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SMB clients: the conundrum solved

Published: July 17, 2013

Author: Sean Marshall

“The SMB often doesn’t have the time, knowledge, or budget to understand search engine marketing.” Andrew Shotland, Confessions of a $100/month SEO Client

I pulled this quote from the first part of Andrew Shotland’s Search Engine Land blog series, which speaks to the client side of the relationship. While working with savvy customers has always been a priority for us, this got me thinking about the agency side of a low-cost relationship. The client in Andrew’s blog mentions only receiving reports when he threatens to turn things off. That’s awful service.
Trying to find an agency to manage your SEM campaign on the cheap? You get what you pay for.
Having had the luxury of investing infinite time into large clients, I’ve always wondered what happens to clients who aren’t so big. Given that most SEM agency pricing models are based on percentage of spend, what kind of effort can you expected from your service provider if you spend less than $1,000 a month. Hell, what happens if you spend under $10,000? $20,000?
Assuming management fees range anywhere between 12 and 20%, you would need to add up a lot of clients just to support one, qualified, independent consultant – never mind what it would take to support an employee with all costs beyond base salary. Hire more senior resources, you run the risk of diluting the service. Go with junior staff, and there’s a higher chance of providing poor service.
Cracking the service code for mini-spenders (mostly local businesses) is impossible. Though “quality” is a subjective word, most service standards I’ve grown accustomed to can’t be applied if someone is managing 100+ $500 spenders to earn a living.
Where I find this gets more interesting, though, is a spend range of anywhere between $10k and $25k per month. While these might seem like meaty enough budgets, the challenges these advertisers face are daunting:
1) Low spend doesn’t necessarily mean simple accounts. Whether it’s an issue of available search terms, geographic restrictions, or otherwise, these accounts are often as complex as larger ones.  Though less spend often means less data and larger intervals between running certain analysis (in other words – less time invested), some accounts present the same strategic issues as much, much larger ones.
Whether the client is spending $100k or $10k, a B2C lead gen play trying to convert a free sign-up to paid subscriber requires a proper understanding of the customer. Factor in that this paid service could be a brand new way to do something (as many up-start companies are apt to offer), and the positioning challenges multiplied by the lack of intent-driven traffic can quickly turn a $10k spender into a meaty project. How can an agency really deliver top service at anything less than 20% of spend?
2) Low spend doesn’t necessarily mean low maintenance. Andrew’s quote about the $100 client is probably true. It’s hard to command that client’s time – but for a Series A startup marketing manager committing $100k+ in marketing spend on PPC, there’s plenty of time to be involved.  Question is: how attractive is that to an agency at those prices? Can an account manager really support that level of engagement? On the flip side, an agency might make it a point to tell the advertiser they need to drive strategy (to offset the time investment in example 1) – but then, how good is their relationship?
Agency/Client relationships work best as partnerships. Surely a client will get benefit from a reliable button-pusher/task doer, but as that agency, your value can only be measured by the number of tasks you run and, ultimately, by your price. While the low spender can be more engaged than his larger counterpart, creating (and pricing) a relationship that aims to reduce 1-on-1 strategy time exposes the agency to short engagements and probably hurts both parties in the long run.
3) Low spend means junior staff. Finding a top-flight consultant isn’t easy. That said, consultants don’t have the same financial burdens as agencies and could price things in a way that makes them money while giving our low spender the service and experience they need to get off the ground. Most advertisers, though, will need to go the full agency route – and this is where the math gets tough.
In short, there’s no way an agency can offer senior-level talent to a $10k spender without losing money OR barely giving that account an hour a week OR charging over 25%. So, in most cases, you’ll be working with someone with little experience. While a sound process and great training could offset inexperience, it’s the situational awareness that can’t be replaced. Part of the appeal of working with agencies is that the cumulative experience of the company can help the advertiser should a particular scenario come up. A consultant with a great network of SEM friends could offset this, but betting that a low-cost agency has the infrastructure in place to spread knowledge is a risk.
Proven process will go a long way to mitigate this, and should be a sticking point if you’re thinking about a low-cost option.
4) Low spend could mean outsourcing. Let’s face it, search has become increasingly commoditized. I’ve been banging this drum for a while, and it only becomes truer by the day.  This commoditization has opened the door for outsourcing. One way to give low spenders more experienced front-line staff is to support said staff with outsourced work.
The potential challenges, ranging from language barrier to extended turnaround times, are significant. It’s a tradeoff advertisers should be mindful of before hiring an agency. Also, how far removed do you want your account manager from the day-to-day management of the account? How do you create redundancy to ensure knowledge of your SEM program doesn’t go out the door with a particular team member or your consultant decides to stop consulting altogether?
5) Low spend makes it hard to afford the best technology. While a significant percentage of low spenders have simple account setups that might not need tech, an equally significant percentage need it. Your average B2B lead gen program might not spend more than $15k per month but faces the same measurement problems as a $150k spender. Merging offline lead qualification and sales data is more work, so without technology, there’s even less time for the low-cost agency to invest in other areas.
This pain point would be perfect for a Marin Software or SearchForce, but minimum fee levels will price out most advertisers. Agencies operating on already thin margins will be hard-pressed to incentivize their clients to use these, let alone accrue enough spend under management to qualify for these technologies’ monthly minimums.
It’s not easy being a low-to-mid spender on AdWords these days. Between reduced service from Google and the lack of reliable agency support out there, the count of underserved and under-optimized accounts must be in the thousands. I can’t imagine how many viable programs go sideways and turn off a company from SEM altogether due to poor service. It’s hard for either agency or advertiser to do as they intended – run a great, growing SEM program using the best-of-breed tech and process. There are many obstacles to overcome and though the opportunity is great, the big advertisers get all the best attention.
So what would it take to deliver great service and results for clients in this space? Well…
– Process (like I said).
– Experience (ditto).
– Existing relationships that don’t require the client to assume full costs.
If that seems like a rare combo, well, yeah. There’s a reason this space is underserved. And there’s no question that fees are going to run at higher percentages than for million-dollar accounts to make the whole enterprise work. But it’s about time someone figured out how to show SMBs the money a good, tight, strategic paid search campaign can bring in.
Come to think of it, that sounds like a fun challenge.  I think I’ll give it a shot…

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