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The 5 Steps to Selecting the Best Advertising Agency for Your Business

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October 23, 2020 8 min read

Opinions expressed by Entrepreneur contributors are their own.

If you are investing material dollars in , more often than not, you have considered engaging, or have engaged, an advertising agency to assist you with those efforts. Those decisions whether or not to manage your marketing campaigns with in-house teams versus third-party agencies are typically not easy. And if you decide to outsource to an agency, the selection process can be overwhelming. This post will help make those decisions easier for you.

In-house teams versus third-party agencies

The decision to manage campaigns internally versus externally often comes down to the following things: (1) the size of your media budgets; (2) the complexities/channels of the campaign; and (3) the skills of your and the analytics tools you have to work with. Over time, my leaning on this decision has changed. I used to want to run everything internally to save on cost (an agency typically costs 15-20 percent more). I also used to want to find disparate agencies with a specific expertise (e.g., one agency for search engines, another agency for social media).

But, as the advertising industry has evolved over time, my opinion on this topic has shifted 180 degrees. Today, I am a proponent of this work to an agency, preferably a cross-channel one that can manage all our needs. The reason for this is: (1) the agencies have materially evolved from being single-channel experts to multi-channel experts; (2) strategically, it is better to have all strategies and budgets managed centrally, to easily shift dollars between channels and get cross-channel attribution tracking all in one place; (3) the optimization technologies the best agencies are using, and their direct relationships with , , and others, are heads and shoulders better than anything your internal team would be doing; and (4) finding a team of good internal marketers is hard to find and manage, as opposed to leaning on an agency’s team and its recruiting and training processes. The techniques that work best each year can rapidly change, and you want to benefit from the most recent learnings (not hire someone with yesterday’s playbook). 

So don’t be a penny wise and a pound foolish here, as a good agency should more than cover its additional fees, with materially higher revenue performance from its efforts than you most likely could generate with an internal team.

Related: Use These 10 Facebook Ad Campaigns to Maximize Your ROI

Step 1:  Identifying the best potential agencies for your business

All agencies are not created equal. Certain agencies are expert in B2C, and other agencies are expert in B2B. Certain agencies are full-service agencies handling all services, and other agencies handle certain specialty solutions (e.g., branding, creative, television, B2B lead generation). Some agencies are set up to handle huge budgets, and other agencies are set up to handle smaller budgets. The first step is to have a rough idea of your budget and needs (e.g., prepare to spend 10 to 30 percent of your revenue target on and marketing activities), and the next step is to identify the agencies that are best suited to support those budgets and needs.

For purposes of this post, let’s assume you are like most B2C marketers, and you need a good performance marketing agency. That is an agency that: (1) can handle most of your digital advertising needs (e.g., search, social, affiliates, commerce, display, digital video, connected TV); (2) has a suite of sophisticated technologies, reporting and tools to optimize the campaigns across channels; and (3) have an ROI-first mentality, shooting to drive clearly attributable transactions from the campaign at a profitable return on ad spend (ROAS).

With that being the goal, go to Google and search for “best performance marketing agencies,” as an example. You will stumble on a bunch of websites like Capterra, G2Crowd or other bloggers that have ranked the agencies based on customer reviews or their research on the subject. Or, you will find research firms like that interviewed the best agencies and ranked them, as seen in this chart, as an example. That will help get you started. But you should also talk to your peers at other similar companies to see who they are working with. Get recommendations from other colleagues. And if any agency says you are too small of an account for them, ask them who they refer business to for smaller accounts, as they will have a good idea of the best players in the space. This process might result in a list of around 8-10 agencies to consider.

Related: How to Leverage Paid Social Media With Retargeting

Step 2: Create a questionnaire and interview the best targets to ensure a good fit

Just because you think they are a good agency for you based on preliminary research, doesn’t mean they really are a good agency for your exact needs. You need to ask probing questions of them, such as:

1. What is your minimum media budget? Are we large enough to be a material account for you?

2. What are your fees? Can we afford your services?

3. What is your industry expertise? Do you have good references from similar companies like ours?

4. Are you working for any of our competitors? Do you have any conflicts we need to worry about?

This part of the process will narrow down your list to around three to five best targets.

Related: How to Create an Amazing Video Ad Without Breaking the Bank

Step 3: Invite the best candidates to pitch their services

The pitching process will start with the agency better learning your budgets, history and needs, and most likely will involve them taking a closer look at your current campaigns in Google Ads, Ads, Facebook, Google Analytics, etc. After two to four weeks, they should be have completed their research and planning and be ready to present their proposal. In those presentations, pay attention to things like: 

1. The quality of their team (and make sure the team on the pitch is the same team that will be on your account, to avoid bait-and-switch)

2. Their fit with your business and team

3. The quality of their strategic-level ideas

4. Their proposed media mix

5. The quality of their optimization tools and cross-channel reporting capabilities

Step 4: Pick the front-runner

Once you pick your favorite agency from the presentations, it is time to take the next step with them. That will include things like speaking to their references and negotiating the agreement and statement of work. This can take several weeks to complete.

Related: Should You Spend Money on Branded Search Ads?

Step 5: Formally award the winner

Congratulations, you have formally engaged your advertising agency. Hopefully the above process enabled you to find a really great partner for that will propel your business to new heights. Now starts the busy work of transitioning services from your old agencies or team members, sharpening your pencil on campaign strategy and media mix modeling and setting up all the management processes. This part of the process is as important as the agency selection is, and it will help tee up the campaign for maximum success. Now comes the hard part: executing the winning campaign that hits your desired metrics and managing your agency on a weekly basis (which I will cover in a future post).

A couple useful tips

Here are a couple things to think about. If you can, try to get part of the agency’s fee in a pay-for-performance structure. So, maybe half of its fee is fixed, and the other half of its fee is incentive based. keep that incentive uncapped — the more success they drive for you, the more fees they can earn. Do your best to cap your total fees (e.g., not to exceed a certain percent of the media spend), as these contracts can be very complicated and confusing, with all kinds of fees that can add up quickly. 

Hopefully I’ve taken the daunting process of selecting an advertising agency and simplified it into an easy step-by-step guide—one that will result in a well-experienced agency to handle your specific needs, both in terms of team and tools. The relationship between your business and your advertising agency is one of the most important relationships you will have; they are the team that will dictate how quickly you will scale your revenues, hopefully on a profitable basis. And, in today’s high-tech digital world, they are as much a technology partner as they are a media-buying partner, so pay special attention to their capabilities in this regard. Now you’re off on your journey to marketing success and profitably scaling your business.

Related: Stop Overthinking Your Advertising Creative

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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