I recently read Dennis Yu’s blog article Evolve or Die: 2010 Local Ad Agency Fiscal Models. Having met Dennis (2009 Search Marketing Expo in Sydney Australia), I have great respect for him as an individual and also for what his company does.
Many of the points that Dennis has made, are right on the money. Others, I feel, miss the mark.
At the centre of Dennis’s article, is a quote that local search marketing firms are seeing a 90% churn of clients every 6 months. When a client churns, one of the following occurs:
- The client stops spending money on PPC and will never do so again;
- The client moves to another SEM Agency; or
- The client takes the learnings and does it themselves.
So while client churn from a particular agency may very well be 90%, the industry churn rate is far lower than that. By industry churn, I mean clients lost from the industry as per reason 1 as this is what I would consider to be “real churn”. Reasons 2 and 3 result in the client’s media spend staying within the SEM industry – a sideways churn.
Don’t get me wrong, the overall churn (real and sideways) is a worry for the industry as a whole and not just the individual agency – any poor customer experience is blight on the industry. This is where I agree with Dennis’s call for a code on ethics.
Where I differ on Dennis’s view is that the companies which are benefiting from this – the search engines themselves – should be the driving force behind setting up an industry watch dog and be responsible for providing the funding to back it. The search engines don’t loose out from sideways churn. In fact, I would strongly suggest they benefit from it due to the general increase in marketing spend.
An industry watch dog should also be responsible for monitoring the search engines themselves, to ensure that the practices that the engines have, encourage responsible management of clients. From my understanding, certain search engine reseller programs actively encourage companies to aggressively and ruthlessly recruit customers, and ignore customer satisfaction. The SEMs are measured and rewarded on acquisition of customers and not retention. The rewards assist in offsetting the costs of managing these clients.
If the search engines rewarded for new customers acquisition and provided a strong incentive for retention, then many of the issues that Dennis calls out would simply go away.
Many of you will ask why don’t the search engines bypass the SEM providers and go directly to the businesses – well they do. However, they have discovered that managing thousands of small to medium businesses is a challenge. SMBs can’t be treated the same as corporate’s. They want and require hand holding, not to mention a multi-vendor approach to marketing. They do not want a self service model and have extremely high expectations of the results. The biggest issue with dealing with SMBs is expectation setting and management.
The company with the best customer service, expectation setting/management and retention will win the game – not the company with the most numbers.