The Diablog - it's Diabloglical™
It’s time for 2020 vision.
– Robert Kruger19 February 2010
Recessions are historically rough on creative agencies. When money gets tight, clients stop spending money on new campaigns, ideas, collateral, and websites. They try to get by with what they have until the economy turns around.
In September 2001, the creative industry tanked. The terrorist bombings caused financial panic while the economy was still reeling from pop of the dot-com bubble. It took several years for our industry to recover. But did we recover? It didn’t feel like it to me. Business changed. Budgets were smaller. Green lights took longer to secure. Clients who earlier were willing to buy entire campaigns were more likely to spend “as needed”.
Then, just as creative agencies were getting adjusted to the new, tighter way of doing business, the second largest recession in American history hit.
I think the most important lesson to be learned from the recent downturn is that we need a strategy for recession. Here’s what I mean when I say it’s time for 2020 vision. Based on the economic performance of the past fifty years, it is likely that the year 2020 will be similar to 2010. We will probably be recovering from a recession (hopefully not as severe as the one we just exited), and the business atmosphere will have shifted again.
Here’s a quick history lesson. In the history of the United States, our economy was growing about 2/3 of the time. Of course that means that our economy was shrinking (in recession) 1/3 of the time. Fortunately, we have learned a lot over the centuries, particularly after the Great Depression, and our recent history is much better. Over the past 50 years, we have been in recession approximately 1/6 of the time.
We were in a recession in the early 60’s, the early 70’s, the early 80’s, the early 90’s, and the early 00’s. There was one additional recession in the middle of that regular cycle, starting in 1973. Of course, based on this pattern, the recession that just ended came early.
If things go well for the economy, there will be one recession between now and 2020, probably near the end of the 10’s. (If things don’t go so well, there will be two.) That’s right. If things go well, there will be a recession. It’s no good to think that the recession that just ended was the last. It hasn’t worked that way for hundreds of years, and it’s not going to work that way now.
If you accept the idea that recessions are inevitable, you need a plan for coping with them. Here are a couple suggestions to get you started.
“Go after the low hanging fruit” is a bad business strategy.
I have heard this strategy used too many times, mostly by poorly performing companies. Here’s why I don’t like it for creative agencies.
1) When you present your agency to prospects, you look for ways to distinguish yourself from the rest of the competition. That’s how every business gets seen - it’s how they make sales. A problem with only going after the low fruit is that it throws you together with the rest of the bottom-feeders. It doesn’t distinguish you. It makes you look cheap and lazy.
2) By focusing your attention on low fruit, the clients you find will be desperate, looking for a way to get more than they can afford. If they fail completely, they will be gone. If they succeed, they will replace you with someone they respect.
3) If you have the capacity to be efficient and clever, collecting all of the fruit is profitable because you have less competition. In particular, you won’t be competing with the bottom-feeders from point 1) who will undercut you with artificially low pricing. Here’s a success story about a company who built their business around picking up after low-fruit-gatherers. XTO Energy has been, for many years, clever and efficient at extracting natural gas from wells that other companies thought were underproducing. They had little competition in this arena, which allowed them the freedom to grow. Late in 2009, the company sold for $31 billion. I know that’s probably bigger than your firm, but the strategy is sound.
4) Low fruit is plentiful in a healthy economy, not so when the economy gets tight. Let’s look at this business cliché in a literal way - an actual fruit tree. When the tree is well watered, it produces a lot of fruit. During a drought, it produces less. And when it produces less, it doesn’t stop producing fruit in the high branches only. There is less fruit all over, even on the low branches. How does this aspect of the metaphor apply to your business? If you don’t know how to pick fruit from the higher branches, tough times may leave you with little to feed on.
Base hiring decisions on business analysis, not on emotion.
Balancing the size of your staff to your project workload is tricky business. Reducing staff is commonly an easy business decision but a difficult emotional decision. Deciding to add staff after a recession is the opposite. As business picks up, you are emotionally ready to add staff, but getting the timing right is a difficult business decision.
Historically, unemployment recovers 18 months after a recession ends. Why? Because it’s hard to feel confident that this month’s sales will continue next month, if this quarter’s sales will continue next quarter, etc. Another significant issue is debt. If you accumulate debt during a recession, you feel pressure to pay down that debt before increasing your overhead.
If you don’t staff up as your sales increase, how can you get the work done? There are a variety of ways.
1) Push your existing staff to do more. I am astounded by the prevalence of this strategy in the creative industry, particularly because the downsides to this strategy are so obvious.
- Overworked employees quit. It doesn’t matter how long they have worked for you or how good they are or how much they like you or your clients. An employee shows up for work to bring home a paycheck, and “overworked = underpaid” in the mind of your employees. Plus, driving off dedicated and proven employees makes your understaffing problem worse.
- Efficiency and quality suffer in the hands of overworked employees. After staring at a computer monitor for 14 hours, any employee, no matter how good they are, would rather be at home.
- In a service industry, employees are everything. Good employees cause success. If you treat good employees as a valued asset, your employees will stay with you. You will enjoy business consistency critical to overall success. A service company cannot succeed if the employees don’t feel appreciated.
- Finding a good employee is difficult and expensive. If you already have good employees, it is better business to keep them satisfied than to have to replace them. This is particularly true coming out of a recession, because if you had a layoff, your remaining staff is made up of your best employees.
Overtime can be an effective short-term strategy, but it’s a bad medium- or long-term strategy. If you decide to apply this strategy, tell your employees your plan. In particular, promise your employees a deadline for the end of the overtime push, and keep your promise.
2) Pick up the slack with freelancers. For certain projects, utilizing freelancers can be a nimble way to balance the workload. Keep these points in mind:
- Develop a relationship with a freelancer before you have to rely on them. Skill, efficiency, and reliability can vary widely from one freelancer to the next. Don’t hang your success on an untested freelancer.
- Freelancers cost more than staff on an hourly basis, but you never pay them for non-billable time.
- Progress made by a freelancer can be offset by setbacks caused by unusual work schedules, software version differences, file transfer time, etc.
Using a proven freelancer is best suited for work on an individual project or to help you through a quick growth period that ends with the hiring of a permanent employee.
3) Contract labor can be a good medium-term solution. Keep this in mind:
- If you hire someone on contract for a specific period of time, be clear about the terms of the contract, even with your permanent employees. Mistreating a contract employee can cause bad feelings throughout your firm.
- Freelancers aren’t necessarily good contractors. If the contractor will need to go back to making a living as a freelancer at the end of your contract, they will continue to serve their customers during the time they spend with you.
- Don’t dangle the carrot of permanent employment as a negotiating tool to convince someone to sign on as a contractor. Decide if you want to convert a contract position to permanent before you start interviewing, and make your position clear.
4) Outsource work to service providers. The end of a recession is a good time to re-evaluate your business goals. If you decide that certain aspects of your business are outside your core competency or are difficult for you to make profitable, finding a long-term service provider can give you the flexibility to accept projects without the staffing concerns. Some thoughts on outsourcing:
- Offshore outsourcing can be cheap, but quality control is difficult. You may find that the corrections that need to be made take nearly as much time as if you had done all of the work in-house. File transfer technology can also make offshore graphics work impossible.
- Onshore outsourcing service providers can operate like an extension of your company. They can work from estimates, or they can work on an hourly basis.
- Finding a reliable service provider is similar to interviewing job applicants. Make the prospective vendor prove their quality and reliability with work samples and references.
Recovering from a recession is an opportunity to improve your agency.
The recession is over. Let’s move on.
That means getting busy, growing, and adapting. Just like in 2003, the business climate is not the same now as it was before the crash. That’s where adapting comes into play. Take a new look at your agency. The adjustments you make today can prepare you for the next downturn.
Dialogs Professional Services is dedicated to helping creative agencies grow their interactive business. With us on your team, you know you can say yes to any interactive opportunity you find. We can provide the technical expertise you need to expand your service offerings without any risk to your financial security.
Buzz is more than a new social app, it's how businesses grow.
– Brett Barron10 February 2010
Today, you open your Wall Street Journal to read that Google has announced "Buzz", the latest social network killer-app, and you cringe. Yet another internet whatsit you have to get your head around. You want to leverage your investment in your business website by optimizing your reach. That's what the allure of social networking is all about from a business perspective. Instinctively you understand this, but sorting out all the terminology and how it relates to you isn't easy, especially if the source of your information is your IT department or your propeller-headed web developer. This article explores common internet communication technologies from a business perspective. (We'll write a future article with technical direction for your developer.)
What could be easier than email?
Everybody, EVERYBODY, has email, and sending email is free, right? Consistently, businesses lunge at the opportunity to send their message directly to customers and prospects. Here's what you need to know about doing this right. If you have a customer/prospect's email address, it's generally acceptable for you (singular individual) to send a unique email to one (singular) email address for most any legitimate business purpose. To avoid having legitimate mail flagged as spam, resist all-caps and excessive punctuation in the subject of the email, and limit the number of recipients. Sending the same, generic email to multiple recipients constitutes spam unless you have specific permission before hand from each recipient. The best-practice way of establishing this permission is called double-opt-in: users sign up for your email communications on your website, and then you send them a confirmation email with a link back to your site to confirm that they want to be on the list. You should send bulk email, such as a newsletter, to users on your opt-in list through a legitimate Email Service Provider (ESP) such as MailChimp, inContact, or Constant Contact. Properly written emails delivered through an ESP are more likely to pass through spam filters and end up in your recipient's inbox. Additionally ESPs provide helpful tools for creating emails and statistical tracking of recipient behavior.
The short answer is: email is an easy way to communicate one-on-one, but as a mass communication media, it needs to be managed carefully or it can do more harm than good.
Is a blog the answer to mass communication needs?
You've been told you need a blog, but why? Consultants frequently recommend that business websites have a blog. Blogs offer a convenient means of adding fresh content on your website. Fresh content is believed to be an important factor in Search Engine Optimization (SEO). Additionally, a blog written in a conversational tone helps establish a more personal relationship with your site visitors. The relaxed nature of a blog post lends itself to generalized advice and can help establish credibility in your field. Visitors that like what they read may elect to subscribe to your blog via an RSS feed, allowing them to be alerted to new posts, which brings them back to your website. RSS feeds are also a convenient means of allowing various other services like Facebook, LinkedIn, and MailChimp to poll for updates in your site content and publish or push the information out to your friends, followers, or subscribers. Think of a blog as a constant trickle of communication between you and your customers and prospects. Twitter refers to itself as a "micro-blog" - like other blogs except each post is limited to no more than 140 characters. Twitter has an extensive Application Programming Interface or API that allows developers to write integrations with the service - posts on your corporate blog can automatically appear on Twitter.
A blog is not "the" answer. No one media has that much power. It is a useful solution and should be a part of your overall communication strategy. Keep in mind that blogs don't happen on their own. You will have to assign resources to write articles. Posting articles with regularity is the best way to maintain interest in your blog.
What about social bookmarking?
It is human nature to want to share things that interest or impress us. Social bookmarking services such as Digg, Delicious, and reddit, to name a few, allow users to share website links with others. This is the basis of viral marketing and can have great value, as such bookmarks carry an implied endorsement. You should strive to have many links in such services. These links are not only a direct conduit back to your website but additionally are valuable for SEO purposes. It is a good idea to help site visitors bookmark key content on your website. Website owners can write custom code to do this or more easily embed code from bookmarklet services like AddThis or ShareThis or AddToAny.
Bookmarks that point to your website are like billboards along the highway - they get seen by a lot of people, but they only reach people interested in the message. Unless you have a Doritos budget, you may never appear on the first page of Delicious, but your bookmarks may still be helping your business.
Could anything get more hype than social networking?
If you're not yet 30, odds are you have at least one account with a social network site such as Facebook, LinkedIn, or Google's new Buzz. If, like me, you're among the over thirty crowd, you should strongly consider it. People establish an account with a social network specifically because they want to communicate with others. You want to be in this space because people that connect with you want to communicate; they are receptive. Pick wisely and understand the nuances of the way users interact with each network. Businesses create Facebook accounts because of the sheer volume of users. It is by far the most important social networking conduit consideration for this reason and can be configured to update via an RSS feed from your blog. LinkedIn has far fewer users but is considered more business-oriented. Pushing updates to LinkedIn is easy (they publish an API specifically for doing so). Due to the nature of Twitter, communications are short but often razor sharp and fast moving. It's common for a single big news items to get mentioned millions of times in a few days. Buzz was announced today and will be most attractive to those already using Google apps; it's tightly integrated with gmail. Think of Buzz and having some of the best features of Facebook and Twitter rolled into a service designed from the outset to allow you to precisely control who has access to your communications. Buzz is the one to watch over the coming months. There are hundreds of other, smaller social networks, any number of which may have particular interest for specific vertical markets. There are also tools like Ning or BigTent for "rolling your own" social network. (Social networking components can also be built directly in Dialogs.) This may make sense for businesses that wish to have precise control of network look and feel and when controlled communications and security are key concerns.
Social networking is not hype. It is here and can't be ignored. Take advantage of all the talk - get your message in the mix. At the very least, don't ignore the possibility that people are already talking about you.
Can you put it all together for me, please?
The strongest approach for businesses to leverage internet buzz is to build on a solid interactive website framework like Dialogs. In addition to providing design-accurate content management, Dialogs allows you to easily add one or more blogs to your website. Each blog post can automatically trigger updates to LinkedIn and Twitter. All Dialogs Lists can be configured with corresponding RSS feeds to be monitored by outside clients including Facebook. Dialogs can easily collect visitor data and can allow your users to double-opt-in to mailing lists. The Dialogs MailChimp plug-in allows easy transfer of email accounts and related data to MailChimp for robust email campaign management. Additionally, MailChimp can monitor your Dialogs-powered blog and send email notices to your users when you make updates. Embedding code from social bookmarking services like ShareThis is quite simple. As for google Buzz, we'll be watching for enhancements to its API to allow pushing content from Dialogs.
There has never been a better time to invest in your interactive website. Let Dialogs power your website and become the hub for your social networking strategy.
“Self-fulfilling prophecies.” or “I should have known that client would be trouble.”
– Robert Kruger4 February 2010
Selling creative services is a tricky business. You often find yourself sitting across the table from someone who doesn't appear to have a hint of understanding about what you're trying to sell, yet clearly they will be the decision-maker. Add the pressure of a down economy to the dynamic, and you may resort to desperate measures. You promise anything to land the business: you'll do work on spec or you'll do the first job for a reduced price or you'll allow the inexperienced client to manage the project.
If I hit a sore spot, relax. I'm not trying to beat up anyone with this article. Believe me, I know how personal this topic can be. That's why I want to talk about it.
For reasons I don’t understand (and I have never found anyone in the industry who does), creative/communication services are not regarded in the same way as accounting, architectural, medical, or legal services.
- We all provide professional services.
- We learned how to perform these services through many years of higher education.
- We all have the same product for sale - our time.
- We all adjust the value of our time based on experience and past successes.
With all these similarities, no one would tell their lawyer, “I don’t like the outcome of my divorce, so I’m not going to pay you.” No one would ask their architect to design their first house for free.
So why do creative agencies get asked to do these things? I have a vision of the first time a client asked their attorney to do something for free. I see uncontrollable laughter and heads shaking, “No.” I also have a vision of the first time a client asked the same of their agency; only the outcome is quite different.
OK, as I mentioned earlier, I don’t know how we got here. I’m not really a “blame” guy anyway. We’re here. How do we get out? Let’s break it down into some basic analysis of human nature.
People are creatures of habit.
Habit may explain why you have never been able to make a client profitable after doing the first job for them at a reduced rate. I have heard this story from nearly every agency I have consulted with. The client promised more work down the road if they could just get some help on the first job. The agency is never able to adjust their billing up to their full rate. The client gets used to the rate charged for the first job and expects it to be the norm.
Habit can also prevent you from doing your job. You are the expert in creative communications. That is what you have been hired to do. You know how to get the job done. If your new client tells you how to do your job, you will be frustrated and they will be disappointed with the results. It's likely this a habit - your client has probably always called the shots, even if they aren’t qualified to do so.
If you discount your first job with a new client, assume that is your rate for them forever. If the client micromanages you and your staff, assume they will work that way forever. They will likely leave you for a new agency if you push the point - or, at least, that is your fear. Your client may have formed a sense of habit around their first job with you. But more detrimental to your business, you may have formed a habit of compliance out of fear of being fired.
Use habit to your advantage. Set up how you want to be treated from the start, and that will become the habit - for you and your client. Another way of looking at this issue is: people don’t like change. It’s easier to start a relationship on the right path than it is to change the relationship after it is established.
People look after themselves first.
This is as straightforward as it sounds. When you negotiate the terms of a job, your client will look after their own interests, not yours. It is your job to look after your interests. Your client may be fair-minded, but that will only mean that they understand and appreciate your motives. You still need to be the one to state what you need to make the deal good for you.
I’ll take this one step further. If you are talking to a reasonable, professional client, they will expect you to defend your side of the deal. They will have more respect for you if you do. This is the sort of client you want to associate with. It is also in your client's best interest for you to succeed.
Most people are good. Some are bad.
Don’t confuse my first two points with this one. A good person (and a potentially good client) could habitually expect low fees, given the opportunity to develop the habit. It’s also likely that they will put their interests above yours. That’s both natural and avoidable.
Occasionally you will encounter a bad person. They may lie to you. They may lie about you. They may bully you. They may intend to take advantage of you whenever possible.
I know this sounds obvious, but a genuinely bad person is not who you want as a client. Cut your losses and get out of the relationship as quickly as possible. I have seen several instances where agencies tried to mend a bad relationship, some of them over periods of years. They never succeeded, and the entire time, they were losing money and causing undo stress on their staff.
You have the power to fix the problem.
Once a relationship with a client goes in the wrong direction, you are stuck with nothing but undesirable options:
- fire the client
- get fired by the client
- live with a difficult and/or unprofitable client
- spend valuable time trying to redirect or retrain the client.
I love Einstein’s definition of insanity: doing the same thing over and over again and expecting different results. If you keep having client-management issues, change what you are doing.
If you state reasonable needs in a contract negotiation, and the client disagrees with your terms, it’s likely that they are not going to be a good client for you. They may not think the way you think. They may not be able to afford you. You may not have the expertise or resources that they need. It isn’t a matter of fault - a deal that doesn’t go through may be best for both parties.
Honesty and transparency lead to positive, long-term business relationships. Speak your mind, be true to who you are, and good clients will appreciate you. Even in tight economic times, success will come to agencies that focus on converting a single job into a repeat client and converting clients into long-term accounts.
