Interdependencies Between IP and Marketing in Agencies
Ignis Studio is an IP studio that was born of the idea that businesses require a better Marketing Agency. Then, I discovered that there are some kick ass marketing agencies out there that I did not even understand! So, I decided to focus on providing custom IP services in the AI domain.
Ignis Studio’s inaugural blog will focus on the interdependencies that we believe exist between Marketing Agencies and IP Agencies. Let’s start by understanding a little better the Agency industry.
In his Webinar “New Business Math”, Blair Enns states that the ideal number of clients that a customized services firm, or IP Agency, should have is between 8 to 12 clients. He explains that this is because when such agencies begin to work on more than 12 clients’ needs, their profitability goes down; he provides his own equations for backing this up.
When I first heard this, it made sense to me; after all, you don’t keep paying your doctor for extended services once he has cured you. A customized services agency is an agency that looks at a pain point in a business and comes up with a solution; once the solution has been implemented, there is no more need for this practitioner to offer their services. Blair explains that once the business relationship reaches that milestone that the relationship changes and it turns into one of a vendor providing services and that the profitability decreases rapidly. He insists that it is better to simply foster an environment of churn and bring in new clients that require customized services to maintain profitability and growth.
While it is true that by functioning in this manner, the agency will increase the value of their services and thus the next client will need to agree to a higher billable rate, it purposely creates a lot of inefficiency in the business model.
To simply part ways with a client simply because they no longer need to pay the premium rate that a subject matter expert practitioner commands, does not mean that the agency should lose the entirety of the revenue that was generated by that client.
Think about it, traditional sales wisdom will tell you that it is easier to upsell a current client, than it is to go out and find a new client.
This is where I see the key differentiator between an IP Agency and a Marketing Agency.
A marketing agency will work hard to provide the best ROI for their clients through their marketing campaigns. The reason why they work so hard to do this is because they realized that if they can continue to provide unmatched ROI to their clients, that the lifetime value of such a customer is far greater than any profitability that can be generated by increasing the cost of acquisition that a client must pay to acquire their services.
This is specially true, as new technologies make it hard for business to remain competitive and they must rely on outsourcing their services to trusted industry leaders.
Where I see the sweet spot that generates an endless opportunity for sustainable growth and profitability between an IP Agency and a Marketing Agency is in innovating a way to bridge the two business models so that we can minimize shrinkage and maximize ROI from each new client acquired.
The challenge that I see moving forward will not be how to generate customers, but how to layer multiple streams of residual income upon multiple streams of residual income in Agency business models.
The cool part is that what we just discussed is only the top down approach to the marketplace. However, were we to take the time to analyzer the marketplace from the bottom up, we would find that such a view provides a whole ‘nother level of sustainable growth and profitability.
CEO and Foudner