Lesson #339: OKRs Unite Companies to Achieve Goals

 

Goals setting is one of those business processes that is really an art. When it is done really well, it can unlock huge performance increases and propel your business to new heights. I was recently introduced to Matt Roberts, the founder of London UK based ZOKRI, whose software helps fast growth companies use Objectives & Key Results (OKRs) driven goals and agile working practices to provide clarity on how growth will be delivered. He is an expert in this space and was gracious enough to allow me to pick his brain to assist me in writing this post.

Why Do Goals Matter? 

The research is clear. Goals serve to direct our efforts towards relevant activities and away from irrelevant ones. Put another way, goals are there to make sure we are doing the right things everyday. The activities that will make a difference.

There are other insights in the research, as well, though. The most important recurring theme is the need for goals to be a challenge to achieve, to push the business forward to new heights. This is why these "harder to hit" goals matter:

• Harder goals are proven to increase our focus and prolong our effort
• Harder goals encourage learning, collaboration and innovation - when goals are easy we don’t need to try as hard

If goals really matter to performance management then it is worth exploring what good looks like to start a process of inquiry and improvement. This post has been written to:

• Introduce the basics of OKRs as a way of setting goals - it’s a leading goal setting framework
• Share common OKR failure points so you can avoid them
• Share examples of OKRs that align and would unite a company and teams
• Emphasize the importance of committing to a update and discussion cadence
• Encourage you to go all-in if you feel that more aligned and ambitious goals and agile execution are for you

An Introduction to OKRs

OKRs are the go-to goal setting framework for start-ups and scale-ups, and they have been around for a long-time. In fact, they can be traced back to a framework called Management By Objectives (MBO), which was used in the 1970’s. Since then, they’ve become a mainstream way of setting goals and managing growth with Google being the most famous of the companies that use the framework.

There is a simplicity to OKRs that is really attractive. Starting with the fact that they have just two entities:

• An Objective - describes the Mission you want people to sign-up to and why
• Key Results - measure the outcomes you are trying to get to. 

Other attributes OKRs have that make them different to other methods like SMART goals are:

• Frequency of discussions - OKRs are designed to be discussed frequently and widely
• Aligned - OKRs are set at the top in the form of Company Objectives and aligned with by teams, both departmental and cross-functional.
• Transparent - OKRs are designed to be shared across teams and not hidden away in silos.

However there are nuances to OKRs that if not understood can cause confusion and even make their introduction a failure that it’s worth understanding.

Common Issues with OKR Implementations to Avoid

Like with the introduction of any new system or way of working, some of what you do and is being asked feels alien or even counterintuitive at first. The most common issues are:

• 100% is not the only definition of success, in fact, the level of ambition and how you work towards the goal often matters more than the final outcome.
• Tasks not outcomes are used for Key Results - usually because teams are not good or comfortable talking about measurement.
• OKRs implemented well are talked about all the time and weekly priorities are constantly aligned and re-aligning execution around them. If agile ways of working are new, OKRs can still become a set-and-forget goal.
• OKRs are expressions of the most important objectives being targeted. They are what teams are being asked to align with and focus on outside their business-as-usual activities. The issue can be that teams describe their roles and everything they are doing as OKRs, so everything and nothing is most important.

How you avoid these issues is with education, coaching and reinforcement of what good looks like, and leadership. 

OKRs that Can Unite a Whole Company

OKRs, when used well, have the ability to not just be a way of setting goals in traditional teams like Sales and Marketing, they have the ability to unite teams around Company goals and encourage the creation of cross-functional teams. Here is an example of a Company Level OKR that could unite and focus a start-up:

Achieve product market fit and be easy to invest in

As measured by:

MRR increases from X to Y

Churn has reduced from X to Y

LTV : CAC Ratio is over 4

NPS is 80+

Teams would be asked to align Objectives with this OKR. Which is what will be discussed next.

It’s easy to see how Marketing and Sales could work together on top, middle and bottom of the funnel OKRs and target the MRR and CAC metrics. What is often not done as well is Product, Data Science and Engineering OKRs.

If these teams go it alone they are highly likely to create OKRs that target improvements in processes and systems that improve their team performance. For example, it’s common for Product Managers to create OKRs around talking to more customers, or Engineering to reduce the bug count or increase story-point velocity.

If you got these teams together and asked them a different question such as ‘how can your team be improved’ and asked everyone, ‘how could the product be improved to help customers?’

To be clear, you can also have a team OKR, but having an OKR that is targeting the customer and the value they need you to provide is more important.

For example, what if your product was hard to learn and it’s stopping you from getting scale. The value you need to provide is:

Make learning our product really easy

As measured by:

80% of new sign-ups complete all 5 engagement tasks

50% of new users invite 5 colleagues to the app

To achieve this you’re going to need Product Management, Engineering, and the UX / Design team to work together, not working in separate silos.

Tracking & Reporting OKR Progress

What then follows on from this is a planning session where Initiatives are proposed, a backlog is created, some are moved to ‘in progress’ and execution begins.

Every Monday the teams propose priorities for the week, share problems, and review related metrics that would support the OKR like Sign-ups Volume, Weekly Average Users.  On a Friday, wins are shared.

This focused agenda and cadence is what keeps the teams connected to the OKR and helps its achievement, and is what OKR software like ZOKRI supports.

Software matters because spreadsheets not only suffer from ‘set and forget’, they are not good at managing the constituent parts of goal and executional conversations, both when teams are together, and when people are working asynchronously.

The reality is you want and need the reminders, alerts, input structure, workflows, integrations, data views and reports. Not having them reduces goal and execution focus, or increases the time and management overhead.

The other part of the argument is that you want to be breaking down the silos not supporting them. Having a friendly easy to navigate common system that shows anyone what teams are trying to accomplish, their progress and priorities has huge advantages. For example, it helps decisions in teams make sense, especially if what is being done conflicts with what you need, as goals provide context for the work being prioritized and committed to.

Mastery is Not Hard But Needs Commitment 

Mastering OKRs is not hard but does take commitment from the top and an understanding that changes in how you plan and collaborate takes time as you are acquiring new skills and embedding new behaviors. The destination and journey can be a rewarding one as it can unite your whole company around a common vision and set of goals. If you want a deeper dive on this, Matt shared this free guide on OKRs which may be helpful.  If any of you need help with setting business goals, call us at Red Rocket.  If any of you need help with measuring and achieving those goals, call Matt's team at ZOKRI.  Matt, thanks again for your help and inspiration here.  

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] George Deeb Discusses Paths to Revenue Growth (on ASBN)

 

I was recently interviewed by the Atlanta Small Business Network (ASBN), an online "television network" serving the small business community, about the various paths to revenue growth.  I thought this video turned out great, and I wanted to share it with all of you, to see if it can be helpful with your own growth efforts.  I hope you like!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above, or feel free to watch it on the ASBN website.

Thanks again to Jim Fitzpatrick and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #338: The 7 Steps to Managing Your Advertising Agency

In my recent post, we learned how to select an advertising agency, with the best skillsets needed for your exact business challenges.  In this post, we are going to learn how to best manage that agency, to ensure both parties are in alignment on key goals and performance metrics.  As you are going to learn, it is not as simple as hitting “autopilot”, crossing your fingers and hoping they get it right.  You will need watchful eyes along the way, helping to get your agency back on the desired track, when they start to stray off course.  Let’s learn more.

1. Set the Business Goals

Everything starts with the business goals.  Your agency needs to be perfectly clear on the budgets they have to work with and what you are defining as success from the campaign.  Sometimes that is upper funnel targets, like growing your overall brand awareness metrics.  But, more often than not, it is lower funnel targets, like hitting a desired revenue level and matching return on ad spend (ROAS) or cost of acquiring a customer (CAC).  It is very difficult to manage for everything at the same time, so set a very specific goal to shoot for.  As an example, a ROAS in the 5x-10x range, or a CAC not to exceed 33% of your average order value (AOV).

2. Set the Target Customers

Every business is different.  If you are a B2B company, you are typically targeting specific companies that would be logical buyers of your products.  Or, more likely, specific employee roles, within those businesses.  For example, if you are selling a social media marketing software, you may be reaching out to a Chief Marketing Officer, or a Director of Social Media, at those target companies.  Understanding that not all companies are created equal.  Maybe you are targeting employees at big enterprise scale Fortune 500 companies, or you are going after employees of small and medium size businesses that can better afford your products.  So, lock down your target company size and the target roles of employees inside those companies, understanding you may have more than one target persona to go after.

If you are a B2C company, you are most likely going after a particularly customer demographic that would be most interested in your products.  Is that men or women?  Is it high income, well-educated people, or more mass market?  Are they aged 21-34 or 55 plus?  Does geography matter, if so add your target states or cities of residence?  And, if you can layer in persona information from various psychographic data sources, that is even better.  For example, is your customer more of a “fitness fanatic” or an “arts and crafter”, to enable media targeting at that “interest” level.  The better you understand your current customer base, the easier it will be to identify the right look-alike targets to go after.  Again, there may be more than one persona here.

3. Set the Media Mix

Mastering your marketing funnel and media mix is a more in-depth conversation that I have written about in the past.  But, at the highest level of understanding, your marketing funnel has three parts: (i) upper funnel, driving awareness of your brand; (ii) middle funnel, driving consideration for your products; and (iii) lower funnel, driving transactions and revenues for your business.  And, there are different media tactics to consider for each stage of the funnel.  For example, maybe you would consider television media for upper funnel, social media for middle funnel and search engine marketing for lower funnel.  That’s why understanding your goals is so important, so we use the right media to help you hit those goals.  So, at this stage, you are deciding how much of your budget to put into each funnel stage (e.g., 20% upper, 30% middle and 50% lower funnel), which tactics for each funnel stage (e.g., social media for middle funnel), and which specific publishers for each tactic (e.g., spend the social media budget evenly between Facebook, Pinterest and Twitter). 

4. Set the Analytics and Reporting

The best advertising agencies these days are as much technology and analytics businesses, as they are creative and branding businesses.  They will make sure your website and campaigns are set up in a way that most all clicks, contacts and transactions can be tracked back to their originating source, including assigning cross-channel marketing attribution metrics.  And, they will build the dashboards that will enable you to easily see which marketing efforts are working towards hitting your desired goals, and which ones are not.  So then, they can easily “dial up” or “dial down” any winning or losing tactics within the campaign.   It is important that the key business goals are being measured in these reports, by funnel stage, by channel, by publisher, by campaign, by creative, etc.  Make sure you are getting these summary reports sent to you on at least a weekly basis, so you can track their progress and make changes quickly, before you waste a lot of money on a “losing” campaign.  And, make sure you are using the right metrics at each funnel stage (e.g., CPV upper funnel, CPL middle funnel and CPA lower funnel).

5. Set the Communications Frequency

Your communications with your agency depends on the size of your budget and how often things are changing.   If it is a relatively small budget and the campaign is largely optimized and static in terms of changes, maybe you can get away with monthly meetings.  If it is a large budget, the campaign is still being set up and lots of testing and changes are being made, more likely you will need weekly meetings with your agency.  But, meetings will be needed for communications both ways.  You will want to make sure the campaign is achieving your goals, and your agency may need guidance from you for anything they are not clear on, or if there is a “fork in the road” that needs your input.

6.  Set the Roles & Responsibilities

Think of setting up multi-leveled roles and responsibilities at both your company and your agency.  Those levels most likely include: (i) executive oversight (e.g., a CMO in your business and a Head of Strategy at your agency) that is not too involved in the day-to-day, but is being kept abreast of the big picture issues; (ii) day-to-day project leadership and management (e.g., a VP-Media Buying in your business and an Account Executive at your agency), that are “quarterbacking” their subordinate teams and keeping everyone on task and on plan; and (iii) the teams in the trenches living and breathing the campaign and the resulting data (e.g., a Social Media Marketing Manager at your company and a Head of Social Media at your agency).  Make sure you have the appropriate teams set up at both your company and your agency, to optimize at each level—strategic, planning and execution.

7.  Rinse and Repeat

Just because you followed the above process doesn’t mean your job is done when you have completed the six steps above.  This is an iterative process—every quarter you should go back to step one, to restudy everything and adjust for any changes in business goals, customer learnings, media learnings, etc. and then reset the campaign in steps two through six for the new learnings.  Plan for quarterly campaign review meetings with your agencies and internal teams at that more strategic level.

Closing Thoughts

I know this sounds like a daunting process, but it is required to make sure you don’t unnecessarily flush any of your marketing dollars down the toilet.  A strong, well-optimized relationship with your advertising agency could be the difference between sales and profits being flat this year, or up 100%.  If you need any help here, don’t hesitate to reach out to me, as I have worked with many agencies in my past, and know the ones who are currently “best of breed” where the rubber hits the road—with smart teams driving a high ROI on your investment.

For future posts, please follow me on Twitter at: @georgedeeb.

How to Increase Your Marketing ROI Through Customizations and Personas

 

The biggest mistake most first-time marketers make is attempting a “one-size fits all” approach to their marketing efforts. They launch one campaign, sent with the same message, to all people. That may work for something that has mass appeal, across all demographics (e.g., promoting ice cream). But, for most of us, we are trying to laser into a very specific target customer. Or, more likely, target customers (plural), each with a different focus. That is when you need to build different target customer personas, segment your lists and customize your marketing messaging to each of those different sub-segments. Allow me to explain in these two examples, one for a B2C business and the other for a B2B business.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #337: The 14 Characteristics of a Fundable Startup CEO

I recently stumbled on this great article below from my good colleague, David Gardner (pictured), the founder and General Partner at Co-Founders Capital, one of the most active early-stage venture capital firms in the Southeast, based in the Raleigh-Durham area.  David was kind enough to let me share this article with all of you startup CEO readers.

What I liked about this article was it was a clear way to score your performance, which isn't easy to do as a CEO, typically with no boss to help critique you.  Whether you are doing it with the lens of what an investor is looking for, as detailed below, or whether you are doing it for yourself, just to see if you are doing a good job, everyone needs to be accountable for their actions, including the CEO!!

If you scored perfectly on the below categories, you would earn a total score of 70.  If you were average in each of these categories, you would earn a score of 42.  And, since nobody is perfect and you want to be materially better than average, I would say shooting for a score of 56 or better is where you want to end up.

So, after reading the article, score yourself, in an honest and self-reflective way, and see how you are doing.  If you are doing well, congrats, keep up the good work and you should have no problem fund raising.  But, if you are not, it's time to sharpen your skills, especially if you plan on raising venture capital.  

Thanks again, David, for sharing your wisdom with our readers.

___________________________

Being a CEO is a tough job especially the first time someone has to wear that hat.  Constructive and actionable feedback can be hard to come by.  It can also be difficult to know how well you are doing and what areas you might need to improve upon when you don’t have a boss observing you firsthand. You can only improve what you measure and CEO performance is no exception to that rule. 

To help our portfolio CEOs, we have developed the following evaluation criteria.  It covers some of the things we look for in a solid operator and leader.  This annual evaluation is meant to be completed by the CEO, their direct reports and the board members in an anonymous 360 aggregated review.  It’s purpose is honest feedback to facilitate awareness and constructive discussion. We ask each reviewer to rate the CEO being reviewed in each of the following 14 categories, on scale from 1 to 5 scale, as defined below:

1. Very deficient and detrimental to the organization
2. Needs a lot of improvement
3. Base level of competency
4. Meeting or exceeding expectations
5. An exceptional strength

1. Transparency: Our CEO is genuine and forthcoming with all information significant to the success of the business.  Bad news is delivered as is and not sugar coated.  Good news is not exaggerated.  Facts are presented dispassionately for what they are.  Our CEO shares more key metrics and data trend lines than anecdotal stories.  Board members are provided with the timely and accurate information they need to asset the business and help the CEO make informed and balanced decisions.

2. Leadership:  Our CEO is trusted by the team and other stakeholders to make the informed and necessary decisions required to keep the company moving forward.  Staff members know what is required of them at all times and how their efforts and performance metrics contribute to overall company goals and objectives.  Our CEO is demanding but fair.  Team members, investors and advisors feel listened to and that their opinions and ideas are heard and help to shape our CEO’s final decisions and policies. Team members trust their CEO to do what he or she says.  Our CEO respects the chain of command and does not circumvent his or her managers.  Our CEO is building a positive company culture that people want to be a part of.   Our CEO is always bringing organization to chaos as our venture grows.

3. Communication:  Our CEO can articulate the company’s mission, differentiations, and value props to all stakeholders and potential shareholders including employees, customers, prospects and investors.  Our CEO’s communication is clear, concise and convincing.  Our CEO can see things from an audience’s perspective and handles objections in a non-offensive manner.  Our CEO can speak in terms of value propositions that are relevant to his or her audience.  Our CEO can walk a person logically from where they are (point A) to point B when explaining complex matters.

4. Management:  Our CEO is a good manager.  Team members know what is expected of them, how they are doing and how they are evaluated.  Direct reports are never surprised when promoted or fired.  Objectives are clearly defined as are job descriptions, best practices and procedures.  Direct reports feel confident that their CEO is striving for their individual success as well as company success.  Our CEO meets regularly with the management team as a group and each direct report individually to review progress, lend assistance and address concerns.  Our CEO does not have excessive employee turnover.  Our CEO is a good trainer who takes the time required with new team members to make sure they can do all aspects of their jobs.  Our CEO holds direct reports accountable and will decisively terminate consistently poor performers.

5. Judgement:  Our CEO demonstrates good judgement.  Our CEO is calculating and practical gathering all of the information and opinions available before making important decisions. Our CEO does not make rash uninformed decisions or chase every shiny object.  Our CEO will take calculated risk using appropriate risk/reward analysis.  Our CEO always has a contingency plan in mind.  Our CEO sets reasonable timelines and goals.  Our CEO is data driven and not afraid to pivot when necessary.  Our CEO is thoughtful and dispassionate in decision making testing hypotheses and tactics before committing major resources or time to projects.

6. Time Management:   Our CEO manages his or her time wisely and efficiently.   Daily tasks and projects get appropriate amounts of time based on their importance.  Our CEO projects a consistent and contagious sense of urgency.  Our CEO does not waste time but treats it as his or her most precious resource.  Our CEO alots his or her time in a manner always mindful of the opportunity costs that may be involved.  Our CEO is not a perfectionist and knows when 80% is good enough.  Our CEO does not avoid or short-change tasks that he or she doesn’t like to do.  Our CEO keeps a written personal task list and is constantly reprioritizing it.  Our CEO knows when to go slow and when to go fast.

7. Fundraising:  Our CEO ensures that our company does not run out of money and stays well ahead of any cash shortfalls in full realization of the time it can take to raise capital.  Our CEO is the chief fundraiser for the company and always mindful of our runway, burn and cash-out date.  Our CEO keeps investors and prospective investors informed.  Our CEO understands which types of investors and fund managers are a good fit for our company based on their check size, investment thesis, expertise and geographic preferences.  Our CEO maintains and can defend a reasonable forecast and key assumptions.  Our CEO can deliver a convincing investor pitch deck and plan.  Our CEO inspires confidence.

8. Recruiting:  Our CEO is good at sourcing and recruiting the talent needed to grow our company.  Our CEO makes recruiting a regular priority each week and does not wait until the company is desperate for help before starting the recruiting process.  Our CEO conducts detailed interviews and reference checking.  Our CEO can communicate a vibrant company vision and culture where new hires want to work.  Our CEO is not afraid to hire those more talented than himself or herself in any given area.

9. Strategist:  Our CEO possesses a deep understanding of our chosen industry and market sector.  Our CEO has a full appreciation of the subtleties of our space, competitors and how to position our solution to fit into each customer type and business partner’s perspective.  Our CEO knows when to partner, when to buy and when to compete head on.  Our CEO is always looking for business development opportunities and partnerships leveraging the technology, customer  base or salesforce of others.

10. Negotiating:  Our CEO understands and utilizes basic negotiating techniques.  Our CEO is not afraid to push back on or walk away from a one-sided deal.  Our CEO takes the time to understand another’s position, constraints and goals so that he or she can propose creative solutions.   Our CEO rarely pays full price.  Our CEO is always willing to lose a battle if it means winning a war.

11. Maturity:  Our CEO is always the adult in the room.  Our CEO is not intimidated by those with skills and ideas that are not his or her own.  Our CEO is assertive but not overbearing.   Our CEO is comfortable admitting when he or she has made a mistake.  Our CEO takes into account the human element and emotions in every situation.  Our CEO is always professional.  Once a decision has been made our CEO expects full compliance and will not tolerate insubordination in any form.  Our CEO is not given to emotional outbursts or knee-jerk reactions.   Our CEO cares about more than just the success of the business.   Our CEO encourages the team to take risks and try things. Our CEO does not penalize team members who try creative things that don’t end up working out.

12. Resourcefulness:  Our CEO seeks out and utilizes available resources.  From advisors, key customers, grants, publications and reports to competitive sales collateral and market analysis, our CEO stays abreast of that which might be useful in accomplishing the mission at hand.  Our CEO is coachable.  Before starting a new initiative or implementing a key strategy, our CEO taps available contributors and data.  Our CEO avoids an echo chamber and solicits outside opinions.  Our CEO does not shoot from the hip, make decisions in a vacuum or simply buy his or her way out of a problem or into a quick solution.

13. Financial Management:  Our CEO has a complete understanding of the business model and which assumptions and key metric as most important to the business.   Our CEO can spot trend lines and how they impact the business.  Our CEO is constantly discussing key assumptions with those involved and tweaking them to produce the most accurate forecast possible.  Our CEO understands the impact of debt and increasing the burn rate and never waits too long to right-size the business.  Our CEO knows when to grow faster and when to slow down and proceed more cautiously.  Our forecast is continuously becoming more accurate.

14. Administrative:  Our CEO consistently ensures that required administrative tasks such as submitting monthly financial statements and updated forecasts are submitted to board members.  Our CEO fulfills written and legal obligations to maintain D&O and key-man insurance.  Our CEO schedules and conducts all board meetings and annual shareholder’s meetings on the required cadence.   Our CEO schedules required meetings well in advance and sends board decks, option grant proposals, legal and other documents for board member review well in advance of board meetings.

For future posts, please follow George on Twitter at @georgedeeb and follow David at @StartUpHats. 

Lesson #336: How to Find the Best Advertising Agency for Your Business

If you are investing material dollars in marketing campaigns, more often than not, you have considered engaging, or have engaged, an advertising agency to assist you with those efforts.  Those decisions whether or not to manage your marketing campaigns with in-house teams vs. third party agencies are typically not easy decisions.  And, if you decide to outsource to an agency, the selection process can be overwhelming, with the thousands of agencies out there to choose from.  This post will help make those decisions easier for you.

In-House Teams vs. Third Party Agencies

The decision to manage campaigns internally vs. externally often comes down to the following things: (1) the size of your media budgets; (2) the complexities/channels of the campaign; and (3) the skills of your team and the analytics tools you have to work with.  Over time, my leaning on this decision has changed.  I used to want to run everything internally, to save the costs vs. an agency (which can often be 15-20% higher including their fees).  And, I used to want to find disparate agencies with a specific expertise (e.g., one agency for search engines, another agency for social media).

But, has the advertising industry has evolved over time, my opinion on this topic has shifted 180 degrees.  Today, I am a proponent of outsourcing this work to an agency, and preferably one cross-channel agency that can manage all desired channels through one partner.  The reason for this are: (1) the agencies have materially evolved from being single-channel experts to multi-channel experts; (2) strategically, it is better to have all strategies and budgets managed centrally, to easily shift dollars between channels and get cross-channel attribution tracking all in one place; (3) the optimization technologies the best agencies are using, and their direct relationships with Google, Facebook, Amazon and others, are heads and shoulders better than anything your internal team would be doing; and (4) finding a team of good internal marketers is hard to find and manage, as opposed to leaning on an agency’s team and their recruiting and training processes.  Especially since the techniques that work best each year can rapidly change, and you want to benefit from the most recent learnings (not hire someone with yesterday’s playbook).  So, don’t be a penny wise and a pound foolish here, as a good agency should more than cover their additional fees, with materially higher revenue performance from their efforts than you most likely could generate with an internal team.

Step 1:  Identifying the Best Potential Agencies for Your Business

All agencies are not created equal.  Certain agencies are expert in B2C and other agencies are expert in B2B.  Certain agencies are full-service agencies handling all services, and other agencies handle certain specialty solutions (e.g., branding, creative, television, B2B lead generation).  Some agencies are set up to handle huge budgets, and other agencies are set up to handle smaller budgets.  So, the first step is to have a rough idea of your budget and needs (e.g., prepare to spend 10-30% of your revenue target on sales and marketing activities), and the next step is to identify the agencies that are best suited to support those budgets and needs.

For purposes of this post, let’s assume you are like most B2C marketers and you need a good performance marketing agency.  That is an agency that: (1) can handle most of your digital advertising needs (e.g., search, social, affiliates, commerce, display, digital video, connected TV); (2) have a suite of sophisticated technologies, reporting and tools to optimize the campaigns across channels; and (3) have an ROI first mentality, shooting to drive clearly attributable transactions from the campaign at a profitable return on ad spend (ROAS).

With that being the goal, go to Google and search for “best performance marketing agencies”, as an example.  You will stumble on a bunch of websites like Capterra, G2Crowd or other bloggers that have ranked the agencies based on customer reviews or their research on the subject.  Or, you will find research firms like Forrester that interviewed the best agencies and ranked them, as seen in this chart, as an example.  That will help get you started.  But, you should also talk to your peers at other similar companies, to see who they are working with.  Or, get recommendations from other colleagues.  And, if any agency says you are too small of an account for them, ask them who they refer business to for smaller accounts, as they will have a good idea of the best players in the space.  This process may result in a list of around 8-10 agencies to consider.

Step 2:  Create a Questionnaire and Interview The Best Targets to Ensure a Good Fit

Just because you think they are a good agency for you based on preliminary research, doesn’t mean they really are a good agency for your exact needs.  You need to ask probing questions of them, like: (1) what is your minimum media budget, are we large enough to be a material account for you; (2) what are your fees, can we afford your services (keeping the fees under 10-20% range, depending on media budget); (3) what is your industry expertise, do you have good references from similar companies like ours; and (4) are you working for any of our competitors, do you have any conflicts we need to worry about.  This part of the process will narrow down your list to around 3-5 truly best targets.

Step 3:  Invite the Best Candidates to Pitch Their Services

The pitching process will start with the agency better learning your budgets, history and needs, and most likely will involve them taking a closer look at your current campaigns in Google Ads, Microsoft Ads, Facebook, Google Analytics, etc.  After 2-4 weeks, they should be have completed their research and planning, and be ready to present their proposal.  In those presentations, pay attention to things like: (1) the quality of their team (and making sure the team on the pitch is the same team that will be on your account, to avoid “bait-and-switch”); (2) their fit with your business and team (are they nice to work with and share your common values, as you will be spending a lot of time with them); (3) the quality of their strategic-level ideas (did the presentation match your guidance of them and your desires); (4) their proposed media mix; and (5) the quality of their optimization tools and cross-channel reporting capabilities (because in today’s world, the best agencies are more technology companies than anything else).

Step 4:  Pick the Front-Runner

Once you pick your favorite agency from the presentations, it is time to take the next step with them.  That will include things like: (1) speaking to their references (to ensure what they pitched and what they delivered were in line, especially in terms of team quality and happiness with efforts); and (2) negotiating the agreement and statement of work (to make sure both parties are largely in alignment on the legalese and the plan).  This can take several weeks to complete.

Step 5:  Formally Award the Winner

Congratulations, you have formally engaged your advertising agency.  Hopefully, the above process enabled you to find a really great partner for your specific business, that can help propel it to new heights.  Now starts the busy work of transitioning services from your old agencies or team members, sharpening your pencil on the campaign strategy and media mix modeling, and setting up all the management processes (e.g., timing of weekly meetings, desired KPIs on daily/weekly/monthly reporting).  This part of the process is as important as the agency selection is, and will help tee up the campaign for maximum success.  Now comes the hard part:  executing the winning campaign that hits your desired metrics, and managing your agency on a weekly basis (which I will cover in a future post).

A Couple Useful Tips

Here are a couple things to think about.  If you can, try to get part of their fee in a pay-for-performance structure.  So, maybe half of their fee is fixed, and the other half of their fee is incentive based.  And, keep that incentive uncapped, the more success they drive for you, the more fees they can earn.  And, do your best to cap your total fees (e.g., not to exceed a certain percent of the media spend), as these contracts can be very complicated and confusing, with all kinds of fees which can add up quickly.  Especially fees around programmatic buys or the DSP platform.  If they can find high quality media in other ways, it may save you money here, so push them for direct buys with publishers or leverage their bulk buying power, where you can.

Concluding Thoughts

Hopefully, we have taken the daunting process of selecting an advertising agency and simplified it into an easy step-by-step guide—one that will result in a well-experienced agency to handle your specific needs, both in terms of team and tools.  The relationship between your business and your advertising agency is one of the most important relationships you will have; they are the team that will dictate how quickly you will scale your revenues, hopefully on a profitable basis.  And, in today’s high-tech digital world, they are as much a technology partner, as they are a media-buying partner, so pay special attention to their capabilities in this regard.  With a little luck, now you are “off to the races” toward marketing success and profitably scaling your business.

 

For future posts, please follow me on Twitter at: @georgedeeb.