Are Digital Marketing Agencies Referring Themselves into the Ground?

Agencies are addicted.

You’re addicted to referrals – to the allure of trusting your clients to pass word along over creating a new business strategy, with new hires, new ideas, new practices, to generate leads.

I get it, leads that stem from referrals convert at a higher rate, and tend to have a higher lifetime value, than any other lead source for an agency. About 90 percent of ad professionals rely mainly on their referral pipeline to drive new business.

Plus, new business programs are hard. They’re hard to create, hard to maintain, hard to hire for, hard to keep up with, and frankly, most digital marketing agencies just aren’t very good at developing them. You’re already fully engulfed in the intricacies of marketing, creative, design, digital, social and content development. And new business is, well, new. It’s different. You just don’t get it. The “normal” rules simply don’t apply.

So, inevitably, referrals become the backbone to your new business generation, which isn’t all bad, but it’s certainly some risky business (cue an underwear-clad Tom Cruise sliding in to a little Bob Seger).

Referrals definitely have their place, but a singular focus is not a strategy. What happens when your lead-gen cycle starts to run dry? Leads aren’t quite up to snub for your agency, and you’re stuck dumping hours into their success while your profitability takes a hit? What other new business programs should be on your radar as your agency aims toward growth?

Referrals are great – until they’re not.

If you build it, they might come.

If you do good work, good leads (might) follow. Referrals deliver social proof. It means someone has used your services and are clearly happy. If they’re happy, they offer up a referral. The referral gives you a warm lead, an approachable lead.

It makes sense to logic, but can I let you in on a little secret? Prospects don’t give a damn about logic. We all know about hundreds of phenomenal digital marketing agencies with top-notch talent and happy clients that have gone under simply because their lead-gen pool ran dry.

Trusting your clients to pass along new business is just bad business. It puts an enormous amount of control over your company, your growth, into the hands of someone other than you. What happens when you hit an economic stumble? Or your network is left parched?

I’m sure he’s a nice guy, but…

We’ve all been there. Let’s set the scene: your friend is giddy with excitement, “I’ve found the perfect guy for you!” she squeals. He’s the typical tall, dark and handsome type, with a great job and an affinity for buying his mom flowers.

He sounds like a great guy, but after a few dates, the fit just isn’t right.

Now, imagine that in your referral program. A client sends you a prospect who comes from a fantastic company, but the relationship just isn’t a good fit. Maybe they don’t meet your minimum, or there’s a disconnect in expectations or even personalities. Absent of a polite way out – and always looking to up your ARR – a sense of obligation kicks in and you take the client.

“They’re a small account,” you rationalize, “it’s not going to be that bad.” And sure, the arrangement might work for a while. And you’ll bring in (a few) dollars that weren’t there before, so that’s something.

But now you’re stuck investing time and draining resources you could be using to invest in your best relationships. You’re squashing productivity because you’re forced to focus on “fixing” the fit to maintain a relationship with your new client and, usually more importantly, the reference. It’s a dangerous, and expensive, game you’re playing just to keep them happy.

Referrals aren’t a consistent or scalable source.

In an industry that makes its living on selling marketing services, why do so many digital marketing agencies miss the mark when they’re marketing themselves?

Referrals are insanely important. Referral clients have around a 25 percent higher lifetime value than non-referred clients, and are about 25 percent more profitable per year. And, they provide social proof, which warms up a prospect’s psychology into spending.

If you don’t have a process to drive referrals, go make one. NOW!

With that said, though, it’s dangerous to rely solely on referrals. They’re not a consistent or scalable source for new business generation. Referrals come from relationships, and unless you keep feeding your relationship pool with new contacts, the referrals will dry up. Sooner or later, you’ll run out of leads in your pipeline and it might be too late to change the tide.

So what’s New Business Development look like?

New business is more competitive than ever right now. More digital marketing agencies are fighting for the same volume of new business. Larger agencies are looking to smaller accounts just to keep growing. Their smaller counterparts are becoming more aggressive in the search for business outside of their typical domain.

As the economy slowly improves, the feeding frenzy will only continue. Consumers are spending more, driving an upturn in demand, and more demand means more opportunities to sell. Those who sell want to be heard. The sheer number of digital marketing agencies trying to get a piece of the action is just insane – somewhere around a half million across the globe.

And marketers are just loving it. They’re working to up agency competition and drive down costs. You’re left falling into the trap of under-charging and over-delivering just to stay in the game.

Now get this: 66 percent of agencies report they don’t have a business development plan. What?!

To get started, conduct a brand review to make sure your current brand, story and service offerings create market differentiation. Create your buyer personas to know exactly who you’re selling to and how they want to be sold. Remember, people hate to be sold, but love to buy.

Then create a compelling brand story, driven by your history, services, offerings and most importantly your personality. Be authentic and empathetic to your ideal client.

Need some ideas on brand-building and connecting with your clients? Check out our newest resource!


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