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.”
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I am having a difficult time grasping the fascination that newspapers have with Digital Agency Services. What I have learned from a number of newspapers that have jumped in the Digital Agency arena and I have spoken with is that they, quite frankly, have NO idea what they are doing. Unfortunately, many are are throwing out the baby (O&O Inventory) with the bath water in favor of vendor services.
This article presents tremendous points of consideration on entering the space. Points that many of the newspapers I have spoken to never thought of or considered.
Reading Chris Lee’s comments on how DDM positions these services is a great example of how it should be done and how it fits in your sales model – feed the O&O goods. Greg Walls comments are examples of why you may not want to get into Digital Agency services – high sales & staff churn which is very costly in terms of dollars and customer satisfaction.
Given the low profit margins of vendor supplied products Digital Agency services only makes sense if they can be delivered at scale – something that cannot be done with feet on the street. As BIA/Kelsey noted in another article, “This point was underscored with data from BIA/Kelsey’s Local Commerce Monitor showing the majority of SMB prefer to deal with a premise (outside) sales rep.”
Before you even consider this path do you know the answer to these question?
What is your online inventory in-market/out-market split?
Do you have an audience segmentation plan that addresses this split?
What is your sell-through rate?
What is your average unit rate?
What is your retention rate on non-OTO business?
If you cannot answer these confidently and quickly you have some serious house maintenance to do. After you have maximized the O&O revenue potential then look outside for other opportunities and scale.
I agree with your comments and as a newspaper rep selling digital products, I spend more time on line reading and researching on line marketing than I do selling it in an effort to answer client question and to help clients get results. Mr Walls training program is out dated and what little training you do receive is based on LocalEdge products not the importance of websites that function, how social media, content, links, etc all work together resulting in Google rankings. Their program is further complicated with very poor fulfillment as they admit to hiring administrative professional to do the implementation. So you have a yellow page company who just got in the game in 2011 with the same products that need updated, teaching newspaper reps only a small percentage of what they need to know with a revolving door of admins doing the fulfillment. Not to mention the newspaper business has steered toward controlling content, owning as many media outlets as possible. Client satisfaction is the last priority and it is small businesses who suffer through the process thinking they have experts working in their favor. Churn is about to go off the charts.