AI Is Killing Agencies. This Is How To Save Your Agency

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1:02AI is killing agencies right now. Ad agencies, marketing agencies, design agencies. Clients are canceling every single week. I got friends with agencies that have clients walking out the door saying, we'll just use ChatGBT. The truth is, AI is not killing all agencies. They're just killing the agencies that are selling the wrong thing. You got to stop selling services and start selling outcomes. It makes selling a no-brainer. I'm going to explain exactly what this all means and give you real-life examples. Let's go inside to figure this all out.

1:40Welcome back to the$100 MBA show. I'm your host, Omar Zinhome, where I deliver practical business lessons three times a week, Monday, Wednesday, and Friday, to help you start, grow, and scale your business. Hey, if this show has helped you in any way, it would be amazing if you dropped us a quick review on whatever app you're using right now to listen to this podcast. It helps me and my team bring you new episodes every week. And more importantly, more entrepreneurs will be able to discover the podcast so you can help someone else start their journey. AI isn't coming for agencies. It's already killed the ones that aren't viable.

2:16The uncomfortable truth that a lot of people don't want to face right now is that people are paying thousands and thousands of dollars a month to agencies for things that a lot of AI tools can do in seconds. I'm talking about creating thumbnails, creating Facebook ads, writing content for their blog, writing content for their ads, you name it, AI can do it. And this is the conversation that's happening in your customer's head. They're saying, why should I pay an agency to do something that AI can do for$20 a month with a subscription to Clutter ChatGPT? And they're right. Why should they? They have to ask that question because every dollar counts in a business.

2:55And if they are looking for solutions, they're going to find the most economic solution, but also the most profitable one, the one that actually is going to get them results. And the data backs this up. 53 % of agency owners are now seeing AI as a serious threat. And that's up from 44 % from just last year. Okay. The average agency client relationship has dropped dramatically in a very short amount of time. So you got to wake up here if you're an agency, because AI is killing anybody who's selling tasks. You got to stop selling tasks. You got to stop selling, creating ads or creating graphics or creating a website even.

3:35Okay. Stop selling tasks. What you need to do that AI can do is sell outcomes. An AI can't own an outcome. So in other words, stop selling what you do. Okay. Start selling what the client gets. Okay, that's all they care about. What am I getting out of this relationship? What results am I going to get by hiring this agency? And if you can get them results, they will happily pay you because an AI chatbot, chatGBT, Claude, you name it, is not going to guarantee any kind of results. It's not going to own or have any kind of responsibility over those results. In other words, you got to start understanding that services, tasks are becoming commodities because AI can do them now.

4:20All right. An outcome on the other hand is a result and AI cannot promise an outcome, cannot own an outcome. I want to be super clear. I want to make sure this is crystal clear to everybody who's listening and watching because if you have an agency, this is urgent. If you want to build an agency or build in some services in your business, you need to do this right. So to make this clear, we're going to head over to the whiteboard and I'm going to show you what I call the vertical value ladder. So what's the vertical value ladder? Let's say, for example, you have an agency that creates images and ad copy for Facebook meta ads, you know, Facebook, Instagram ads.

4:56So this is the first rung, like, okay, I'm going to create the creative ad creative. And, you know, this is going to be like the image and some of the ad copy. You got to ask yourself the question, why does the client want this? Well, they want to run ads with this creative on Facebook. Okay. Right now, the free version of ChatGBT can do this for them. They don't pay any dollars and they can just do it. And it's not going to be super perfect, but it's going to be good enough for them to run some ads. So they need this so that they can run ads on Facebook or on Instagram, FB and Insta ads. Okay.

5:33So that's the next level of value. It's like, I will create the ads and then I will run the ads on Instagram. Well, actually, unfortunately Claude Cowork can do that as well it can just take over your screen and run the ads in your meta account if you wanted to okay so what's the next level of that why do they want to run the ads remember why are they doing this what result what outcome does do they want out of this whole transaction well they want somebody to run the ads and then analyze the data and then make some suggestions and make some changes based on what they learned from the data okay this ad it's converting well this one's not let's let go of that one maybe make some tweaks to this copy or make some tweaks to the actual image on the ad why why do they need this well because at the end of the day they're trying to get leads the business the client wants to get leads for their business so at the end of the day what they really want is leads you need to sell them that i will get you 100 qualified leads every month for your business so you can reach out to them call them and have that sales transaction.

6:35This is what AI can compete with. If you actually sell the outcome, it really solves all these problems. And then you take care of the whole ladder of value for your clients, the vertical value ladder. So I just gave you an example of what a Facebook ad agency would do to sell outcomes rather than services. But let me give you a couple more examples so that you get the full picture. Let's say you are in the business of designing YouTube thumbnails. And really what you're trying to help your client with is to help people with what? To click through the actual thumbnail and watch the video. So what the client really wants is a higher click-through rate.

7:16So just go to the outcome. Okay. So what do you need to do to get that higher click-through rate? Well, you have to own the whole thing, meaning that you're going to design the thumbnail. You're going to package the video, meaning you're going to also adjust the title. You're going to test things out. You're going to split test, which you can do inside of YouTube. And then from there, you're going to work your way up to the fact that people are going to click through on that video at 5 % or higher. So if you can sell that outcome, hey, I will get you 5 % or higher on a click-through rate. I'll take care of all the packaging.

7:47It's your job to make sure they watch the video after they click. That is a clear outcome that you're selling that AI can't promise. One more example, the content agency. Let's say, for example, you write blog posts for people. Well, why do people want blog posts? Well, they want people to find their website or see some content on their website. Well, how do they find them? Well, they do a Google search. Well, let's just get to the outcome. Why do people want the actual blog posts to be written in the first place? Well, they want to rank on Google. So help them get ranked on Google by owning the outcome.

8:15Hey, for your keywords, We'll make sure that your blog posts show up in the first three pages of Google. That is what owning the outcome looks like. This is what the actual customer wants. This is what they actually need. They don't actually need blog posts. Now, there's one caveat here. There's really an elephant in the room we need to talk about. In order for you to be able to sell outcomes, you have to be good at what you do, okay? You actually have to be able to feel confident enough to be able to own that outcome and to be responsible to make sure that you can deliver. So this is why AI is killing a lot of the weak agencies, but the strong agencies that can deliver outcomes are the ones that are going to win, and they can charge a premium for it because people are willing to pay a premium to get that outcome.

8:58So work on making sure that you can actually deliver for your clients. But this also means you've got to be selective with your clients. Make sure that you're choosing clients that you can actually help get that outcome for. Some people, no matter what you do, their business is just not one that you can work with, whether it's the product itself, whether it's the content that you're trying to put together, whether it's the offer you're trying to convert with the marketing of the Facebook ad. You got to be selective about who you are working with, because as Seth Godin says, choose your customers, choose your future.

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12:01That's exactly what I need. If you're going to give me that, I'm willing to give money. And if you want to even sweeten the deal more, you can delay reaping the benefit or asking for payment until you get the outcome. It's like so hard for somebody to say no to that. If I say to somebody, hey, I will increase your click-through rate on your YouTube videos by 3 % or I'll get you to 5 % on all the videos I package and you're not going to pay me until I get you a result. How can I say no to that? As soon as I get a result, that's what I want. That's the only time I pay. That's great. So this makes it a no-brainer for the client.

12:37It makes it easy for you to sell because you're not really selling. You're actually just delivering before you actually get paid. So it's a no-brainer for the business. I could say as a business owner, if I'm given this option, I will take it seven days a week, twice on Sunday, because it makes total sense financially because I get the result first, then I pay because I'm going to get something out of that result. I'm going to get traffic. I'm going to get customers. I'm going to get ad dollars through YouTube or whatever it might be. So I'm getting an ROI before I pay for the service or pay for the outcome, I should say.

13:08I need to make something crystal clear. When you sell a service, you're asking them, the client, to carry the risk. Hey, trust me, this is going to work. And they're taking a risk by paying for a service. But when you sell an outcome, you carry the risk. And that flips the entire conversation. And it also allows you to put the customer at ease. They have no risk involved here. All they have to do is pay you when you deliver. This in business is called a risk reversal. And it's one of the easiest ways to make more sales because the client feels like they have nothing to lose. And when you have a no-brainer offer, they feel stupid.

13:45They feel silly not to take that offer. They feel like they're doing a disservice to their business if they don't take that offer. So when you offer this to your clients, it's going to be easy to sell. And if you don't like selling, you're going to just making a juicy offer makes it a process where you're not selling at all. They're just like, hey, please take my money. One of the biggest problems with agencies is churn. People don't want to pay for the service anymore. Why? Because they're not getting an outcome. People just don't cancel expenses for no reason. They go down their expense sheet and they say, hey, this is not serving me anymore.

14:18This expense is not helping my business. But if you're giving them an outcome, they can't cut you out. They're like, we're getting results. How are we going to cut these people out? These people are actually helping our business, helping us grow, helping us get leads. So you become the last thing or non-negotiable. We cannot cancel this service. We can't cancel this agency when things get tight, when the economy is tough, when people are trying to save money here and there. Like, hey, we'll save money on maybe no snacks in the office, but we're not going to save money and cancel this agency because this agency is helping us get outcomes, which is helping us get customers, which is helping us make money.

14:53Start selling outcomes and you stop being an expense and you start becoming an asset for growth for that business. Now, there's one rule you must obey when it comes to this strategy, and that is only sell outcomes that you can actually control. This is critical because you can't bankrupt your business by doing all the work, trying to achieve an outcome that you really don't have full control over. Let's go back to that thumbnail agency again, right? They are promising the outcome of 5 % click-through rate. This is an outcome that they can control. Why? Because they're going to control the whole packaging, like I mentioned.

15:30The thumbnail, they're going to design it, they're going to test it, they're going to A-B test, they're going to also have control over the title and modify the title to make sure that, hey, when people see this video in their feed, Let's get them to click. How do we get them to click? Beyond that, that's the stuff out of their control. They can't control viewer duration. They can't control retention rate. They can't control drop-off rate. They can't control how much money you're going to make through ads. They can't control that. Okay, so don't promise those things. Promise the things that are in your control, which in this case is the click-through rate.

16:02So to simplify this rule, set the outcome to sit closest to what you do in your expertise. So in this case, it's CTR, click-through rate, not views. You can't control views, okay? Same for the ad agency. You can get qualified leads because you know how to create an ad that will attract qualified leads, but you can't promise that these leads are going to convert into customers. That's their job and their sales team's job, okay? Remember, what's your expertise? How can you get them the result, the outcome that they're looking for using your expertise? Nothing beyond that. If this episode's reshaping the way you're thinking about building an agency, awesome.

16:39That was the whole point. I want you to subscribe to the show because we have an upcoming episode I don't want you to miss. It's called Why Creators That Publicly Share Their Income is Absolute BS. This is not marketing. This is not actually helping you in any way. It's not attracting the right customer. And we're going to explain why and what to do instead in that episode. So make sure you hit subscribe so you don't miss it when it launches, when it comes out in your feed. Here's one of the biggest benefits of this structure is that when you can give somebody an outcome, you can demand more money.

17:09Okay, let me give you an example. You might charge a base fee for your real costs of doing the work, and then you can also charge a performance reward for the outcome. Listen, if the business is getting the outcome, if the client is getting what they want, and you can give them more if they want, they're willing to pay more. So for example, you might have a base rate of$1 ,500, and then if you hit 15 % click-through rate, that's what you get paid. But what if you hit 6 % or 7 %? For every percentage point, you might say, I want an extra$700. For them, it makes sense because with every percentage point going up, that's more views.

17:48With more views, they're going to make more ad dollars, or they're going to get more clients that are going to watch that video and become customers, paying clients of their products and services. So as long as you are moving closer and you're increasing the result for the customer, they're going to be willing to pay you more. Some people say never do 100 % performance, meaning like I only get paid when I get a result and there's no base rate. Well, I'm not a big believer in that. I think that especially at the start when you're trying to prove yourself, when you're trying to get a reputation, when you're trying to build a client base, it's okay to go 100 % performance.

18:24Make some money. Earn your stripes. And then once you've shown results, you can start saying, hey, we're now incorporating a base rate because we're going to use some more resources to make sure that we maintain the results that we have. And then you can have those percentage point bonuses we talked about earlier so that you can continue to push yourself and push your team to get better results for your clients and get rewarded handsomely for those results. Now, listen, the funny thing is that the agencies I know that do this and are successful by selling outcomes, they leverage AI to get those outcomes, okay?

18:59They are not just like, hey, AI is the devil. No, they're like, hey, how can we use AI to help us get those outcomes for our clients so that we can lower our margins and make more profit? And you could do the same. So, for example, if you go back to the YouTube agency that's creating those YouTube thumbnails and increasing the click-through rate to 5 % or more, you know, they can use the power of AI by, you know, maybe creating a few variations themselves, like a few designs of those thumbnails, and then telling AI, I need 100 of each of these designs. So you have like 300 thumbnails that you can test through YouTube day after day, week after week, even hour by hour, and you can maximize your ability to get to that 5 % using the power of AI.

19:37And by the way, the YouTube platform has AI built in so that you can leverage it and make sure that you're getting the best results possible. So AI, the enemy that you hated, now becomes your friend, the one that's going to help augment your business, lower your margins, and increase your profits. This is why I've said this over and over. It's probably one of the main points I make whenever I speak on stages or at conferences is that your product, what you offer your customers, really doesn't matter, okay? What do I mean by that? Some people fall in love with their product. They fall in love with their service.

20:09They fall in love with their idea. All that matters is your customer. The customer matters because your customer's needs will change over time. As you can see with AI, what they're willing to pay for will change. So as long as you're focused on the customer and you're willing to pivot and evolve, then you're going to be able to be all right in business. Your agency will survive and it will thrive and it'll do better. But you have to be ahead of the curve. You can't just wait until it's too late. You have to be willing to let go of what might be still working barely in order for you to take that leap and change the business model of your agency that you are actually building for the future, not just for the present or even the past, what was working.

20:52Change is hard, I know. One of the jokes I make on stage is like, I have this great idea that I could sell to businesses, which is this machine that does a carbon copy of credit cards. and then you have to call the bank to figure out if this person has money on that credit card or it can afford this purchase. And then if they approve, I give them the actual product. That was a great idea in 1979. It's not a great idea anymore. Why? Because people's needs have changed. The customer has changed. They want Apple Pay. They want something easy. Tap to pay, go. They want Afterpay even, all that kind of stuff.

21:23So don't fall in love with your business and what it does, fall in love with serving the customer. Thanks so much for tuning into today's episode. I hope it was helpful. if it was, let me know. Drop me a review. And if you want to continue learning, we have a episode that we published recently called How to Set Your Prices to Make a Million Dollars in a Year. How to reverse engineer making a million dollars in revenue through your prices. Go ahead and check it out. Just scroll up on whatever app you're using, whether it's YouTube, Spotify, Apple, we're on them all. You'll find that episode. Again, it's called How to Set Your Prices to Make a Million Dollars in a Year.

21:58If you found today's episode helpful and you want more practical business lessons to help start, grow, and scale your business, subscribe to the podcast. All you gotta do is hit subscribe or follow on your favorite podcast app, the one that you're using right now. By hitting subscribe, you get our next episode automatically. It's absolutely free and it's a way for you to commit to growing your business. I'll check you in the next episode.

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