The Problem With Marketing As A Service

The line of the week!

Ewen,

Products are not for everyone. I will tell you this... I saw that you touting the Puma contract. I have been after Nike in one way or another just to one up you... still no success and THEN I saw what the contract was for?!?!?!?!

I was on the phone the NEXT day setting that up.

That being said. I personally do have my hands in more than a few product based business' Some that I produce and sell, and others that I buy in bulk in sell, etc This is why I sell my "Services" as Products. Its tangible... you can put your hands on it... ok well maybe cant touch it, but your eyeballs can see it!

More than anything it is a matter of diversity of in bound cash flow. And if you happen to be able to set up a "System" that allows you to take orders... pass the orders along, and they get delivered.. well "good on ya" is what I say!

Everybody around me ( in person ) thinks I am the ideas guy. Truth be told all "My" good ideas so far this year... have ALL come from this board.

Hell.. the "Tipping Point" post made me $150,000 ( gross ) in one phone call. Claude's video stuff. a good chunk. Paper products... I don't even want to go there. I think I owe some people some steak dinners or something!

Read less between the lines... and actually read the lines... then follow. go blindly and follow. It will pay off!

Again, I would say you're missing my point. Offering marketing services isn't in and of itself a bad business. It really comes down to your growth model no matter what business you are in. If you're going to sell toilet paper or you're going to sell marketing services you need to have your systems in place.

I think the problem most people have in this business is they target blindly and they target the wrong companies. They target owners of very small, not very profitable business like restaurants and realtors and plumbers. Most of these business owners gross less than $300k, and are generally making less than $100k in profit. They can't afford to pay you $25k a year in marketing, even if it could increase their profit to $200k+ a year. That's a very difficult sale.

Instead you should only target slightly larger small businesses in the $1-10M revenue range that already do marketing. Doing anything else is an exercise in frustration. Not enough people pay attention to who their ideal clients are, and instead get in bed with every pain in the ass client who is willing to write them a check. Ask yourself this, are you marketing to people who actually own businesses or do they own a job? There is a vast difference in marketing to real businesses over people who own jobs. Huge!

I also believe you should specialize in a handful of niches, and dominate verticals rather than geographies. Yes at first you have to experiment to figure out what niches meet your skills. But eventually you're going to want to dominate no more than 2-3 verticals as that gives you tremendous leverage.

Then you're going to want to have a system in place for client acquisition, and you have to avoid the cardinal mistake of stopping marketing for new clients. You need to have a new client funnel that never stops. You should know exactly what that funnel looks like to, how long it takes, and how much you'll have to invest for each client. Difficulties in this business happen when you lose a client or two and your funnel isn't working and then you struggle to get back to profitability. You should be aiming for predictable growth. What's always interesting is seeing marketing consultants who don't do a very good job of marketing themselves.

Then you should have a system in place to get your clients to spend more, more often. This is client management and income creation. Your existing herd is much more profitable than finding new clients.

Then finally you should have a client servicing system. As I've said before I'm a huge fan of systematization. I like the Michael Gerber material. But I'm also a huge fan of Paul Lemberg. I like the Gotta minute time management techniques of Chet Holmes. And I'm a huge fan of the Paddi Lund material.

So to recap problems with offering marketing as a service you should pay attention to:
1. Target best clients only, go bigger get out of your comfort zone.
2. Niche. Go into a handful of niches and dominate the vertical. Less work, more profit.
3. Replicatable, always running client acquisition system.
4. A system for getting your current clients to spend more, more often.
5. Sytematized service providing.

Now these keys aren't specific to offering a marketing service, you can use it in any business. Whether you're offering a service or a product. I would be willing to bet a pretty sizeable amount that your clients weren't following those simple principles. It's that their particular business model was broken not that the business itself is unsustainable. Their business could have been fixed by some simple steps. And if I had to pick any of them I'd be willing to pick #1 as the most important of all. Getting the right clients is the key to making a marketing business work. If all you're doing is offering marketing services to penny pinching business owners who net less than $100k a year, you're going to have a miserable existence. I've found there's not a great deal of difference in the work needed for a client who can afford to pay you $300 a month and one who can pay you $10k a month. So why would you bother going after the smaller fry clients unless you're just uncomfortable at that level.

I just don't buy that moving from a service based business is a better path. Perhaps you could explain further your position of the superiority of a product based business over a service based business. I've worked with many businesses in many different categories. I've never seen a can't miss business. It takes skill to run any business well. Just curious of your position if you're willing to expand upon it. What do you believe are the natural benefits of a product based business over a service business, and what are the risks? How do you get over the fact that most product based businesses are commodities, and most consumers of those goods will elect to buy based on price and convenience.

Now where I will agree with you is eventually you're only going to want to provide marketing for businesses you own or control or participate in the growth of. It can be very frustrating to take a set fee and not participate in the growth you've created, and equally frustrating when you know what they should do, you tell them what they should do, and they don't do what you tell them to do. I really only like doing work for equity now. So as I grow my new marketing biz this year, I'm only going to specialize in industries in which I'm actively acquiring companies of my own and growing them.

Fun discussion.

P.S. - Another alternative I thought of as I was re-reading my post. Perhaps the issue also lies in the monetization of their service. Yes, it's hard to deal with people giving you a hard time when you're only charging them $100-500 a month. However the BS meter is a lot more flexible when you're charging $3k, 5k, or $20k a month. Or if your pay was tied to performance- i.e. 20% of profits. Change how you get paid, and how much you get paid, and the business just might be more attractive. Just a last thought.

What a business! 8 figures by pushing/moving, er, TP (and other paper products). Yeah, I must be in the wrong business.

Interestingly enough, If you really look at this list how many are JUST
Product based, or JUST Service based or for that matter JUST Consultant based. Looking at the list I think that less than 5 on this list are just providing one of those 3 categories.

Using APPLE as an example... Sure they Sell Apple products. But what about "iTunes"? That would actually be a service.

For the most part having a list of the Top 25 companies in Earnings per employee isn't as helpful as it could be. Chances are most of us that are posting on an internet forum aren't likely to be building the next Apple in our spare time. However, let's actually dig a little bit. Let's look at the top 5 companies. From taking a look at the websites of each company, there's only one pure product company in the top 5.

1. Interdigital is mostly a company who licenses out it's technology. So are they products or services? Is the business of creating new intellectual material that you can license a service or is the end product a technology you can license, a product?
2. Rosetta Resources- They are an oil extraction and refinery. They do refining(a service) for other oil producers. They sell the oil to distributors. I'm going service on this one, as in the service of being the best oil extractors in uncommon oil fields. Although you could argue that the oil(product) is what they do.
3. Everest is a reinsurer. Again is it a service you're providing, the reinsurance or is it a product the reinsurance product?
4. CF Industries is a fertilizer manufacturer. I'll go product on this one.
5. Iconix is a licensing company. They license brands to manufacturers. They don't actually make anything, they provide a service between the brand and the manufacturer. Again you could really go either way depending on how you wanted to interpret what they did.

I don't have the time or energy to go through the rest of the top 25 in the list.

You can get much better detailed information by spending time studying the RMA books. The Risk Management institute puts out yearly books on broad strokes of industries by SIC code. I've spent hours and hours picking apart those books and verifying it by talking to biz owners. Basically you can find out generally how profitable different industries are and by size. I don't have the information in front of me right now or I'd give examples. That's a much better example of how profitable different types of industries are. Let's talk about SIC codes, let's talk about the averages of industries as a whole. I think that's more relevant to the discussion at hand.

It's kind of a silly conversation really though, as there are very rare instances when a company is purely product based or service based. I think it's kind of arbitrary, and you can argue either way(is a reinsurer a service or a product?). Is a restaurant selling a product(it's food) or is it providing a service(providing a convenient avenue to avoid cooking, and get entertained and fed at the same time).

I think back to my most recent marketing activites- selling proven marketing systems to businesses in a vertical. I mean it was "sort of" a service, as there was some customization to it and it might include things like PPC campaigns, websites, direct mail, telemarketing, etc. But I could also hear the argument that it was a product because it was a black box, that you paste the outside of it with company information, feed it traffic and it spins out money/customers/appointments. There was very little labor involved in the fullfillment of the service. What I also found very interesting is that two of the top five most profitable companies are doing EXACTLY what I do- licensing. I too have found licensing the most profitable business model I've ever undertaken.

My point isn't really about whether a marketing consulting company is greater than an office products company. My point(if I still have one) is that making a distinction between whether a service based business or a product based business is inherently better than one or the other is kind of silly. I've seen bad business owners break really good business opportunities. And I've seen people who by all measures shouldn't succeed, build something spectacular. She who markets well, manages well, and creates value superbly will succeed no matter what the industry.

And I'd argue against the original post from Ewen, I don't find marketing consulting to be a horrible profession. In fact it's been QUITE good to me. There are blueprints you can follow. I believe Alan Weiss has laid out through his books a fabulous blueprint towards success. Some of Frank Kern's marketing consultant material was quite good. I in particular love the material that Paul Roetzer has put out on building a hybrid marketing/PR agency. I think it's fabulous. For about $100 on Amazon, you can pick up 4-5 books on becoming a marketing consultant that will give you a great start. But then of course you'll become much better when you study other marketing masters like Dan Kennedy, Jay Abraham, and others. If I had to give a short list I'd choose the following:

The Consulting Bible: Everything You Need to Know... The Marketing Agency Blueprint: The Handbook for... Million Dollar Consulting (TM) Toolkit:... 80/20 Sales and Marketing: The Definitive Guide... Million Dollar Consulting: Alan Weiss:... Amazon.com: dan kennedy -- All of these that I could afford.
And then I'd go on Jay Abraham's site- where he gives a ton of marketing information away for free. Try to find either the Mr. X book, or Stealth Marketing. Either is fantastic.

You'd be in for less than $100 and have a fantastic start.