Digital Agency Summit: Building a Digital Agency
Building a digital agency involves a lot of heavy lifting — making the right hires, structuring the right organization, building the capabilities to fulfill programs and measure their success. This morning at the Digital Agency Summit in Chicago, seasoned agency vets broke down the details on how to build a digital agency. BIA/Kelsey is partnering with the Local Media Association in presenting the summit.
First up was Greg Walls, VP, reseller channel at Local Edge. LocalEdge is the digital agency within newspaper publisher Hearst Corp. Local Edge is the legacy of Hearst’s acquisition of the independent Yellow Pages publisher White Directory. Local Edge still publishes some print, but has shifted its emphasis to the digital agency business. White works with a lot of newspapers who resell the Local Edge digital agency services, including most recently Fairfax Digital in Australia. Local Edge is all about selling digital bundles. Walls offered several tactical tips for hiring and training digital agency salespeople.
“Assume 50% of each [sales recruit] class will turn over within six to seven months. Set classes up accordingly,” Walls says.
If this isn’t handled well, an agency risks falling short of revenue targets as they scramble to replace lost sales people. One key is to set up another training class six months into the previous classes tenure.
Walls offered three possible approaches to initial training. The first involves a solid two-week captive training program, the first week devoted to product training, and the second week is about how to sell, specifically how to sell a digital bundle.
The second approach is called gap training, and covers a three to four week span. The first weeks is all about product training, with some preliminary sales training. Then the rep is sent out to sell, make mistakes and learn from them. The final one or two weeks are about training to fill the gaps in sales skill that week two revealed.
The third approach involved how to train a partner’s existing sales force, which after all touches most of the company’s revenue. “We need to get them training, but no one wants to pull them out of the field,” Walls said.
His approach is to train legacy reps gradually by pulling them out of the field in half-day increments.
The other piece, Walls said, is that you have to hold legacy reps accountable for selling digital.
“Otherwise, rules without consequences is merely advice,” Walls said.
Next, Chris Lee, President, Deseret Digital Media, gave a primer on the economics of digital agencies. He made the case for using a digital agency as a source of new sales for higher-margin owned and operated inventory.
Utah-based Deseret has five different digital only sales channels. The company no longer has legacy seller carrying digital products.
As Lee noted, margins for a media company (selling mostly owned and operated inventory) are much better than those of an agency (which largely resells other’s products).
Agency economics involve 20%-40% gross margin products, not 80%-90%, Lee said. This is substantially different than the publishing business. Different business, different economics. As a result agencies need to compensate their sales people differently, with commissions based on margin rather than revenue.
Lee pointed to two scenarios that allow a digital agency to make money. One is that it drives very high sales volume. The other is that it facilitates upsell to higher margin owned and operated media.
“Nothing else will drive success,” Lee said.
Deseret’s strategy is to leverage the agency to drive higher margin sales on Deseret’s owned and operated digital properties.
“We must move to our owned and operated media,” Lee said. “And to do that we need to focus on audience development. We won’t make money just doing agency in my opinion.”