How to Differentiate Your Agency from the Competition
The Problem
The agency business model is growing like a breeze in 2024, but this boom brings significant challenges. Agencies today are quasi commoditized services, leading to immense competition where players often compete on price and guarantees.
This situation creates several pain points for established marketing agencies:
- Decreased Pricing Power: Agencies are forced to charge less and less, impacting profitability. A report by Forrester highlights that 58% of agencies have seen their profit margins shrink due to increased competition and pricing pressures【Forrester, 2021】
- Lower Deal Closure Rates: With more competition, the percentage of closed deals declines. The average conversion rate for marketing agencies dropped by 12% over the past two years【MarketingProfs, 2022】
- Increased Acquisition Costs: More ad spend and resources are needed to attract new clients. According to Gartner, customer acquisition costs have risen by over 50% in the last five years【Gartner, 2023】
- Tough Client Retention: Competitors frequently target your clients, increasing the risk of replacement. A study by Invesp shows that increasing customer retention by just 5% can lead to a 25-95% increase in profits【Invesp, 2021】
This scenario adversely affects the bottom line of agencies, driving down profits and escalating operational costs.
A Few Reasons Why This Is Happening
The number of agencies vying for the same customers is skyrocketing. The rise of millionaire online gurus and shiny courses on starting marketing agencies has led to a literal mushrooming of new agencies. According to a report by HubSpot, there was a 14% increase in the number of marketing agencies from 2019 to 2021【HubSpot, 2021】
Additionally, the freelancer model is gaining traction. Talented freelancers often evolve into agencies. Upwork reported a 10% annual growth in freelancers transitioning to agency models【Upwork, 2022】This influx intensifies competition, making it harder to stand out.
Furthermore, the accessibility of digital marketing tools has lowered the barrier to entry, resulting in a saturated market. The global digital marketing software market size is expected to grow from USD 56.52 billion in 2021 to USD 182.21 billion by 2028【Fortune Business Insights, 2022】, indicating an increasing number of new players entering the market.
How Not to Fight Your Competition
- Lowering Prices: This is literally the worst strategy in a competitive market. Lowering prices reduces profit margins and often leads to compromised quality, dissatisfied clients, and high churn rates. Dissatisfied clients and high churn is the best way to go bankrupt as the agency model is the most profitable if you can retain the clients for long enough so your cost per acquisition is low compared to the lifetime value of a client. As such, a high client churn rate is a recipe for disaster, as it increases the cost per acquisition relative to the lifetime value of a client.
In general, dissatisfied clients lead to bad reputation in the market and fewer referrals, which also quickly backlashes on your agency and profits. Referrals are the best leads and they cost 0 dollars to acquire.
- Giving Crazy Guarantees: Guarantees should only be offered if you are 100% confident in achieving them. Otherwise, they can backfire, damaging your reputation and trustworthiness.. For example, we here at Blackhole offer a pay-per-lead guarantee to our agency clients because it’s a win not only for them but also for us – they pay for actual results and we get compensated more if we perform better.
- Increasing Ad Spend Like Crazy: This approach is not sustainable. At some point, the cost of acquiring new clients will outweigh the benefits. According to a report by eMarketer, digital ad spending is expected to increase by 13.3% in 2024, but this does not guarantee proportional growth in client acquisition【eMarketer, 2023】.
How to Differentiate Your Agency
Creating a unique category within your niche can help you stand out. You need to be perceived as a unique player with a special offering that solves your clients’ problems more effectively than anyone else can.
1. Identify Your Ideal Customer Profile (ICP)
Determine the specific type of companies you want to target. Consider their industry, revenue, market presence, etc.
- Wrong Example: All consumer brands with a budget.
- Better Example: E-commerce brands in Germany.
- Best Example: Growing fashion e-commerce brands located in Germany.
Analyze your best clients to identify those who are the most successful, easiest to work with, and pay the most.
2. Create Tailored Offerings
Develop offerings that address the specific needs of your ICP. For instance, if you run an SEO agency:
- Example Offer: “We help growing fashion e-commerce brands in Germany increase their organic reach by 150% in 3 months.”
If you know your ICP’s needs and wants, you can offer exactly what they are looking for in terms of results and services. This tailored approach can lead to higher conversion rates and a good differentiator for your company.
Circling back to our pay-per-lead model that we mentioned above, we tailor our offering to our clients’ needs in a way so that we also benefit from the arrangement: everyone walks away with the best solution.
3. Develop a Unique Mechanism or Term
Differentiate yourself with a unique mechanism or term. For example, if you offer graphic design and video editing services, you could specialize in creating TikTok native content and offer a “Viral on TikTok Package.” This approach leverages the rapid growth of TikTok, which has seen a 45% increase in users since 2021【Statista, 2023】. Now that is something unique! You still offer videos and social media content to your clients but it is packaged differently and I bet that you will only find a few competitors with a similar offer.
For instance, one of our unique mechanisms at Blackhole is the Agency Lead Generation System™. The system gives agencies the exact number of leads specifically when they want them and in a way so that they have full control over their lead generation.
4. Create Relevant Case Studies
Case studies that address the needs and pain points of your ICP are invaluable. For instance, an advertising agency working with fintech startups could showcase how it acquired 10k new users for a known brand in 3 months with an impressive ROAS. According to the Content Marketing Institute, 73% of B2B marketers use case studies as part of their marketing strategy because of their effectiveness【CMI, 2022】.
How cool would it be to have 3 different case studies where you helped to acquire new customers for fintech startups?
If you could send this out to a fintech company, do you think they would be interested in how you did it and if you could do the same for them? Of course! If you had such nice case studies do you think that they would consider a cheaper agency as an alternative option? Of course not!
People are willing to pay more for certainty. And the more case studies you have, the less risk they will have!
Also, here at Blackhole we have numerous case studies about our successes working with our different target industries: marketing agencies, industrial companies and consulting clients.
5. Generate Specific Content
Create content that speaks directly to your target audience’s problems, desires, and objections. This builds trust and positions you as an expert in your niche. According to Demand Metric, content marketing costs 62% less than traditional marketing and generates about three times as many leads【Demand Metric, 2022】. Moreover, a survey by Edelman found that 81% of consumers need to trust a brand to consider buying from them【Edelman, 2021】, and this is even truer for marketing agencies.
If you know your target audience well enough, you know their problems, their desires, and the objections they might have. This means that you can create great and useful content for them that will educate them, help them with their work, and interest them. If you can provide them with all this valuable information, they will learn from you and you eventually build trust with them. You will be the expert to whom they come for tips and tricks. If you can establish this, they will also start to ask to work with you.
For instance, on Blackhole’s blog, we always publish content that is relevant and valuable to our target audience or content that helps them get to know us better.
Conclusion
By fine-tuning your offering, creating tailored solutions, developing unique mechanisms, producing relevant case studies, and generating specific content, you can significantly differentiate your agency from the competition. This approach not only helps in client acquisition but also enhances client retention and satisfaction.
If you have these 5 things in place, you will be in a 100 times better place to sell to them and won’t have to worry about the growing competition in your niche.
