Recently I did a little work with a new marketing agency. Their primary focus has been event based marketing but started to dabble a bit with adding a web component. When breaking into any new field or starting any new business there is always a learning curve.
As we worked together little tips and tricks that I learned throughout my own consulting career and while working with the marketing firm juggernauts down in Chicago during my Facebook app days. This post will outline some important business model concerns I suggest anyone going into business for themselves consider but using the marketing agency model as the case study.
Ever watch Mad Men? This show was hitting the peak of its popularity when I was working with the marketing agencies in Chicago. What I was able to learn from this show was that "It's all about the media buy".
Basically this means the development cost of the Facebook app or the production cost of a magazine ad were a minuscule piece of the puzzle. Of course you mark that up but that is not the real money maker. The production or development of the media is tough and the most attention consuming part.
Lets just say that a Facebook App cost $25K to develop. Then you mark that up 100% to $50K. You make $25K and you had to put a lot of work into it.
Now let's say you are smart and once you have the app up you spend $100K on ads driving traffic to the Facebook app. Then of course you mark that up 100% to 200K and 100K of that goes into your pocket. The media buy part is the easy part.
If you're really smart you can reuse whatever app or ad you build again and again saving you the production costs and skipping straight to pocketing the $100K markup from the media buy.
Hell with that kind of markup just to make it easier for your customer I would consider eating the cost of development and focusing on the contract solely on the media buy markup. It all depends on your margins.
So what does this all mean?
Focus on scalable revenue streams!
Scalable Revenue Streams:
So now the gears in my head start to turn. What is scalable about event marketing?
The promotion of the event. Merely producing the event is a lot of work for a decent payout but promoting the event includes a series of media buys you use to get the word out. Yeah you will have to produce some content and ads which is more time consuming but once you have that get that media buy markup in there.
Scalable revenue streams are great but they are boom and bust. You get a lot of money for a one time thing. The best businesses are sustainable because they have long term predictable revenue. There is an amazing book on this called The Automatic Customer by John Warrillow.
This is the long tail. Money that comes in long after the event has come and gone.
Managing Attendee Relationships Long Term:
So who manages those customer relationships long term? Your attendees paid their hard earned cash to come to your event so they obviously saw value in your client's brand. So what happens to the attendees after the event. Good bye? So long? Have a nice life?
You worked so hard to get the attendees in the door why let the relationship die there? Sure maybe you generated an email list and at the end you hand that over to your client as a value add for the event. Does your client know what to do with it? In my experience the answer is almost always "no".
Never assume your client knows what they are doing. Some do. Don't get me wrong many of my clients have been the most savvy marketers and I appreciate that but I never assume they are.
If they are not then you have 3 choices:
- Give them the email list and hope they know what to do with it
- Give them the email list and teach them what to do with it. But then they have to go through the effort each month of maintaining those relationships and that can be taxing.
- Offer them a service where you maintain those relationships via social media and email campaigns.
It is the classic teach a man a fish versus selling a man a fish. I realize that is not the original proverb but think about it.
If I am the client and I run a company that sells beer I am focused on 100 other things. Beer production, bottling, shipping, distributor relationships, etc. What are the chances that each month higher priority things will push off maintaining that relationship with the customers from our last event? Pretty high. If you provide me with the service of taking that off my plate each month then that is one less thing I need to worry about.
The attendees win because they get the feeling of being connected with the brand they already laid down their hard earned cash for. Perhaps there even rewarded with discounts, etc.
The client brand wins because the monthly task of maintaining those relationships is on being handled and all my loyal customers are more engaged and buying more of my product.
Finally my friends at the marketing agency win because they have a beautiful recurring monthly revenue. Money in the bank. They don't have to sit up at night worrying if they will land that next big event. They can keep the lights on with the monthly recurring revenue. Any new revenue is great, but you have a stable bottom line to protect you. It is a great feeling knowing you can keep the lights on with or without new customers.
This post started out as a completely different post but somehow swung into a business model post and optimizing your business model. Now I suppose I will go back and write the original post.
If you have any suggestions or ideas how to further optimize your business model or any other feedback please leave them in the comment section.
PS: If your considering selling a client on a media you will want to check out my other post: When a Media Buy is pure Madness