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Agency 101: A Guide for Beginners

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Updated on:
February 27, 2024
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Competition has become plenty intense in all sectors. As a result, most businesses prefer working with marketing agencies to maximize their reach and effectiveness in engaging with their target audience. It’s no surprise that the demand for agencies keeps growing day in and day out. In fact, research shows that 70% of businesses outsource their marketing to agencies.

But whether you want to start a marketing agency or hire one to lead your marketing plan, you need to understand the basics. How agencies operate, their responsibilities, types, and more. This agency 101 guide will introduce you to everything you need to know about agencies.

The basic concepts of an agency operations

Simply put, the concepts of a marketing agency revolve around clients. Let’s explore this a bit more. Usually, brands come to an agency with varying marketing needs. Some might want to create more awareness, increase leads and conversions, or boost sales.

An agency prioritizes understanding the unique goals and challenges of each brand. By doing so, it is able to carry out in-depth research and develop strategies tailored to specific business situations. Afterward, it implements marketing initiatives on behalf of the business.

Typically, most, if not all, agencies take their client-agency relationship seriously. This is because the success of a client’s brand is equally the success of the agency. So, agencies know if they don’t provide tangible results, clients will leave.

For the record, marketing agencies work with multiple clients at a time. For them to be successful, they hire a team of experts with diverse skills and expertise. Not to mention, they also adopt agency management tools to improve client service and streamline operations.

Most of the time, brands that work with marketing agencies don’t maintain an internal team. The agency does everything on their behalf. After an agency delivers the agreed work, it bills the client for compensation.

Types of marketing agencies

All marketing agencies are not equal. Their services differ depending on the area of specialization. Broadly, marketing agencies fall into the following categories:

  • Full-service marketing agencies: As the name implies, these agencies cover all aspects of a client’s marketing initiatives, from strategic planning and campaign development to execution, measurement, and optimization. They also include traditional and digital advertising methods.
  • Social media advertising agencies: These agencies specialize in helping brands choose the right platforms to reach their target audiences and create engaging content.
  • Digital advertising agencies: All advertisements for these agencies take place online. They offer services such as lead generation, SEO, email marketing, and social media marketing.
  • Brand advertising agencies: They specialize in creating names, colors, and logos for companies to differentiate them from the others in the market.
  • Creative marketing agencies: These agencies come in handy for companies that are getting started or rebranding. Their primary focus is performance branding, which includes graphic design, web design, and content creation.
  • Growth marketing agencies: The primary role of these agencies is to help companies grow and create strategies for accommodating growth.
  • Traditional marketing agencies: They don’t offer any digital services. Instead, they offer “classic” advertising methods such as print advertising, mass media, brand management, and public relations.

Agency 101: Building blocks for effective agency operations

It goes without saying there’s a lot that goes on in a marketing agency. These businesses have to strive to give their clients an unmatched experience and deliver results for the work entrusted to them. For these outcomes, every agency requires specific elements in its operations.

Client relationship management

When it comes to client relationship management, what takes center stage is client acquisition and client retention. For an agency to maintain a healthy bottom line, it has to look for new clients continuously. It also has to put in the necessary work to ensure its existing clients are happy, or else they will look for other agencies to work with.

Typically, there can’t be retention without acquisition. Be that as it may, agencies have a 60 to 70% chance of selling to existing clients and a 20% chance of selling to new clients. So, from the first time an agency discovers a client, it has to do its best to give quality experience and maintain a good relationship.

Here are a few tips that make client relationship management a smooth ride:

Ensure a client is a perfect fit

Acquiring many clients might mean a net positive. However, if a client is not a perfect fit, you might end up channeling your resources to clients who will end up being unsatisfied anyway. To set the pace for a smooth relationship, your agency should thoroughly research a client during onboarding. This way, you’ll know whether you can comfortably meet the specific needs of the client or not.

Set realistic expectations

The last thing you want to do as an agency is overpromise and underdeliver. As such, you have to be transparent with your clients about what you can do and what you can’t. Doing so gives clients a realistic idea of the deliverables to expect. Moreover, it eliminates uncomfortable confrontations that can strain your client-agency relationship.

Have clear lines of communication

Before a project becomes successful, there should be lots of back-and-forth communication between the agency and the client. For instance, the client might want to receive regular updates on the project’s progress. Alternatively, if the client only wants minimal updates, the agency will look forward to feedback and go ahead after achieving a given milestone.

Having a clear line of communication ensures that everyone is on the same page. An all-in-one agency management tool like Bonsai can help you hold all communications with your clients in one place.

Project management

An agency usually has multiple projects running at any given time. Ensuring each project gets delivered within the budget, on time, and with high quality is no easy feat. This is where project management comes in handy.

First, it helps you determine the time needed to complete the project and create a schedule. Doing so reduces the risks of running behind on deadlines throughout the project’s lifecycle.

Second, it defines the scope of work or tasks that will need to be completed, keeping the project on track. Project management also ensures material, labor, and overhead expenses don’t exceed the budget. Lastly, it guarantees that the project meets the expected quality.

To keep projects flowing smoothly, agencies break down a project into several stages:

  • Initiation: The first stage involves laying out the project’s purpose and objectives. It’s also where project managers determine whether a project is viable.
  • Planning: This stage includes laying out a roadmap that will lead to the end goal.
  • Execution: The real work begins here. Each team member gets assigned their tasks and deadlines.
  • Monitoring and control: Project managers evaluate if the project is headed in the right direction and propose changes if need be.
  • Closure: Here, the agency gets approval from the client. Depending on the level of satisfaction, the client can decide to renew the relationship or terminate it.

Financial management

Proper financial management is the lifeblood of any agency. Poor number tracking can lead to problems pretty fast. Research shows that 82% of businesses fail because of poor cash management. As an agency, you have to do proper bookkeeping to make sound financial decisions.

Here are a few metrics that agencies use to keep an eye on vital finances:

  • Agency gross profit margin: Measures the profit left after deducting the direct costs associated with delivering services to clients. With this metric, an agency will know whether to scale down or expand business operations.
  • Agency burn rate: It shows an agency’s spending after a given period, like a week, a month, or a year. A high burn rate indicates that an agency is spending its funds too soon and is likely to run into issues.
  • Agency operating cash flow: Determines the net cash that flows in and out of the agency within a given period. A positive cash flow means a business is healthy since it’s spending less than it’s receiving.

Resource capacity management

Resource capacity management is all about using your resources optimally. For an agency, the main resource that gets the work done is human resources. So, you have to look for a balance so you don’t underutilize your employees or overwork them.

But that’s not all. Resource capacity management has to consider the number of employees available, their expertise, productivity rate, and working hours. With a clear understanding of the resources available, an agency gets insight as to whether it can meet existing and future work demands.

For ease of resource management, agencies use software that stores all employees’ data in one location. From a single glance, you can tell what each employee is doing and how long they will take. In case of changes in work demands, a project manager can update the schedule, and everyone will receive an update immediately.

Talent acquisition and retention

Talent is one of the key resources that drives success in an agency. As such, recruiting and retaining the right people is important to keep an agency running efficiently. To attract the right talent, an agency has to stay ahead of the competition by offering the best perks to employees. These include compensation, work benefits, mental health benefits, and work flexibility.

Work doesn’t stop at talent acquisition. You have to ensure that you retain your talent. According to Employee Benefit News, losing an employee can cost up to 33% of an employee’s annual salary. That’s a road you don’t want to tread. You avoid it by offering a supportive work environment that:

  • Offers room for growth and development
  • Gives employees a work-life balance
  • Encourages good work relationships with coworkers
  • Supports smooth communication from top to bottom and vice versa
  • Commits to training and advancing employees’ skills

Challenges common in agencies and how to overcome them

Every business faces challenges, and agencies are no exception. However, although some agency challenges are unique and differ depending on the type of agency, most of them are common across the board.

The good thing is that there are ways to solve these problems and maintain a shared, fulfilling experience for clients and the agency team. Below are the common challenges agencies face and how to overcome them.

Inconsistent management processes

Management processes refer to established procedures that help to guide the activities of an agency. The framework of these processes can touch on features such as:

  • Roles and responsibilities of team members
  • Metrics and key performance indicators to measure progress
  • Structured meetings for stakeholders
  • The technology applied in the agency

However, a good number of agencies do not have well-defined processes that dictate the running of operations. These inconsistent procedures pose risks such as low-quality work, missed deadlines, isolation of teams, higher employee turnover due to burnouts, and impeding agency growth.

As such, to curb these risks and ensure efficiency, agencies need to create organized processes that give a clear outlook of their goals and objectives. Some of the ways to do that include:

  • Evaluating the present processes and noting the issues the agency is struggling with
  • Setting priorities and deliverables that align with the agency’s goals and objectives
  • Investing in a resource management tool to help manage workflows
  • Assigning roles and responsibilities across the agency and establishing communication channels

Ineffective communication

Most agencies, both new and established ones, struggle to ensure there is effective communication. Although it’s not a distinct agency challenge, it can be one of the most destructive if left unchecked.

Effective communication is the key to building trust between clients and agencies and collaboration between teams. A breakdown in communication results in delays and errors, unvoiced client concerns, misunderstandings between employees and management, and suppressed frustrations.

To avoid such complexities, agencies should:

  • Form clear protocols for both internal and external communication.
  • Hold regular meetings to voice concerns and address issues.
  • Encourage feedback from team members and clients.
  • Use tech tools that automate information sharing.

Client acquisition and generating new business

Like all other businesses, agencies need to grow and expand into new markets. However, doing this requires them to overcome stiff competition and navigate long-running sales cycles. All this can be expensive as well as time-consuming.

Nonetheless, it is essential for the survival of the agency and actually doable with the right techniques. To create new business opportunities, agencies can ensure a vigorous marketing strategy, leverage their referrals, and have an easy onboarding process.

Distinguishing your agency

Every agency struggles with finding its niche and differentiating itself from the competition. However, standing out requires specializing in a service rather than the common generalization that is customary to many businesses.

In order to set themselves apart and rise above their competitors, agencies can tailor their services to a specific client niche. This is possible by identifying their strengths and unique values, advertising successes, and investing in branding.

Evolving technology

Technology is always improving, and clients rely on agencies to be at the forefront of these changes. But, some agencies are left lagging with outdated tech stacks, and others don’t even apply the right technology in their activities.

Running an efficient agency requires knowledge and application of the current tech trends. Those who don’t adapt are likely to be phased out of the market. Additionally, having too many software tools that provide the same services or accomplish similar tasks can be expensive and confusing.

Agencies must stay updated on all relevant tech advancements and solution software. They can do this by evaluating the current technology and removing unused or outdated software. Training team members on the correct use of tech tools and, of course, incorporating new technology is the only way to maintain a competitive edge.

Agency efficiency

Usually, agencies have many operations and activities taking place at the same time. The complexities of these operations can make running the agency efficiently a headache for the management team.

It is tough to focus on achieving the set goals and objectives for client satisfaction while also ensuring that resources are put to good use. More often than not, inefficiencies result in a lot of pending work and delays, breakdown in communication, wastage of resources, and reduced revenue.

To improve operational efficiency, agencies can opt to:

  • Periodically assess and improve management processes.
  • Evaluate resource planning and allocation practices.
  • Automate tasks and workflows to save time and increase productivity.
  • Encourage collaboration and feedback from employees.

Benefits of hiring a marketing agency over maintaining an in-house marketing team

Effective marketing has become the backbone of business success. When choosing how to approach marketing, businesses have the option of either working with an in-house team or outsourcing services from an agency. Although both of these methods are known to work, hiring a marketing agency stands out because of the following reasons:

A specialized team of experts works on behalf of the business

A lot of headaches come with hiring an in-house marketing team. For instance, you must do an in-depth vetting of every person before bringing them to the team. This can result in time wastage that could have gone into other productive activities for growing a business. Hiring an agency eliminates the hassle because each agency has an all-star marketing team with varied skill sets, perspectives, and industry insights.

An existing system already in place

When working with an internal team, businesses have to create their marketing system from scratch. The process involves trial and error before a business figures out the tools that will meet its needs. Not to mention, there might be some learning curve and cost involved before the in-house team gets acquainted with the system.

On the other hand, marketing agencies have readily established systems that they use to serve other clients. Moreover, their tools are advanced, given that they are experts in the field. Lastly, companies don’t have to absorb the cost of subscribing, designing, or buying software. This can be a plus for small businesses looking for ways of cutting expenses.

Flexibility in scaling marketing efforts

The only way to expand marketing with an in-house team is by hiring more employees. Conversely, an agency has a readily available team that can handle any workload a business requests. Better still, the scaling process will be much faster.

For instance, if a business wants to embark on video marketing, it doesn’t have to pay for a mini course for its team or hire someone new. Though scaling marketing efforts with an agency comes at a cost, it doesn’t match that of an in-house team.

Marketing agencies have to work for success

As evident from this Agency 101 guide, the operations of an agency are quite complex. However, when an agency has all the necessary elements of success well laid out, it’s guaranteed to work more efficiently than an in-house team. But there should be regular in-house check-ups to avoid roadblocks. And working with the right marketing agency software like Hello Bonsai is a prerequisite for success.

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