As a digital agency in a crowded market would this be a competitive advantage?

[Dillon Lawrence Ltd]

We’re in this somewhat awkward stage where we are moving more upmarket in terms of our client base, meaning naturally that our prices are rising. By upmarket I mean we’re attracting larger businesses whereas when we started we mainly worked with smaller businesses and one man bands.

We’re finding that these price rises are somewhat alienating to smaller clients who are suddenly asking “why are you now charging this insane amount for a website etc”. They want to keep using us due to the quality of service compared to other agencies who work with small businesses (who mainly throw out poor templates sites). The truth is the work is less profitable compared to working for larger clients.

I’ve considered setting up a Small Business division because it’s still a profitable market and to turn our back on it completely I think would be stupid. The main idea behind this is to offer financing for a website of any size and complexity, opening up the potential of better sites to smaller companies.

I’m not talking pay monthly crap template sites like most offer but full site builds, branding etc that’s on par with larger projects. They put down a deposit, desired term and we offer them the opportunity to just pay monthly for the project’s cost. We’d take control of the domain as a requirement and no ownership of the site would be given until all balances are cleared, with interest being charged on the monthly amounts.

Similar to a car PCP, the business gets a site without worrying about paying a large amount out.

Thoughts on the idea?

 

[Ozzy]

I would choose where you want to be in the market and just focus on that. If it’s the larger blue chip clients then go there, if it’s the SME then go there.
As you say, the market is crowded with plenty of providers so neither will be left with no one to deal with. The problem you will have is trying to service both. The larger blue chips attract a higher fee as they require more consultation and “paperwork”, and diligence. The projects are often bigger, and those with experience in those sectors attract higher salaries.

I did this with my corporate consultancy before I sold it in 2014. The market I was in was going cheap with everyone fighting at the lowest price, so I tripled my prices and focused on high end corporate work. Much higher standard as I could afford to do it to a higher standard. I was happier with fewer clients but more profitable business.

 

[Deleted member 335660]

I think Ozzy is right in that you cannot be all things to all people and need some focus.

When I started in sales we had small business salespeople and large business sales people.

If you had two divisions then they would need two sets of staff I think. It could be a training ground for your employees. Perhaps trainees on lower salaries would help with profitability.

If your not large enough to have two separate teams then chose one.

 

[fisicx]

Subcontract out the small clients. Get someone else to look after them on your behalf.

 

[Mark T Jones]

I'd agree with the above - you have identified who your value clients are, so run with them.

You might be surprised how many smaller clients step up and come along with you - or not, it doesn't really matter.

As someone who works in the credit industry I'd say that offering monthly terms is just a magnet for bad business

 

[The Byre]

Subcontract out the small clients. Get someone else to look after them on your behalf.

THIS!

Small clients sometimes become larger clients and you don't really want to lose them. I have an acquaintance who does this - he has a large division for large clients and a small clients division that is run by freelancers and even a DIY/template section that offers free hosting similar to DoDaddy but with better templates and designs.

 

[Andy Harris]

First: congrats on the evolution, and also for caring about those you worked with historically.

If the key issue is that some of your historic clients feel they can't afford your new pricing, are there some value adds you can give them, that will make them more money (to continue paying you)?

There's no way not to make this look like a sales pitch but we had one agency who was in a similar position and they ended up white labelling our product, which enabled their clients to gain more business from their website visitors, and so more money to spend with the agency when needed.

I also know of an agency in the automotive market who grew (bigger projects/clients) and then dumped all their historic customers and the negative vibes are still out there (when their company is mentioned) over 9 years on from that decision.

Overall, I applaud that you care - it's a good quality to have.

 

[Paul Norman]

We have encountered this, when our business started to take off some years ago.

There are various ways to do it. You have suggested one, and other suggestions which are workable are above.

We kept most of our smaller clients. We never increased their prices, beyond inflation. We simply quoted for new work in a way that made more sense given our target market. Actually, we still receive a decent smattering of orders from smaller businesses. But we are quite content that many will simply say they had a cheaper quote. Actually, the conversion rate at all levels is fairly similar, although the reason for not clinching a large deal is rarely price.

 

[The Byre]

the reason for not clinching a large deal is rarely price.

A very, very important point! And a point that is true for every industry and market. You must be able to tick all the boxes. It matters little how cheap you are, if one box remains unticked, they cannot use you.

I was in Abbey Road Studios ages ago, where a friend was recording an orchestra for a movie score and I casually asked the studio manager what their day rate was - it came to about £4,000 plus VAT at the time, including all the extras such as piano tuning and a larger recording system. That was much more than their competition at the time - but the competition did not have the size of live-room for such a large orchestra and did not have a canteen capable of feeding all those people.

"That's nothing!" said the woman from the music agency. "The orchestra is costing us £82,000 a day."

The costs for marketing anything are seldom mostly the online costs. The costs of marketing some products are sometimes over half the overall costs. Just getting stuff onto supermarket shelves can be the largest component - or trade fairs, or TV and magazine ads, or designing and making the casing.

 

[Dillon Lawrence Ltd]

Thanks for the replies.

Then plan I’ve come up with is to keep my main company going in the direction of larger clients and projects but setting up a separately branded subsidiary that can focus on lower budgets, tap into some of the better technology and knowledge of its upmarket parent company (such as CRM development, ecommerce etc) and work with clients who are smaller businesses, eventually if they grow enough they can work with our larger agency.

Example, a client came to us for a basic ecommerce site and some one off packaging designs. Our main agency quoted for someone in house to do the designs, a project manager who’s in house to manage the project and a development team for the site. The budget was well in excess of what the client wanted to pay so we didn’t get them. No big deal as they couldn’t afford us. The problem is, why lose them completely? With this model we could refer them to our subsidiary, an outsourced developer could tweak a packaging template and build a site tweaked to their requirements based on a modular setup to reduce costs, something a bigger agency wouldn’t do.

Whilst the work is being checked for quality by someone in the UK and the outsourced developer guided to what the client wants. We can also offer them a way smaller cost with no reduced quality (to them) as they didn’t need the fancy stuff in the first place.

Saves losing a client and our main brand isn’t tarnished by also working with one man bands and smaller companies.

 

[AllUpHere]

Thanks for the replies.

Then plan I’ve come up with is to keep my main company going in the direction of larger clients and projects but setting up a separately branded subsidiary that can focus on lower budgets, tap into some of the better technology and knowledge of its upmarket parent company (such as CRM development, ecommerce etc) and work with clients who are smaller businesses, eventually if they grow enough they can work with our larger agency.

Example, a client came to us for a basic ecommerce site and some one off packaging designs. Our main agency quoted for someone in house to do the designs, a project manager who’s in house to manage the project and a development team for the site. The budget was well in excess of what the client wanted to pay so we didn’t get them. No big deal as they couldn’t afford us. The problem is, why lose them completely? With this model we could refer them to our subsidiary, an outsourced developer could tweak a packaging template and build a site tweaked to their requirements based on a modular setup to reduce costs, something a bigger agency wouldn’t do.

Whilst the work is being checked for quality by someone in the UK and the outsourced developer guided to what the client wants. We can also offer them a way smaller cost with no reduced quality (to them) as they didn’t need the fancy stuff in the first place.

Saves losing a client and our main brand isn’t tarnished by also working with one man bands and smaller companies.

Just make damn sure the more expensive business can justify it's extra cost with good, solid, tangible benefits over the cheaper alternative. Not fluffy intangible benefits either, I know what you web guys are like.

 

[Dillon Lawrence Ltd]

Just make damn sure the more expensive business can justify it's extra cost with good, solid, tangible benefits over the cheaper alternative. Not fluffy intangible benefits either, I know what you web guys are like.

Absolutely, but most larger companies wouldn’t want what we’d propose for a small business such as a templated site.

As a plan do you think if done right it could work?

 

[AllUpHere]

Absolutely, but most larger companies wouldn’t want what we’d propose for a small business such as a templated site.

As a plan do you think if done right it could work?

Yes, I think you seem to have the makings of a pretty good idea. Actually, I think you have the makings of an excellent idea.

 

[Dillon Lawrence Ltd]

Would it be worth the separate brand being something different altogether with no connection to us or our agency name with “Small Business” added

Just trying to strike a balance between not putting off bigger companies whilst also not having to rebuild a brand

 

[AllUpHere]

Would it be worth the separate brand being something different altogether with no connection to us or our agency name with “Small Business” added

Just trying to strike a balance between not putting off bigger companies whilst also not having to rebuild a brand

If you want me to tell you how to do it, and how to make money from the idea, you are going to need an invoice.

 

[Alan]

My opinion. Don't do it. Move up to the bigger clients and leave the small ones behind.

The market place as you say is swamped with template driven 'web designers' with very limited really understanding ( or many aspects that go into a really good website ) that crunch out stuff at bargain basement prices which is attractive to these one man bands and micro businesses.

My read of the situation is that the OMBs and Micros love you because you are better than the rest, which means you have been undervaluing ( or they wouldn't love you ).

If you create two businesses the low end business would have to properly compete with the market place and that means delivering low quality product for a low price to maintain a profitable business. And that to me seems agains your vision.

Of course this is just my opinion, but I have been there in this sector and back in 2011 we were cracking out sites for a handful of £ to OMBs and micros and very quickly realised that we had to move upmarket as quick as we could.

 

[SillyBill]

We always have dilemmas it seems. Not just how to win customers, sometimes how to lose them. It took me a long, long while in business before I had the confidence to prune the customer base periodically. Always thinking: what if? Looking back now I lament the time and energy expensed in not doing so relative to what could have been diverted to more profitable avenues.

I ended up with a business of two halves in the middle phase, one very lucrative, concentrated volumes and the other bloody hard work, lots of it (work) for only "okay ish" profit, albeit low margin for the industry. I was ticking the latter over for too long. I ended up far happier and far wealthier when I eventually stopped trying to win every goddamn piece of business I could quote for. Left the guys at the "bottom end" to continue to slit each others throats. I did bring a few along incidentally into paying more but was relieved to lose quite a few. Still found it tricky in shedding these in a way which was respectful. My hardest clients have always been those who pay the least and also never pay on time.

 

[Dillon Lawrence Ltd]

The market place as you say is swamped with template driven 'web designers' with very limited really understanding ( or many aspects that go into a really good website ) that crunch out stuff at bargain basement prices which is attractive to these one man bands and micro businesses.

My read of the situation is that the OMBs and Micros love you because you are better than the rest, which means you have been undervaluing ( or they wouldn't love you ).

That’s what attracts me to the idea really. Mainly because we could essentially ‘clean up’ with far nye tree service and quality whilst still making a very respectable margin.

We always have dilemmas it seems. Not just how to win customers, sometimes how to lose them. It took me a long, long while in business before I had the confidence to prune the customer base periodically. Always thinking: what if? Looking back now I lament the time and energy expensed in not doing so relative to what could have been diverted to more profitable avenues.

I ended up with a business of two halves in the middle phase, one very lucrative, concentrated volumes and the other bloody hard work, lots of it (work) for only "okay ish" profit, albeit low margin for the industry. I was ticking the latter over for too long. I ended up far happier and far wealthier when I eventually stopped trying to win every goddamn piece of business I could quote for. Left the guys at the "bottom end" to continue to slit each others throats. I did bring a few along incidentally into paying more but was relieved to lose quite a few. Still found it tricky in shedding these in a way which was respectful. My hardest clients have always been those who pay the least and also never pay on time.

Absolutely. That’s a point I take on board - smaller clients are much more needy and can be difficult.