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Subscription services for agencies: must read articles for agency execs
Subscription services for agencies: must read articles for agency execs

Over the last few years, the trend of subscription services for agencies has emerged as a driving force of change in the way we do business. SaaS, or software as a service, subscription models are sweeping through the market and competitive agencies are scrambling to get on board.

The paradigm is changing and it’s a big shift to get around. Check out our list of must-read articles on the topic of subscription-based agency models.

How Advertising Agencies Can Make Money While They Sleep

Over the last two decades, advertising agencies across the board have seen a 40% decline in income per unit of work. Tim Williams explains that this phenomenon is due to the boxed-in nature of ad work – it’s all about hours on the time sheet. He explains that agencies should create value for clients and themselves in different ways, moving away from executing and amalgamating services already available and towards inventing new and better ways to work.

“Instead of being executors of communication campaigns, we must become inventors, architects and conductors.” John Winsor

Why Most Digital Agencies Are Nuts

Traditionally, the advertising agency has been modeled on a per-job structure that leads agencies to pull out their hair, pass over growth opportunities and think small. But, out of necessity, the model is changing and shifting towards a subscription model. The benefits are manifold – financial and creative flexibility for the agency and a real relationship with the client based on long term goals. Smart Digital Business suggests achieving this with retainers and selling your own service packs and software products.

“Most digital agencies are nuts – they don’t focus on making recurring revenue.” Steven Penfold

Subscription Business Trend Predictions for 2016

2016 is the year to shake things up for SaaS based companies. Impeccable customer service will become the new must have feature for all subscription based models while at the same time, agencies will be aiming to move towards different business models. Recurring revenue will become the new black and co-working spaces are set to boom.

“In 2016 we will see more marketing and ad agencies continue to shift from the traditional hourly or project-based billing to subscription business models.” Kate Harvey

Why do digital marketing agencies need recurring revenue?

The difference between product-based companies and service companies is the same difference between hunters and farmers. Hunters (agencies and other service-based companies) feed themselves with one project at a time. Farmers (product based companies) put effort, time and money into developing a valuable product, then they sit back and reap what they sow. But in order to be effective, service based companies need to invest in recurring revenue streams to ensure the same stability and allow themselves the freedom to grow.

“One of the worst things that can happen to your digital business is that during unpredictable business conditions you can have fast overload and even faster overhead in short period of time. It is often with companies that doesn’t have recurring revenue strategy to have challenges handling appropriate headcount per project for a longer period of time an even more often is that they need to lay off people after big project is done as consequence of not having stable business for the future and cash flow.” Nikola Radivojevic

The Rise Of Subscription Billing In Marketing & Digital Agencies

There are many problems associated with the traditional agency model. From the unpredictably nature of freelance-based contracts, to the high cost of client acquisition, to promoting inefficient employee habits to push up hours per project, the old model’s pitfalls generally outweigh the benefits.

“Honestly, most marketing and digital agencies can’t afford not to move to recurring revenue models.” Kate Harvey

4 Things You Need to Know Before You Start Recurring Billing

Some tips for agencies looking to switch to a subscription service model include:

  • Your product needs to actually work in a recurring model. Some creative products that work in a recurring service pack in frequent flying, counseling and shaving paraphernalia.
  • Your platform must be built to handle the practicalities of recurring billing. The easier it is to change preferences/orders, the less time you’ll waste managing the accounts.
  • Offer a tailored service or you can guarantee someone else will swoop in and take your client.

“In spite of its challenges, recurring billing is an industry game changer. If you don’t start a subscription component to your business, then you’ll have to compete with companies in your industry that do.” Neil Patel

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How to Excel at the Subscription Economy

The unfamiliarly of the subscription service is currently a big roadblock in converting loyal customers. Companies have traded off clients’ fickleness and insecurities for a long time with the promise of “opt out anytime!” deals. People overwhelmingly believe this model is safe for them. What is forgotten however is that a stable investment over time benefits both parties.

“Running a subscription company means there is a continuing relationship with the customer. No longer does the business-customer relationship end with the swipe of a credit card. Since the subscription business is new to many consumers, you may need to explain its benefits and embrace its uniqueness.” Zach Bulygo

Digital Agencies – How to Make £1M Without Breaking a Sweat

Theoretically, with the help of a subscription model, you could offer 20 clients a package of five services at a rate of £1000 (around $1760) per service and turn over £1.2 million each year (around AUD$2.1 million). Services like design, development, tech support, sales conversions and SEO can be stacked into a viable, but tailored, package for clients.

“Start with a list of 200 prospects in a given sector. (Ideally one where you already have a case study – it will be much easier to sell to more of them). Make sure all the prospects have a turnover of £2M+ Why? You will be asking them to part with £60K+ per annum so they need to have a decent turnover to allow a marketing budget of that size. (£60K is 3% of a £2M turnover so therefore affordable).” Steven Penfold

Digital Agencies: 5 Smart Ideas To Grow Your Revenue

There are a few ways to ensure your agency enjoys recurring revenue streams. On-demand and remote training resources are a great money spinner as you’re trading off your existing knowledge set to sell education subscriptions. You can also go beyond this and offer in-house training sessions in whatever field your agency specializes in. The other tip is to upsell, upsell, upsell. Service packages with tempting additions are the best way to turn a small client into a keystone client.

“Whatever type of pricing you have set up for your digital agency, you need some means of growing and earning revenue consistently to attain financial stability throughout the year. This way you will not have to always depend on money from new projects alone.” Divi Fernando

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