Recession Fears Mean SEO Agencies Must Brace for the Great Unbundling

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As former Netscape CEO Jim Barksdale said, “there are only two ways to make money with business: one is to group; the other is to disaggregate.”

Since the concept of search engine optimization (SEO) became something a little over 20 years ago, marketing agencies have remained stuck in an arms race. They have developed new tactics, tools, and approaches to help companies climb to the top of search engine results pages (SERPs).

They have also worked to pool their services to provide customers with everything they need to thrive online at a single price. For companies, this has been an attractive proposition. After all, in the kind of bullish market cycle we were in for many years until the pandemic, thriving companies value cost certainty and simplicity more than offers. And they honor extraction above efficiency. This made one-stop deals from SEO agencies easy to sell.

But the SEO industry is about to face something it, along with many other industries, has not seen in a long time: a major recession. In the cycle we are heading into now, it will be efficiency and frugality that win the day.

Except for 12 to 18 months back in the early years and throughout 2008, recessions have not been something SEO agencies have had to deal with. That is, the SEO industry tends to skew younger, that is, most current experts and agency owners have not experienced any recession before. And the impending recession threatens to mark a tectonic shift in the SEO market. It will create the conditions for what I have called “the great disaggregation.” This is what this means and what SEO agencies need to do to prepare.

Related: 5 Ways to Maintain Business Growth During a Recession

Why Recessions Force Companies to Look for Cost Savings

When the recession hits, companies are looking for ways to bolster their financial situation. This means that they are looking for almost any opportunity to reduce spending. But research shows that companies that reduce their marketing spending during the recession are doing worse than their competitors. They also take longer to regain momentum when the recession ends. Therefore, in cunning companies, marketing budgets often escape the ax.

But that doesn’t mean companies don’t change how they spend their marketing budgets when recessions arrive. In fact, a large-scale study by the Harvard Business Review found that the key to getting out of a recession in good shape was to make a mix of defensive measures. i offensive changes in strategies and spending.

When it comes to marketing, you better believe that companies will start researching the reference numbers of their marketing agency invoices. In my company, we are already seeing this start to happen first hand. There has been a sharp increase in business comparison shopping for various individual SEO services, indicating that they are starting to do the calculations to see if the package your current agency offers is still the best way to go.

Related: How to make your business stand out from the noise

What can agencies expect when the recession takes hold

For marketing agencies, all this means that continuing to offer only bundled services is about to become a responsibility. Packages work by combining a set of related services, and all the details of how they interact with each other, into a convenient package at a single price.

As customers begin to assess their spending levels, they will naturally begin to try to isolate individual costs within their marketing strategies. But because packages are presented in ways that are difficult to deconstruct, it is very difficult to compare individual items. This will lead to two things.

The first is an increase in awkward conversations between business decision makers and the marketing representatives of their agencies. These conversations will include questions about starting costs and why they don’t seem to match open market SEO rates. The answer, of course, lies in convenience, as in the fact that the company does not have to manage a number of individual SEO and freelance experts to carry out its marketing strategy.

Related: Elon Musk doubles fears of recession and says “inevitable”

But as the recession begins to bite, this will not be a good enough reason for any company to keep up with bundled services. Agencies will need to compete with SEO freelancers who are, by nature, more agile and able to adapt to changes in demand. They are often specialists as well, so agencies will need to be world-class in their field for their offering to be more appealing than an individual expert.

The second thing that will happen is that a significant proportion of companies will complete their cost / benefit analysis and decide that they can optimize their marketing spending by looking elsewhere. They will see an opportunity to drop the nice extras that include a package in favor of more focused solutions on link building, content creation and SEO tools like Ahrefs, SEMRush and AI content tools like Clearscope or MarketMuse. This will put pressure on the agencies ’results and put them in danger of becoming victims of the recession themselves. That is, unless they take some decisive action of their own.

In a recession, grouping can work when the set is less than the sum of its parts. This can make sense when looking for contribution margins, such as in hard cost fields such as e-commerce and retail, for example, where they have inventories to clean up. But it is less useful in knowledge work where inventory is time.

How to navigate the great disaggregation

For agencies that rely on bundled services for a significant portion of their revenue, now is the time to act. There are a handful of measures that could mean the difference between staying with valuable customers and losing them permanently. The first is the most obvious:

Start separating your services and preparing on-demand offers as quickly as possible, even if you don’t immediately tell customers you’re doing so.

This will at least prepare you for some of these awkward conversations that will soon begin to take place. But this is only the first step. The next step is to look for opportunities to automate your existing internal workflows. This will help make your customer-oriented operations more efficient and less costly. It will also get you ahead of the game, as automation will soon become a bigger part of the conversation, as it is one of the few deflationary levers available in the economy.

Because automation requires upfront investment, the savings generated can take time to come to fruition, but many agencies will find opportunities in low fruits that they have so far neglected. Savings will become a critical financial deposit to help you take some other necessary steps. The first is to absorb costs as you adjust your disaggregated prices to be more in line with what your customers may find in the open market. And the second is that it allows you to keep paying your staff well, the ones who do the most valuable work for your clients. This is how you will retain your best talent, so you will be prepared to take advantage of new opportunities as your competitors falter.

Finally, consider creating SEO courses and education to encourage your clients to stay. These are value-added items that can be a key component of packages, but because they have a unique setup cost, they have a greater benefit over time. By transforming your agency into a valuable resource beyond the services you provide, your clients will see you as a partner in their struggle to resist the recession. When that happens, they are more likely to reward you with their loyalty. This will help position your agency where you have the reserve cash needed to gain additional market share after the recession. Some see it as a gain to survive a recession, and your market share will grow just by surviving your competitors.

Related: Marketing services are smart to overcome the trend of “unbundling”.

The way forward

The SEO industry is in unknown waters. Relatively few people within the sector have experience in the face of a major recession. But there is ample evidence of how companies react when they crash, which means SEO agencies will soon find their clients questioning whether it’s worth paying for the convenience of bundled services. When they do, agencies will have only two options: they can offer their clients what they want, or they can cling to a business model built for better days. Which do you think is better to choose?

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