If you look at the year-over-year search trends for “digital marketing”, it’s plain to see that more and more businesses are coming to terms with the fact that they need help when it comes to modern marketing.
Increased awareness and demand has led to a digital marketing agency boom. Many agencies are relatively inexperienced and have recently entered the industry via the guidance of a guru, a course, or a mastermind.
It’s easy to see why budding entrepreneurs are attracted to the digital marketing agency model…
Demand is going up and to the right, and the lifestyle that potentially comes with running a digital agency is enticing.
You set your own hours, you can work from anywhere with a reliable internet connection, and the customer base has been trained to expect a retainer model when it comes to pricing.
And if Amazon Prime, Netflix, Apple+, Disney+, etc., have taught us anything, it’s that recurring monthly revenue is the holy grail of business models.
But the industry has an ugly secret.
The primary service of most digital marketing agencies is paid lead generation (or “lead gen”). According to our research, the average lifetime of a lead gen client is between 1-3 months.
Since our inception in 2018, we at HighLevel have served over 12,000 agencies to date…
When we polled our customer base, we were shocked to learn that our customers were retaining their clients, on average, for 1-3 months and churning their customers at an average rate of 66% each month.
Also eye-opening was the fact that our customers could only maintain a maximum of three customers at a time because of this vicious churn cycle.
Assuming these stats are consistent with the industry at large, running an agency that offers only lead generation services is not a sustainable model.
So how does a young agency break the cycle?
Traditionally speaking, you add more services…
Building, hosting, and maintaining a website for a client is a great way to increase retention — as is delivering successful SEO services.
But the problem with these examples is that such services require unique skill sets that often take years to develop and hone.
There’s always the option to outsource the services you’re not equipped to manage in-house…
But this model comes with its own set of challenges that young agencies are often ill-equipped to navigate:
So how does a young agency pivot, survive, and thrive over the next ten years without having to become experts in new fields?
By becoming a software provider who also offers services on top.
If you’re offering lead-gen services, you already know it’s impossible to create success in a vacuum.
To generate a lead, a prospect has to enter their information somewhere (form software, landing page software, etc.)
Then you need to store the lead somewhere (CRM, Google Sheets, Zapier, etc.)
To let your client know that you generated a lead, you have to notify them somehow (Zapier, manual email, marketing automation software, etc.)
For your client to properly work the lead, they need somewhere to manage/track the process (pipeline software).
In order for your client to close the lead, they need to be able to communicate with them (phone software, SMS software), or you need smart automations in place (marketing automation software).
Then for you and the client to be able to know whether leads are closing, you need to be able to see reports (reporting software).
But here’s the rub — most small businesses haven’t got a clue about which software to choose, how to set the apps up, and how to make them communicate with each other…
So who ends up doing that for them?
You — the marketer!
You assume the responsibility because you know it would be pointless (and virtually impossible) to run lead-generation campaigns without the software/systems behind them.
Choosing the right software for your clients and making it work is often seen as a necessary evil as a precursor to your success.
But are you charging for that work?
Are you building branding equity by helping your clients get set up on other companies’ software?
And what happens when the client decides they don’t want/need lead-gen anymore? They stop paying you but keep paying for the software you chose and set up for them.
How do we know this is true? Look at the global churn rate for software providers – it’s 4.8%!
Software is extremely sticky.
Think about it. When you build a WordPress website for a client, they expect to use it for years.
Once you set a client up on a CRM, they cringe at the thought of having to switch to another.
But here’s the crucial question — do they really care that you built the website on WordPress or that the CRM is Zoho?
They only care that everything works the way you said it would!
And therein lies the major opportunity: to be the software that you recommend and set up to successfully execute your marketing campaigns.
HighLevel was co-founded by a marketing agency, so we know these pain points all too well.
That’s why when we decided to build a marketing automation platform, we decided to go against the grain and design it for marketing agencies instead of for small businesses.
We encourage our customers to white-label our platform so they can market and sell it as if it were theirs.
But in the second half of 2020, when we started digging into the metrics of our customer base, we were both happily surprised and strongly disheartened by what the data showed.
We were disappointed by the numbers already posted above: marketing agencies are churning their customers every 1.5 months…
But we were happily surprised to see that a handful of our clients were leveraging white-labeling to automatically collect over six-figures a month in software subscriptions (aka access to their white-labeled version of HighLevel).
So why weren’t more of our agency customers doing this?
The answer was that we just hadn’t made it easy enough yet…
While it was already possible to create a subscription plan in Stripe, integrate Stripe with HighLevel, then build a signup page with a two-step order form in the HighLevel page builder, that process wasn’t obvious/intuitive enough for the majority of our customers.
Furthermore, once a new subscription was created, the onboarding process was too complicated.
You could already auto-create the new subaccount, but you needed to use Zapier or our API, which is too cumbersome or advanced for the average customer.
Once you finally got the account up and running, you needed to monitor its voice, SMS, and email usage manually to make sure they didn’t spend more than you planned for. And you had to ensure that clients actually paid each month and manually lock them out if they didn’t.
It became apparent that successfully reselling HighLevel as your own SaaS was something our customers all said they wanted to do, but very few clients were able to execute.
This roadblock is why we shifted our focus for 2021 to what we’re calling SaaS mode.
SaaS mode comes with a suite of new features designed to make it dead-simple for the average marketing agency to sell “their own” software to their clients, including:
The goal with SaaS mode is simple: empower marketing agencies to build sticky, low-churn revenue streams by selling their clients first on a platform that includes CRM, Website/Funnel Builder, Marketing Automation, 2-way SMS, Webchat, and Reputation Management and then upsell services like website builds, lead-generation, SEO, etc.
No more configuring other companies’ software for your clients at no benefit to you.
Agencies can now sell their own branded platform to clients and keep the monthly recurring software revenue (aka “the utility bill”) — reducing client churn and turning them into a hybrid SaaS + Services agency.
We think the opportunity is massive — take a look at the numbers.
The SaaS market in 2020 was a $157 billion industry. And look at the direction of the growth —- up and to the right.
It’s time for marketing agencies to claim their rightful piece of the pie.
We know that:
Agencies are far less likely when they’re able to provide the software + services that = success.
#3 is eliminated with SaaS mode.
Open a free 14-day trial of HighLevel here!
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