How To Hold Your Agency Accountable To Outputs (Money) Not Inputs (Deliverables)
Updated: Aug 27, 2021
In this article I’m going to teach you a simple way for determining what marketing objectives you should pursue and how you should use them to hold your marketing agency partners accountable. Let’s go!
Deliverables are a curious way for a marketing agency to measure success when the unit measurement for success is revenue, don’t you think?
Yet we see it all the time. Instead of holding themselves accountable to a target revenue objective (or any other objective), agencies hide behind the ambiguity of deliverables (or those monthly data dumps they call “reports”).
In marketing, success is measured by how well deliverables (inputs) make or save your practice money (outputs). It doesn’t matter how many social posts, blog posts, rankings, words per article, or automated XYZ you get if they don’t help you achieve a business outcome that improves your business condition (e.g. more patient customers).
Worse, deliverables give your agency latitude to fail without accepting responsibility. When you focus on deliverables not objectives, how will you know if your agency has succeeded? You won’t. They’ll just point to the mountain of shiny stuff they’ve made- the deliverables– and declare victory. Or worse, point to keyword rankings! Hah!
Furthermore, and the biggest head-scratcher of all, how is your agency supposed to know what deliverables to include if they don’t know what objective they’re chasing?! Seriously. Your objectives inform your tactics. Not the other way around. Your objectives provide direction, not the deliverables. For example, a 50% sales increase objective requires different tactics (ahem, deliverables) at a different cost than a sales increase of 15%. Remove the objective and how does your agency know which roadmap to follow, much less how to price it?
And to be clear, it’s not that deliverables don’t matter- they do. But your agency isn’t a marketplace. It’s not like you’re buying high-quality creative, like graphics or videos or collateral, and then using that supplemental creative to build marketing campaigns on your own (though I know it feels like it sometimes).
Instead, you enter into a monthly agreement with the agency to have them do both: create the deliverables and take responsibility for achieving positive business outcomes with them.
Since that’s the case, doesn’t it make more sense to base your entire contractual agreement around 1-2 tightly-defined objectives and a few key performance indicators (KPIs) that measure progress toward those objectives, and not deliverables?
It’s called a conceptual agreement.
Your conceptual agreement is how you keep your agency focused on outputs, not inputs. It makes success or failure black and white: they either hit the target objective within the timeframe or they don’t- no debate. And it’s how you determine what marketing tactics you’ll pursue in the first place.
Arriving at your conceptual agreement doesn’t need to be complex.
It requires 1-3 target objectives (any more than 3 and you’ll lose focus), the KPIs you’ll use to measure progress toward your objective, and the amount you’ll pay the agency to pursue your objective. That’s it.
Cost you’ll incur
So how do you create a conceptual agreement for your practice?
It starts with setting S.M.A.R.T. (specific, measurable, attainable, relevant, time-bound) objectives. Everything else falls into place after that.
The simplest way to define your objectives and KPIs is to use a purchase funnel (AKA sales funnel). If you don’t know, the purchase funnel follows the classic Awareness, Interest, Decision, Action (A.I.D.A.) framework, though it’s customized to your particular sales process. In other words, it’s a funnel that consists of each progressive step a prospective patient needs to take in your sales process. Your purchase funnel illuminates opportunity and KPIs, and it gives you all the data you need to set objectives.
For most aesthetic practices, your purchase funnel will look like this:
On the left you have broad objectives: awareness, consideration, preference, purchase, and loyalty. On the right you have your KPIs, or the metrics you’ll use to measure how successful you are at achieving the objectives to the left.
This may not look like much, but when you add in data, namely the conversion rates from one stage of the funnel to the next, it becomes a powerful marketing tool.
Using the above example, what objectives might this practice want to set for the year ahead?
(Stay with me. There’s a lot of numbers here, but it’s easier than it looks.)
It seems that they have a consideration and preference problem, right?
Only 12.5% of their website visitors convert into leads, and only 10% of their leads convert into booked consultations. Yikes!
Armed with this information, this practice could set two (2) smart objectives for the year:
Increase consideration by 25% over the next year, from 500 phone calls/form submissions to 625.
Increase preference by lifting call to consultation ratio from 10% to 40% over the next year.
Now, assuming that all other stages of the funnel remain the same, we know that accomplishing objective one by itself (*just objective one, not both) would equate to 63 booked consultations, 58 consultation shows, 44 booked procedures, and 41 new customers (procedure shows). That’s 8 more patients than before. If the average procedure value is $2,500, then achieving objective one (25% increase in visit to call ratio) is worth $102,500 in total revenue (41 patients X $2,500), or an increase of $20,000 year over year.
If we accomplish both objectives, assuming all other stages of the funnel remain the same, we would get 250 booked consults, 230 consultation shows, 175 booked procedures, and 164 new customers (procedure shows). That’s 131 more patients than last year. Using the same average procedure value, that equates to $410,000 in revenue, or an increase of $327,500.
Pretty neat, right? But there’s more…
If we work backwards we can add a third, macro objective. I call this the macro revenue objective. Since we know that the monetary value of achieving objectives one and two is $410,000, and we know that our previous year’s revenue was $82,500 (33 procedures X $2,500 average value) we can confidently set an annual revenue increase.
For example, we can now create a macro revenue objective to “Increase revenue by 396%, from $82,000 to $410,000.” Perhaps a bit ambitious but we’ll stick with it for purposes of this exercise.
With a tightly defined objective or two, now you have a strategy- a direction forward.
Two objectives with measurable KPIs based off of stages of the sales funnel and a macro revenue objective from working backwards. That’s it.
“We want to increase total revenue from $82K to $410K in one year, and we want to do it by increasing our visitor to contact ratio by 25% and lifting our call to consult ratio from 10% to 40%.”
You now know how many new customers you need to achieve your revenue goal (164). You know what tactical direction you must head to get those customers (website conversions, reviews, comparison graphics, phone training, etc.). And you know what budget you need to get there: if reaching your target objectives will deliver $410K gross, and you know how much net profit that will earn, then you know how much you can spend and still achieve a return on your investment. Simple.
Objectives inform deliverables
See what I mean? Without your objectives, how would your agency know that you need to focus on website conversions and phone training to get 164 new patients in the year? They wouldn’t. Instead, they’d show up to the job with a hammer in hand looking to beat nails. But a smart marketer (that’s you) puts the tools down and studies the job first. Then, based off of your desired objectives, assembles the tools and tactics required to deliver the win.
Just three steps:
What are we trying to accomplish?
How will we measure success?
And what will it cost me?
You have to start somewhere
And don’t panic if you don’t have a sales funnel yet. That’s ok. You need to start somewhere.
If you don’t, the first thing you need to do is start building the infrastructure for collecting and measuring your funnel and KPIs. In 3-6 months when you have data, then you can begin setting concrete objectives.
Wrapping it up
The truth is if your marketing agency is selling you on a long list of deliverables, you’re in trouble- they’re hacks. If the conversations center around inputs, like quantity of social posts per week, length of blogs, number of backlinks, or frequency of emails, you’re working with an agency that knows little about strategy.
The essence of a sound strategy is to ensure the program works on a tactical level. Without objectives and KPIs, you won’t know what tactics to pursue, you won’t know whether or not your agency partner has succeeded, and you won’t have a strategy.
Instead, bring the conversation back to outputs: what business outcomes will you focus on to help you improve your business condition? And do it before you sign the contract. Ask your agency prospects how they measure KPIs, if they use purchase funnels, and if they’ll report on outputs not inputs.
If they don’t have good answers (that will be most of them), keep searching.
And last, make your sales funnel your best friend. Seriously.
Paradoxically, immediately driving sales doesn’t always help us increase sales. Building the funnel gives as a viewpoint and basis for strategy that is incomparable to anything else. By knowing conversion rates from one stage of the funnel to the next, we can identify leaks in the pipe, then determine how to fix them and in what order.
Without the funnel, we have no frame of reference for what objectives to set/prioritize or how to measure them. With it, we know exactly what parts of the funnel are leaking and how to fix them.
Also, you’ll use your purchase funnel to help guide your decision making and goal setting for future marketing strategy. For example, by tracking KPIs over the course of this year, you’ll have enough data by the end of the year to know exactly what parts of the funnel need your resources next year.
Try it. You might like it 😉