting. No, do them and budget for them. Because if there’s going to be some sort of a surprise, work it out with your contact first, before you make them look bad.

CHIP: Well, and you know, I think that one of the the keys to being a strategic advisor to your client, is that you ask a lot of questions, and you do a lot of listening. Yeah. And there is a misperception among many people, that strategy means giving people the answers, just, you know, telling them what to do. And that is not what it is at all. I know. I’m sure the same is with you. When you work with an agency client, you probably ask more questions than, than they’re first anticipating, you know, when you sit down with them, it’s, you know, it’s really trying to learn as much as you can about their particular business. They may come in saying, you know, how do I, how do I onboard clients? Or how do I charge more? And you can’t just give an answer, you need to ask questions, and really understand what they’re doing today, what their specialties are, what they’re… all of those different things. And it’s the same with your agency’s clients, you need to be asking those questions, really listening to what they’re saying. And that’s the only way that you can help shape strategy together with them. Because you’re not giving the client strategy, you’re working with them to get to the right point.

KARL: It sounds like we have a theme, you know, if you want to charge more, there are different things you can do – think about your services, but the power of active listening.

CHIP: I think it’s one of the most important skills you can have in life. But certainly, it’s also one of the most important ones that you can have as an agency owner. I think that’s actually a good point to sort of start to wind down on because hopefully, people have been actively listening to us and finding some value in what we have – maybe adjusting the strategy of their own business and their own agency. But are there other things that we haven’t covered on this topic that you think would be good to share with the listeners before we wrap up?

KARL: For a way to organize that, that digging into better understanding your clients, I have a model that I call VGR: values, goals and resources. This works with your clients, it also works in delegating to your team. And the idea is that the more you understand about your clients’ values, how they choose to operate, the more you understand about their goals, where they’re going personally and professionally, and their resources in terms of the people and time and money available to get things done. When you understand those, you can better meet their needs. And if you’re tired of your team asking you constantly, you know, questions that you’re like, thinking, why aren’t you answering this yourself? Well, they probably don’t know your values, goals and resources. If they know the VGRs they can make better decisions without you having to make a decision every time. So I have an article on that we can glad to share for the show notes resources. If you think about values, goals, resources, it’s a lot easier to get the info you need.

CHIP: Well, I think you know that underscores the point that Gini and I talked about on a show not too long ago about the importance of internal communications within your agency, right? Going to your point, you’re going to field a lot of questions from your team that you think are silly if you’re not communicating effectively. And as I was discussing with an agency owner, just yesterday, making sure that they understand the why behind a lot of it is really, really important. You know, when you tell someone, hey, I need you to be doing timesheets, make sure they understand why. Because if they don’t, if they don’t understand the context of that, they’re just going to sit there and say, Wow, this is just brutal. Why are you making me do this? I don’t know. I don’t care about it. It’s you’re just giving me busy work. And frankly, I’m not telling you they’re going to love time sheets, even after you explain the why but at least it will help them understand why they’re having to go through that process that none of us like.

KARL: Exactly. My favorite time sheets solution, by the way. So a couple years ago an agency in Chicago. If you wanted to get beer on Fridays, you had an RFID. wristband. And if you had not loaded your time, no beer for you.

CHIP: That is, that’s a good tactic. I’ll have to think about sharing that one with some of my clients who are having compliance challenges around that. Maybe beer is the answer.

KARL: As we discussed, it’s all about the incentives.

CHIP: Absolutely. Absolutely. Well, hopefully we’ve given you a lot to think about as listeners on this episode. Karl, if someone would like to learn more about you, we will obviously include links to the myriad of resources that we’ve discussed so far in the show notes. So if you’re on the treadmill, or driving in the car, by all means, don’t crash now just you know, come back, look at the show notes on the website, and you’ll have all the links there. But where else should they go? How can they find you online?

KARL: On Twitter, I’m Karl Sakas. That’s KARLSAKAS. And if you’re looking for ongoing tips that come to you, I share regular agency business tips in my newsletter, you can go to Sakasandcompany.com, and get that along with my ebook: Don’t Just Make the Logo Bigger, Taking Clients from Painful to Profitable.

CHIP: And I would highly encourage everybody to sign up for Karl’s email newsletter because it’s always chock full of not just useful stuff, but really things that you can act upon as you get it. And I think that’s, that’s the mark of good content these days. It’s practical, it’s actionable, and it’s timely. So go ahead and go over to the website, get the links, click over there, get that material. And then of course, come back and listen to us on the next episode of the Agency Leadership Podcast. Will Gini be here? I don’t know. We’ll just have to find out. It’s a surprise on the next episode. But in the meantime, it depends.

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