As a business owner, how much are you willing to pay for “Digital Marketing Services”?
How about $0? Or do you think that’s impossible?
There is a way to get Singapore’s best digital marketing talents, without having to pay large monthly fees. It also doesn’t require any technical knowledge so you’d be able to do it right after reading this.
To make this method work, we have to first understand what’s happening in the start-up and SME space here in Singapore.
Smaller SMEs and start-ups guard their finances closely, so they usually pay $500 to $2,000 in monthly digital marketing agency or service fees.
Can you guess how much it takes to hire top talent in the industry?
A client of mine previously worked with one of the world’s leading creative agencies. My client paid $60,000 every month in agency fees alone. However, their campaigns were handled by junior executives as they were considered a “small client”. Bigger clients were spending MILLIONS on monthly agency fees alone. In the end, results weren’t satisfactory and my client pulled out.
Larry, a good friend of mine, used to be the top figure for Publicis Groupe’s (a “Big 4” creative agency) operations in China. The salary he drew was easily 20 times what SMEs pay smaller agencies. I’m not as established as him, but my last drawn salary was also in the 5-figure range. Those salaries were justified by the results we delivered, which often exceeded standard agency benchmarks by as much as 50 times.
Now we have a problem.
The people we get for $2,000 won’t be able to do a great job. The people who can do a great job are asking for $15,000 per month. Even if a top talent accepts you as a client, you can’t be sure of the effort he puts in (Principle-Agent Problem).
How can you attract top talents, ensure they do their best for you while staying within budget?
The trick is to drop your agency fees from $2,000 to $0.
“Huh? Nate, you siao ah? Why will the top people reject $2,000 but accept $0!?”
DISCLAIMER: I do often offer free advice to charities, students and tech-startups but that’s because I have a personal interest in that space and enjoy such work. For business deals, that’s highly unlikely.
Think back to the time you were hiring salespeople. Would it help if you found someone willing to take a 100% commission-based compensation? You will be less worried about him slacking off or not performing up to standards. You basically transfer your risk on to him.
At tech companies, people pitch for funding from investors. Companies trust their investors more than they trust their marketing agency.
At annual AGMs, companies inform shareholding directors on the plans for growth. Companies trust their shareholding directors more than their marketing agency.
Can this also be a way for you to attract top-notch digital marketing talents?
Here’s what I do for some of my clients:
The above graph is based on a Pay-Per-Click marketing campaign and it shows a situation where the goals of the agency and client are completely aligned. In such a scenario, it hurts the agency to spend the budget irresponsibly. This is because any mistake directly affects their profits. The more profit they help you generate, the more compensation they get in return.
We can create a similar situation in real life by finding a marketing investment partner and offering profit-sharing rather than a fixed monthly service fee.
Here’s why this works: a true digital marketing expert gains more from a commission-based structure than any fixed payment you can offer him within your budget.
For those of you who are wondering if there will be agencies confident (or dumb) enough to accept a deal like this, check out this Bloomberg report from 2014.
The benefits of finding a marketing investment partner are 3-fold
This idea sounds too good to be true. What’s the catch?
Of course, there can be complications. Firstly, top digital marketers will not accept any random profit-sharing deal. If you want them to invest, make them see the potential in your business.
There are also other factors involved, such as the percentage share, whether profits factor in fixed or variable costs, tracking the source of sales, how much information you want to reveal etc. But you can slowly work these details out. The variables in the deal might change, but the underlying concept remains the same.
However, the bottom line is this – if you pay agencies $2,000, you will get only $2,000 worth of effort put in. Pay them $0 until they deliver results then give them their fair share of the profits.
We can start by understanding how these deal structures affect you:
Be careful not to use this same approach for Operations, HR, Accounting, IT etc. This only works in areas that are directly tied to revenue (Sales, Marketing, Digital Marketing).
If you’re currently looking to hire an in-house digital marketing manager, put a performance-based payment structure into the contract. Better candidates will be more confident in accepting riskier offers.
If you’re currently searching for an SEO agency, web design company or internet marketing service, tell them you’d only pay service fees after they’ve brought customers to you. This helps you separate mere “service providers” from true professionals who will help you grow your business.
Try it! Let me know how this works for you.
Already tried but can’t find any agency that’s willing to accept such a deal? Send me a message if you feel I might be interested in investing in your business.