Transcript

Speaker 1:
You’re listening to Rattle and Pedal, diversion thoughts on marketing and growing professional services firms. Your hosts are Jason Mlicki and Jeff McKay.

Jason Mlicki:
Jeff, how are you doing?

Jeff McKay:
I’m wonderful. And you?

Jason Mlicki:
Wonderful. I’ll say I’m good. Wonderful is pushing it. So, today, we agreed we are going to talk about how to adjust your marketing budget to the pandemic, to adjust it for this moment that marketers are experiencing. I’m not exactly sure where to start. I think you suggested that maybe I share some of what we’re seeing our clients do, and I think it would be good for you to do the same. So, we could certainly start there and talk about the different things that we’re seeing play out.

Jason Mlicki:
And then, maybe lean into how you make those choices the right way.

Jeff McKay:
I say we don’t cut any marketing.

Jason Mlicki:
Ever?

Jeff McKay:
Our podcast where we ask, “How much did you spend on marketing?” And your response was, “More.”

Jason Mlicki:
Well, that did not account for a hundred-year pandemic. But generally speaking, I would say most firms do radically underinvest. So, usually, I would say that my answer of more is always right. But in this particular moment, I will be more prudent and problematic.

Jeff McKay:
Oh, look at you.

Jason Mlicki:
But no, that’s pretty funny. And you said that I had this image of the stock market in my head, that belief that the stock market always rises. Obviously, it has its momentary blips but always rises. And so, if we have marketing budgets, it should always rise, just momentary blips. That’s clearly not the case. So, let’s talk about this. Always on our side, the obvious thing that I’ve seen is that there’s three scenarios, and they’re obvious scenarios.

Jason Mlicki:
And they’re a function, I imagine, of a couple of different things. Obviously, we have clients that had to pull back on their spend. And so, they’ve made budget cuts, both internally and external outlays. Usually, that is primarily a function of real revenue cash flow problems at the moment. So, this pandemic has obviously shutdown the whole sectors of the economy. So, there’s organizations where their revenue went to zero overnight.

Jason Mlicki:
And that’s trickled its way back up into every company that touches them and works with them. So, the firms that I’ve seen that have pulled back, it’s not necessarily have been a function of strategic choice or a belief, or lack thereof of the effectiveness of what they were doing. It was just a raw revenue cash flow reality, which is that we have less cash coming in the door, and we have to adjust all of our expenses accordingly in order to survive the moment.

Jason Mlicki:
So, there’s clients in that bucket. We have clients that are in the middle. I would say they’re basically static. So, they are just staying in the course. They haven’t made any significant changes in direction, significant changes in spend, and they may have made some modifications in the things they’re doing right now in order to be more responsive to where opportunities are in the moment. But they’re not changing the trajectory of what they’re doing or why they’re doing it, or how they’re doing it.

Jason Mlicki:
And then, we have a few clients that are actually overinvesting right now. They’ve found a very real significant marketplace problem that they have a solution for. And they’re essentially seizing the moment and saying, “We can invest more in our marketing right now to go out into the universe and say, ‘Hey, we’ve got a solution to this problem, and here it is.'” And so, there are firms I have seen that have taken that prudent risk, I guess.

Jason Mlicki:
Because they recognize that it’s both a horrible time for so many people, but that is, there are also opportunities in the hurricane, as we’ve said in previous podcast, and they’re seizing on those. So, I don’t know if that helped at all. Because it’s fairly obvious that those are the three scenarios that there are. I guess, I just maybe give listeners the confidence that we are seeing all of them. We have clients in every one of those trajectories.

Jason Mlicki:
So, if you have a tendency or a belief that you need to go one of those three directions, yeah, I guess maybe it’s okay to go there. It’s okay to invest in marketing right now if you think you have an opportunity and you can solve a real problem at the marketplace. Because I do think sometimes people need permission anyway, but go ahead.

Jeff McKay:
Yeah. Well, nobody wants to be the first person to step out of line sometimes, and I get that. I also think in a lot of firms, marketers wait to be told what to do instead of proactively going to the managing partner or the practice leaders, and says, “I’ve already created the contingency. Here’s the thinking behind it. Here are the results I’m expecting from it. Here are three or four scenarios that could play out.

Jeff McKay:
And based on those scenarios, here’s the bottom-line impact to us. And then, here’s how we could recover, reengage once this thing is over, given those scenarios.” And I think that’s a really useful exercise as well. I would say, my clients fall into those three categories as well. I’d be curious, if you laid percentages across those categories, what would they be? What percent of your client they’re in category one, two or three?

Jason Mlicki:
Well, obviously, we don’t have a ginormous client base because we’re an agency, and our whole agency is predicated on the idea that we serve 12 to 15 clients in a very deep strategic way. So, honestly, it’s probably 70% to 80%, or in the middle, just stay in the course, maybe making some minor adjustments to their strategies and tactics, but not substantially disrupting their revenue model. And then, you’ve got 10% on the other end.

Jason Mlicki:
So, you’ve got 10% that had to go through a significant change and 10% that are seeing this as, I say opportunity, I’m careful of saying that word. I don’t want people to misunderstand what I’m saying. And what I’m saying is, they recognize that they can solve a real significant problem right now that is going to create long lasting effects. And so, they’re stepping into that moment.

Jason Mlicki:
So, I don’t want it to come off like they’re trying be opportunistically gaining off of other people’s suffering. That’s not what it’s about. So, I just wanted to preface that. But yeah, it’s I guess 70% in the middle, 10% and 10%, or something like that, 15% and 15%, I guess. My numbers don’t add up. I am the math guy after all.

Jeff McKay:
Yes, you are. Yes, you are. Mine would be 180 degrees-

Jason Mlicki:
Really?

Jeff McKay:
… different than yours. Yeah. And I would say the majority of mine, more than the majority, are actually investing because they’re in a strong cash position. They have, to some degree, available leadership time to focus on some more strategic things and feel now is the time to position the firm to come out stronger. The ones holding in the middle maybe an industry, is a little more impacted. And I think they’re being smart about keeping their powder dry.

Jeff McKay:
And then, the others are, it’s just clear. There’s not a strong position to do what they would like to. And I think they’re learning quickly why and they’re making adjustments. But for the most part, I think… and people that I talked to in the industry are really, really busy. Yeah. I was talking to one of the big four partners just a week or two ago.

Jeff McKay:
He’s putting in 15-, 16-hour days working with clients, helping them get through this. So, they’re still generating revenue in major parts of their business. So, it’s definitely a mix. It’s definitely a mix. But I think for me, my clients see it as an opportunity to invest and come out stronger when it’s over.

Jason Mlicki:
I’m shocked to hear you say that only, because the prudent decision maker that you are, I would imagine you would have pulled back. The thing I’ve said all along, I mean, there’s always that saying, “You don’t want to waste til recession.” Right? And this is a different recession because it’s more acute and it’s more painful, because people are dying and it’s horrible.

Jason Mlicki:
But there’s substantive research out there that shows that these are the best times to market when everything is not going well and other people are pulling back, and you can lean in a little bit. There’s honestly less clutter for mindshare. Now, there’s a lot of clutter for COVID-related thought leadership at the moment. So, I don’t know that that’s really a true statement in terms of the ability to self-publish.

Jason Mlicki:
And I also think that there’s more attention. So, the thing that people keep saying to me is, “Well, people are busy. They’re helping homeschool their children and they’re caring about for their loved ones. And they’re making meals,” and all these things that are getting in their way. And they’ll say they don’t have their attention for commercial activity. And we’ve just found it entirely opposite that we have people’s full attention more so than we’ve maybe ever had.

Jason Mlicki:
It’s now getting from attention to a sale is a lot harder, getting people to part with their money might be more difficult than it was 60 days ago. But getting their attention is not the case. And the thing I’ve said all along is that if you can be helpful in this moment as a marketer of a professional services firm, if you’re helping your clients work through this crisis, prepare themselves for their recovery as a marketer.

Jason Mlicki:
Even if you’re not getting rewarded with new work or new client relationships, or new projects from that effort, you will absolutely get tremendous goodwill and separation on the other side. And you will be remembered for the actions you took to create value and help people right now, even if you don’t know who they are. I mean, as you know, from us, I mean we’re doing a lot. I mean, we’ve got now one of our first webinar coming up this Friday.

Jason Mlicki:
I’ve coauthored an article with Bob. You and I did a podcast. We’ve done a lot of things to step in and just give, I guess, mine and our best advice on what to do in this moment, on every level, and we’re getting more interest in readers and in all of those things than we did a month ago. But I just think it’s because we’re just trying to help. And I’m confident we’ll be rewarded in the long-term for that effort.

Jason Mlicki:
And we’re getting lots of new people in the system that I wasn’t familiar with, right? You look across the funnel and some of the people that are showing up to webinars or signing up for our newsletter, or just firms and people I wasn’t familiar with prior. So, those are all good things. Whether they hire us now, hire us in the future, it doesn’t matter. Eventually, all of that will come back in some form. I don’t know. That was a random comment and we’re off base, I’m sorry, or off course.

Jeff McKay:
I didn’t think it was off base at all. Yeah. On the blog post I shared a couple of weeks ago, it really does come down to crisis really bring out our real personalities and being helpful is part of your personality. So, I’m not surprised to hear that. And ask yourself, “How do you want to be remembered? What reputation you want your firm to have when this thing’s over?” And it’s going to be over.

Jeff McKay:
I feel like we are very close to tipping into getting back to work. And who knows? This conversation may be moved to a large degree by the time it airs. I don’t know. I could be wrong. I could be wrong.

Jason Mlicki:
Well, to your point, we should preface something real quick. We are recording this on April 15th, and this probably won’t publish until probably late April. So, to your point, with the timeliness of this, it may not entirely be there. I mean, I know last I heard, they’re anticipating, at least in Ohio, that they expect our peak of infections to be April 19th to get to the upside from the Florida peak to… I don’t know, 45 days? So, to get from the peak to the trough, probably 145, right?

Jason Mlicki:
So, I can’t see this thing totally releasing before June, as I’ve said a number of times. And then, if you look at the data coming back from China and Japan, and Singapore, and other places, they are seeing reinfection after they reopened the economy. So, I think you will see most States take a slow, methodical approach to reopening things, trying to work from more essential to less essential things.

Jason Mlicki:
I’m pretty comfortable that when this publishes in late April that it will still be relevant until the end of May, into June. And then, of course, even at that though, it doesn’t really… and the thing I keep trying to remind people is the economy is not a light switch. You don’t just flip a switch and turn the thing back on again, right? I mean, some of these companies are going to take a very long time to get back on their feet.

Jason Mlicki:
And it’s going to take consumers a while to come back. And every professional services firm and every B2B marketer, whether they like it or not, their success hinges on consumer sentiment. I mean, consumer behavior in this country drives everything. So, you need consumers to be comfortable to go back and have a meal in a restaurant, hop on a plane again, and that’s not going to happen again with a light switch.

Jason Mlicki:
That’s not going to happen. The moment someone says they reopen the restaurant, people aren’t just going to come flooding in the door. It’s going to take some time. And we actually have some research on that. So, we worked with the National Center for the Middle Market and their research partner is RTI research, and RTI did a study on that. And for most of those behaviors, most consumers, at least in late March, we’re seeing, would be somewhere between one to two months before they would feel comfortable doing some of those things.

Jason Mlicki:
Things like eating at a restaurant, going to a movie, hopping on a plane, going to a sporting event. So, some of that stuff is going to tab a lag from the time it opens to the time people are doing it. And that lag is critical because that’s much longer that consumer spending isn’t happening and stuff trickles back to whatever your firm is in business to do, right? So, whether you’re providing advice or audit, or whatever, or project work, or whatever you’re doing, that stuff hinges on consumers spending money.

Jason Mlicki:
So, that was another sidebar, sorry. I’m about the center here. Get us back on track, Jeff. Usually, I’m the one keeping us on track. I am not keeping us on track today.

Jeff McKay:
I mean, it’s funny as you described because I saw this, oh gosh, I don’t know what the word of the year it will be if it will be social distancing or flattening the curve. As you were describing that, I was very much seeing a bell curve of those of us who are like, “I’m jumping right back in. Let’s go out to eat. Let’s jump on the bike, get on the train, start having meetings. Let’s go.” My wife on the other hand will be on the other tail of that bell curve.

Jeff McKay:
So, I think that’s important to think about as you reevaluate your budget, maybe we should talk a little bit about how you should do that.

Jason Mlicki:
Yeah. And that’s a good transition and right away to get us back on track, by the way. Because I definitely was, you really taken us off the beat back there. But actually, I do think it’s relevant, because the thing I kept saying in the webinars I’ve been doing is you have to look at these things. You have to look at those bell curves. You have to look at that timing because it does affect what you’re trying to market to.

Jason Mlicki:
And even it’s relevant for this podcast, right? In the sense of, when do you pivot out of talking about crisis and start talking about recovery? And you have to make sure that you’re in tune with the feel of people, the executives, and how they’re feeling and having their realities. And there’s a little bit of a lag between the time you produce something as a marketer and you get it in the market, right?

Jason Mlicki:
Although everyone’s trying to compress that, but it’s still a reality. So, how do you make these choices? You start. You’re the cost-cutter amongst us. I’m the guy who just says more, right?

Jeff McKay:
No. I say make smart investments. It’s a little hard, and I always hesitate. And anyone who reads my blogs know that I’m not a big fan of benchmarking reports and professional services. The ones that say, “High growth firms are spending this percent of revenue on marketing or they’re doing video or they’re doing whatever the latest fad is,” I’m just not a fan of those. And I think they can lead you in the wrong direction.

Jeff McKay:
So, when it comes to reducing and reallocating budgets, it’s really important that you look inside for the answers, not outside. This is not where you want a herd mentality. You want to be smart about what you’re doing.

Speaker 1:
You’re listening to Rattle and Pedal, divergent thoughts on growing your professional services firm. Your hosts are Jason Mlicki, Principal of Rattleback, the marketing agency for professional services firms, and Jeff McKay, former CMO and founder of strategy consultancy, Prudent Pedal. If you find this podcast helpful, please help us by telling a friend and rating us on iTunes. Thank you. Now, back to Jason and Jeff.

Jason Mlicki:
Is there any place you want a herd mentality, by the way? I’ve never heard anyone say, “This is the moment when you really need a herd mentality.”

Jeff McKay:
Well, but the thing is everybody always goes with the herd.

Jason Mlicki:
I know.

Jeff McKay:
So, you may not want it.

Jason Mlicki:
No.

Jeff McKay:
You may not say that you want it. But actually, you do want it.

Jason Mlicki:
No.

Jeff McKay:
Because nobody standout like that. It’s risky. It’s risky.

Jason Mlicki:
Of course, it is. That’s why you and I get along well, is because we’re on that fringe on these things, right? It’s because both of us are trying to reject those things as much as we possibly can. At least consciously, we try to keep going, because I agree with you. I love the way you framed it. I love the way you framed it saying it’s, look inward, not outward, which is counter to most marketing thinking, right?

Jason Mlicki:
Usually, you want to be looking outward what we really been looking at. Well, talk to the customer. Talk to the client. See what they need, and understand their problems. That’s the essence of the marketing. But in this case, you’re saying, “No, no, no, you got to look inside.” And I think that’s great. So, keep going on that before I ruin it again with another segue.

Jeff McKay:
Yeah. So, the reason I have to look inside is because even though firms may serve very similar industries, similar geographies and have basically the same size to them, their strategic priorities are going to be different. Their cultures are going to be different. Their brand relevances in given areas are going to be different, and their growth prospects in any given mix of their portfolio is going to be different, given their capabilities that they have and how they’re able to execute it, right?

Jeff McKay:
That’s the thinking behind the thinking, is firms may look like they’re similar on the outside, but they are not on the inside. Are you laughing?

Jason Mlicki:
I’m laughing because the thinking behind the thinking, I’m thinking, that will be… I don’t know. It’s all really sound. I think the interesting thing for some firms is what’s going to play out or what I’ve seen play out and has played out, is that the revenue model just got completely disrupted, right? Firms took out 30% revenue haircut overnight, right? So, there’s this situation where there’s been a significant loss of revenue, a significant loss of cash to fund the operations.

Jason Mlicki:
And so, there are probably leaders that are going to come down and lay those types of broad statements on the marker shores. Well, you build a budget predicated on this amount of money that was 8% of our revenue. And now, our revenue is a third of what it was. I need you to cut that down into this amount of money. That’s 6% of our new revenue target or something along those lines. So, I totally agree with your thinking on the benchmarking.

Jason Mlicki:
Marketers are going to get that type or they probably already have got that type of request. And then, I think it’s up to the marketer, to your point, because that’s an ax. I’ve described the clients that are at the bottom of that bell curve that are cutting back as taking access at times to things. We just cut off all this. Cut off all the independent contractors. Protect all the employees. Well, that sounds great on the surface, except if you step back and think about it.

Jason Mlicki:
And you might have some employees that are not as strong as your contractors, and maybe you should be retaining those contractors and looking at how you tighten up those relationships. And maybe there’s a few employees that unfortunately do need to be moved along. So, there are big rash acts type maneuvers that firm leaders are using. And whereas, I would suggest there needs to be a scalpel.

Jason Mlicki:
And so, for the marketer when that request comes to your desk, you’ve got to really look. In my mind, you’ve got to look really, really hard up and down to every strategy, every tactic, every investment you’re making to identify where the highest value opportunities are and what you believe are the lowest value in the short-term and in the long-term, and make decisions based on that horizon of the things that can help us deliver solutions we have to real pressing problems right now that can be brought forth in weeks or areas where our opportunities are, areas where we might’ve been investing marketing resources against big problems that clients have that have long solutions of years or more.

Jason Mlicki:
It might be things where we want to pull back. Things that we know create a ton of value, thought leadership. Probably, we want to protect things that we are questioning, whether to deliver value, you’ll love this, brochures. I’m doing that PowerPoint templates. I don’t know, whatever else falls into that list of maybe low perceived value activities are probably the things you want to look at cutting.

Jason Mlicki:
So, I guess my just general advice on, if that mandate is coming down and you have to deal with it is, even if the leader used an ax and you as the marketer need to use a scalpel. And you need to get really narrow and say, “Where is the greatest value inside of our marketing investments? Where’s the least value in this?” Make decisions that way and try to avoid those rash decisions that people tend to make. And again, it’s not popular but I’ll reuse that one.

Jason Mlicki:
I’d say it’s not popular because your instinct is to protect your own, to protect your employee base. It makes total sense, and that’s what every business owner and executive, their first instinct is to do. But sometimes, you have to step back and go, “Well, time out. Who’s delivering the most value here?” And those are the people that are going to be the critical resources that are going to get you through the crisis and up the recovery.

Jason Mlicki:
So, if you cut the most valuable resources, whether they’re inside or out, that’s going to do some damage. And so, those are things that you got to be thinking about. I don’t know if that helped or not.

Jeff McKay:
Well, you jumped into I think one of the most critical areas when we’re talking about marketing budgets. I don’t think I’ve ever been in a firm, maybe some of the largest firms, this would be different. But most small and mid-size firms, I would say it’s true of the software and other types of services firms that I deal with. When you look at marketing, I would say close to 50% to 75% of marketing spend in every firm has a different general ledger in how they classify marketing spend much.

Jeff McKay:
It’s one of the reasons I don’t like benchmarking reports. It’s all people cost. It’s all people cost. Any actual spend on programs is de minimis, because you’re selling an intangible, most of us sought leadership, most of it is digital. When you have to cut deeply on cost, you’re going to be cutting people, and that when the hard decisions get made or have to be made and they’re very emotional. But I also think it’s important going in that you understand where you’re going from a strategic standpoint and what it’s going to take to get there.

Jeff McKay:
And I talked about this in building the optimal marketing organization in terms of marketing capabilities and roles, and all firms do this. They use these types of crises to get rid of people they don’t like. They just say, “We’re eliminating your role.” That affords them the opportunity to not really have to manage or deal with difficult people. They just cut them because it’s cost-cutting, which to me is just so lame, and that’s probably a number of podcast in and of itself.

Jeff McKay:
But the point is, you really have to think through the people where you are and where you’re trying to get to, and what skillsets you’re going to need. And your comment about employees versus contractors is very critical. What’s going to complicate that, particularly for those firms with less than 500 people, is the PPP program from the government that’s subsidizing the shutdown if you don’t get rid of people that you keep them on the payroll.

Jeff McKay:
So, that’s going to complicate some of the backend decision-making for people, and you have to be aware of that. But the first place you’re going to have to cut is going to have to be people because that’s where all the money is. The second thing, unless you want to keep talking-

Jason Mlicki:
No, no.

Jeff McKay:
… about people?

Jason Mlicki:
In fact, I think this is going to be the wrap. So, the things that you lay out are going to be the closing comments. So, they want to hear you go through this progression of things, because that will be where we’ll end.

Jeff McKay:
Well, some decisions are going to be made for you. You’re going to have a managing partner says, “Cut this amount.” Bam. “Give me one head, give me two heads, “whatever the case may be. If you have significant industry events where you’ve invested big dollars, chances are that event is not happening this year. That decision has been made for you. But the rest of it is where you’re going to have to make hard decisions.

Jeff McKay:
Because we’re time-short, I’m going to put a link in the show notes about a model that I used for evaluating program areas, and I grouped them into four. And you can go read the article. But essentially, they look at the cost versus the impact, which to me is rudimentary thinking, but it’s important. And I grouped them into four categories. The first one is what I call Prima Donnas. They are high cost and they have high impact, high return.

Jeff McKay:
You may not want to kill those, but you need to have your team looking for ways to identify efficiencies within them. So, don’t cut them because most of these programs take time to come to fruition, but have the team working on efficiencies and saving money. The second one is product goals. They are low impact, high cost. You may think that’s a no brainer. Get rid of it. And it may be, you may just need to modify the approach and change how you’re doing it.

Jeff McKay:
Now, is a time to look at that. But if you need to get rid of something, fast protocols will be what you want to get rid of.

Jason Mlicki:
Those protocols, the IGALS?

Jeff McKay:
Yes.

Jason Mlicki:
So, protocols, like product protocols, so product goals? Okay.

Jeff McKay:
Product goals, that’s my redneck points. Don’t make fun of it.

Jason Mlicki:
You live in Chicago.

Jeff McKay:
The third one is gems, low cost, high impact. Those are the things that you do not want to get rid of. You have to protect those. And if possible, you want to transfer whatever learning you can to protocols in Prima Donnas.

Jason Mlicki:
Those are agency partners, right? Your gems?

Jeff McKay:
Yeah, yeah.

Jason Mlicki:
It could be.

Jeff McKay:
It could be. It could be. And then finally, this is something that should be done, crisis or not, is a category I call distractions. They’re low cost. They’re low impact. They just take your attention off of the things that you should be really working on. But you cannot categorize these unless you’re able to quantify the cost and the return. That’s the impact. So, before-

Jason Mlicki:
Well, I like the impact. It’s better than the return. I like that you’re calling it impact, it’s not return. Just aside, I think if you start making it about return in ROI, it gets a little bit fuzzy and weird. Because it’s hard to say necessarily which one has the most ROI. But I think if you say impact, it’s a much more conceptual discussion. Is this having a big impact on the trajectory of the firm or not? And that’s an easy question to answer.

Jason Mlicki:
It’s a little harder to answer, what is our ROI on this, right? So, I like that you used the word impact.

Jeff McKay:
Yeah.

Jason Mlicki:
Just giveaways.

Jeff McKay:
So, I’ll put a link in there and you can go a little deeper on that. But I think to wrap it up, marketers need to be leading. And by this time, it’s probably too late to lead, so you better respond effectively and lay the groundwork for the next prices. But you always want to be going to the managing partner and practice leader before they ask you, or at least be prepared for when they do ask you on how you can pivot on these things.

Jeff McKay:
Second thing, people are going to be the biggest budget number, and good leaders know who their high performers are and who’s adding the most value. And you’re going to have to be prepared to let some people go, I suspect. But don’t cut too deeply and fight for your people, because I think we’re going to come out of this thing much faster and stronger than conventional wisdom, knock on the wood.

Jeff McKay:
Third, I’ll put this model out there in the show notes and you can look at your product goals, your Prima Donnas, your gems and your distractions and rationalize accordingly. But whatever you do, don’t go look at a benchmark report, look inside.

Jason Mlicki:
That’s a great close. I love the models. So, I look forward to reading it. I haven’t seen that, not all of yours. So, I’m looking forward to reading it. Thanks for taking the time, and I’ll talk to you next week. Yup.

Jeff McKay:
See you, buddy.

Speaker 1:
Thank you for listening to Rattle and Pedal, divergent thoughts on marketing and growing professional services firms. Find content related to this episode at rattleandpeal.com. Rattle and Pedal is also available on iTunes and Stitcher.