Are you thinking of hiring a Chinese marketing or digital marketing agency to help you market and sell your product or services to China?
Hiring any marketing agency is hard enough, let alone hiring a Chinese marketing agency when you’re so foreign to China’s environment.
Here we share with you 6 things that you ought to know before hiring any China marketing agencies.
1) Use quan base pricing
Before I explain what quan base pricing is, let’s examine how most people pay their marketing agency traditionally.
1 Time Based Method
You can pay them for their time.
While time-based pricing is good for paying your creative agencies where you want to create a TV commercial, a flyer, or a website. When it comes to paying your China marketing agencies based on time it is almost always a bad idea.
When you pay your agency hourly rate, you as client inherits most of the risk. If they agency does a great job, the client benefits. But if the agency was unable to produce, the client loses out on the money and also the time invested in the project.
Not to mention the obvious conflict of interest in paying your agency based on time. The agency benefits from longer work hours, but you as a client wants results as fast as possible.
And most importantly, there is no incentive for the agency to go the extra mile for the client. Either way, they get pay by the hour the worked.
2 Performance Based Method
You can pay them base on their performance
Many clients believe that this is the best method of paying their marketing agency. After all, as a client, you have just mitigated all risk, and it ensures the agency has the same interest as the client.
The problem with this is marketing a business, a product, or a service is a process, with unpredictable events that are uncontrollable by the agency.
Which means when you pay your agency base on how they performance, it puts all the risk on the agency. The pressure is high and the agency must produce results or they will not get pay.
Now you’re probably thinking…
“Isn’t this a good thing? I want the agency to be motivated and interested in getting me results, how is this a problem?”
Well…
On the surface, your right. It does seem like the agency and the client has the same goal, and interest, but if you dig a little deeper, you’ll find the contrary and here being why…
Due to the high pressure to produce results, you’re essentially incentivizing the agency to produce short-term results at the expense of long-term benefits.
Let me give you an example that happens all the time. Meet Joe, a sale for ABC electronic shop. Joe has a wife and a kid that he has to take care of. Joe is helping a customer with purchasing a TV, and because Joe has a quota to meet he is under pressure to sell more. So, Joe decided to sell the customer a bunch of additional stuff that the customer probably won’t need.
We all met a Joe who will do anything to meet his quota. When you pay your China marketing agency based on performance you’re essentially turning them into Joe.
So… if both payment method is not the most ideal then what is the right way to pay your marketing agency?
Introducing Quan Base Pricing
By now you will probably agree with me that the problem with time base pricing is a conflict of interest and no incentive for the agency. While the problem performance base pricing is, high pressure leads to short-sighted results.
Is there a way to get the best of both world? Is there a way to reduce the pressure from the agency while still dangle a big enough carrot for the agency to want to deliver extraordinary results?
It turns out there is…
With the Quan Base Pricing, the client pays the agency starting from minimum for the project but as the agency delivers value and meets quantitative objectives alone the way the payments increase in accordingly as well.
This method allows both the agency and the client equally share the risk, while still providing a strong enough incentive for the agency to strive.
Here is an example:
Let’s say the agency you hire is confident in being able to help your increase your revenue by $1 million per year and they need 1 year to hit the target.
You like the agency and decided to give them a shot at hitting the target. At this point, there really is only 3 possible outcomes.
Outcome #1: The agency was successful in reaching their target or better. In this case, since the $1 million per year additional revenue is a substantial growth for the business. The client agrees to pay the agency 30% ($300,000) as their compensation for the.
Outcome #2: The agency was not successful at reaching their target but was able to increase revenue by $750,000 per year. In this case, while the agency was not able to fully achieve their target, they were, however, able to achieve a good 75% of the target. The client still experiences good results and agrees to pay the agency 20% ($150,000) of the $(750,000).
Outcome #3: In the highly unlikely situation where the agency was unable to produce any results at all, then the client will only have to pay $45,000 to the agency. This is just high enough to cover the work the agency has put into the project, but low enough to discourage the agency to just want minimum pay.
All payments are paid in monthly installment. The client begins paying the agency as if have achieved nothing, and as time goes on and the agency begins to hit target gets the monthly installment also increases.
2 Separate realistic goals from speculative targets
Marketing is hard, and marketing a foreign brand to China is even harder. There are numerous unpredictable and unknown events that are outside of the marketing agency control.
At the end of the day, all proposal, forecast, and targets are mere predictions and calculated guesses. Yes, a more experienced agency will get lucky more often than an inexperienced agency, but even the best marketer in the world are run by humans. And the last time I check, humans are imperfect, error prone, susceptible to overestimate their abilities.
The truth is no agency or marketer in the world can guarantee your results in a month, 6 months, or even a year. There are just too many external factors that we cannot control.
As a client, it is in your best interest to accept this as reality and take precaution to reduce risk from speculations. One way to do this is to ask better questions. Ask the agency to get real and separate realistic goals from speculative targets, and what are guaranteed and what are guesses.
The second way to mitigate against this is to use the Quan Base Pricing. This takes the pressure off of the agency just enough for them to be real with the numbers they propose. And as a client, you may not like the numbers you hear, but it is far better to get real and hear the truth than being lead into false promises and get disappointed when the agency was unable to achieve them.
3 Faster isn’t always better
We live in a world where we want instant gratification. Want a new TV to buy it on Amazon and get it shipped to our doorsteps Tomorrow morning. People don’t wait for the next episode of TV series anymore, they just binge watch the entire series on Netflix.
Business owners want results fast, and many agencies are willing to make unrealistic, and false promises just to stay competitive. The problem with this is it hurts both the agency and the businesses that hired them. marketing is a process, it takes time and effort to set up a good plan and stick to it. Growth will usually be a graduate but the effort is often compounded and every now and then you’ll experience exponentially in growth.
Marketing to China is a process, it takes time and effort to set up a good plan and execute it. Growth will usually be a graduate but the effort is often compounded and every now and then you’ll experience exponentially in growth.
For example, here is the traffic report of a website for about a year and a half:
As you can see in the first 12 months of efforts, it was a slow steady growth of 80%, which is pretty good but nothing extraordinary. Now, if we have stopped here, and only looked at the results up and until early January 2014 and stop working with the agency then you might just miss out on the 600% growth spike that happened right after.
But of course, you’re a business owner and it’s hard to resist the temptation to fire the agency after paying for months and seeing very little results. I get it, at the end of the day you want to grow your business.
So, how can you tell when it is time to call it an end?
The answer is… It depends on various of factors such as how long you’ve been in business, how well your sales funnel is, the type of digital marketing tactics that are being deployed.
For example: if you’re paying an agency to run WeChat ad campaign and are going for direct respond conversion, and you’re willing to spend a decent amount of budget on advertising then it is pretty safe to say that if you don’t see a good ROI (return on investment) within 2 months then maybe it’s time to move on.
On the flip side, if you’re hiring an agency to work on your Baidu SEO, depending on how old your business has been around and how good your domain authority is you can typically see some graduate results of traffic increase in about 6 months.
The point is, there are many variables that determine how long you should wait before moving on to another agency. But if you really want to put a number on it, for most China digital marketing projects you’ll usually be able to some graduate improvement within the first year.
But otherwise, if you don’t see some kind of results within the first year then it is time to set down with your agency and to investigate the reason why.
4 Ask better questions
So many foreign business owners ask the wrong question, so they end up with the wrong results. For example, a question we get often from the small business owner is “how long does it take me to rank on the top 3 in Baidu?”
If you ask a generic question you will get a generic answer from the agency.
For instance, with the first question, most agencies can actually guarantee you ranking within 3 months. This is because there will be some keywords that either has nobody searching for it or some search volume but not relevant to your business.
You’ll rank for these keywords and even get a decent amount of traffic to your website but more often than not you won’t get any real leads or customers.
Instead, a better question would be “What is a realistic timeframe, and resource requires from me to generate X amount more new leads for my business from Baidu SEO?”.
A question like this force the agency to dig deeper and give a more meaningful and realistic answer.
Here are some great questions to ask:
- After we agree to a realistic outcome that you can produce in a timeframe you suggested. What would you do if you’re unable to meet the goals you’ve outlined in your proposal?
- What are the cultural difference in China that will affect our product from succeeding?
- Which part of your proposal is guaranteed and which are based on speculation?
- If you were to choose someone to handle the tasked we outlined today, who would that be? And why you would choose them?
- Based on your proposal, and your strategy or plan that you’ve outlined here, what would it take our competitor to beat your proposal if we were to meet the goals?
5 Pay for the best value you can afford
“How much will this cost me?”
My answer to this is as much as you can afford to get the best value and results you can.
Let me put it this way, let’s say you got into a bad car accident and needed emergency surgery. Would you want a low-cost mediocre surgeon to operate on you or the best possible surgeon you can afford?
Here is another way to look at this.
A French-based fashion company who wanted to sell their luxury apparel to the Chinese market. With a little bit of research, they learned that they need to increase their brand awareness with social media marketing in China.
Soon after, they hired a Chinese digital marketing agency to increase the number of followers on both WeChat and Sina Weibo. The agency charged them $3,000/month which is not cheap but hardly expensive and promised them 100,000 followers on both channels in 6 months.
After about 5 months the French company’s WeChat and Weibo account were actually growing their follower counts quite steadily. Weibo had a little over 90k followers and their WeChat was will over 103k followers.
Needless to say, the French company was extremely pleased and happy with what the Chinese agency was able to accomplish for them in such a short time.
Next, believing that they have a large amount followers. They decided to run a small promotion to see if what kind of sales they can hit from WeChat and Weibo.
They posted a few promotional articles and waited for the followers’ reactions but all they got back was crickets. No sales, no comments, and not even a few likes.
This boggled them, how can this be? Social media are notorious for low conversion rate, but not even a few likes? It turned out what the Chinese agency did for the French companies was they had purchased a bunch of cheap followers from Taobao and other sources.
This gives the French company a large number of fake followers but no real engagements. True story, we know this because now they are one of our clients and shared the story with us
The moral of this story? While bad advice maybe cheaper, but you’ll usually end up paying a lot more to fix it up than paying more for good advice right off the bad.
Of course, this doesn’t mean you should overpay either, and a good way to figure out if you’re overpaying is to…
6 Know your numbers
Let’s say for every new customer you’ll earn on average $5,000 gross profit, and you pay your agency $2,500 per month to work with you for 6 months. Initially, it was a slow start and on average the agency was only able to help you acquire 1 maybe 2 new customers per month. And if the growth stops at this point then you’re paying too much for the agency to just break even.
However, should the time continue and in month 4 to 6 the agency was able to gradually grow the average number of new customers to 5 per month? Now, the agency has just generated an additional $15,000 gross profit every single month for your business.
Would you still think it’s too expensive to pay for that agency? Probably not.
This is why knowing your number is so important, as it will allow you to make a better decision and measure the results of the agencies you hire.
Here is a list of numbers that are vital to your business:
Gross Profit: Also known as “Gross Margin” is the total sales revenue minus the cost of goods sold, divided by the total sales revenue. For example: if your gross profit is 15%, this means that for every dollar your business earns, 0.15 cents will be revenue generated.
Lifetime Customer Value: The average total amount a customer will spend with your company, whether is to purchase services or products. For example: if customer a repletely do business with your company over the next 10 years for 16 times and each time spending an average of $100, then the value of that customer is $1,600.
Average Cost Per Acquisition: The average cost to acquire a new customer for your business. For example: if you spent $1,000 on WeChat advertisement and that brings you 10 new clients or customer than your average to acquire a new customer is $100.
There are other numbers, but for the purpose of deciding how much to pay your digital marketing agency, these are the only number that matters. For the other number, we recommend hiring a good accountant.
Finally, before we finish off, sometime you might be paying an agency to work on your social media marketing and the KPI (key performance indicator) may not reflect sales or revenue gross so easily. How would you measure theses situation?
For most business, we worked with their primary motivator is usually revenue. So, a good way to see how well an agency is performing, in this case, would be to see how much your revenue has increased for the time period you’ve hired the agency for with everything else being relatively equal.
But sometime, to increase your revenue may not be the ultimate goal of the project at hand. Maybe you want to increase brand awareness or brand exposure. In that case, an agreement on how you measure performance should be agreed upon before you start working with them. Be it followers, like, or viewership.
What Should I Do Next to Find a Good Agency?
Now we really wish we had better news for you, but finding competent digital marketing agency to grow your business is not easy. We get asked all the time where to find an awesome digital marketer for small businesses. And our answer is that every time we find one who knows what they are doing (they are rare), we hire them to work on our team.
