Are you finding it increasingly difficult to stand out in your agency’s niche? Despite all your efforts, does it feel like you’re just one among many agencies struggling to get noticed and capture that crucial market share? It’s a common predicament that many in the sector face where stellar services alone don’t cut through the noise.
Why do some agencies seem to effortlessly command attention and pull ahead in the race, while others falter? What do successful agencies know that you might be missing?
Today, we’re going to uncover those secrets. Joining us is Garrett Mehrguth, a strategist with a proven track record in not just participating but dominating the market. As the CEO of Directive, Garrett has led his team and clients to remarkable success through intelligence and strategic positioning.
Prepare to uncover the tactics that could revolutionize your approach and help you claim the market share you deserve in this episode of Social Pulse Podcast: Agency Edition hosted by Agorapulse chief storyteller, Mike Allton.
Listen to the full podcast below or read on for the transcript.
Introducing Directive
Mike Allton: I’m so excited to dig into this topic, but first, if you could just start off and share what, in your mind, strategic positioning even means in the context of agencies, whether they’re focused on B2B, SaaS, or other verticals?
Garrett Mehrguth: Strategic positioning, to me, is predicated on the belief that you could go get your ideal client if you said you were actually for them.
In other words, everyone knows the importance of niching, having differentiation, and getting their positioning right in the market—but because they don’t have a strong go-to-market function, they’re terrified of choosing a vertical. Because they don’t feel confident they can go from getting anyone through their clients, referrals, references, their internal network, maybe their local ecosystem, or economy. So they end up sometimes being scared to stand for something in their positioning. That means I’ll have to say no to the leads [that] they’re just naturally getting. I found, in general, that that’s probably the reason why people don’t do it.
Mike Allton: That makes a lot of sense, particularly if you’re just starting off your agency or you’re in a bit of a growth mode, you’re keeping an eye on your revenue, and somebody comes to you with a project that you should say no to, right? Because it’s not in your niche. It’s not in your wheelhouse, but you look at the revenue and you need the money right now. And I totally understand if you’re in that position, it may be an impossibility. You may not be able to say no because you have to bring in the dollars, but at some point, you have to start saying no to those clients.
Garrett Mehrguth: I bootstrapped directed from Fiverr. I had literally five or 20 bucks when we started, and I never took capital from anyone. I never got investments. I just bootstrapped it with my best friend and me, and now I’m at eleven almost coming up—and every year I’d say for almost the first seven or eight, maybe eight years, eight or nine, we would pretty much go through our whole portfolio because we were so focused on getting our cost of goods sold and our gross margin correct.
And the biggest driver of gross margins is price. And so what we would do is essentially raise rates in such a way that for many people, it was more than 15%, let’s say, year over year. But we could do that with a strong pipeline. Sales give your business flexibility to optimize its margins and its other pieces.
But positioning’s important. You can do positioning to a vertical into positioning to service lines. You can do positioning in a lot of different ways. You have to do it. Although I coach eleven agency owners right now and all of their positioning is the biggest driver of their growth, it’s also the hardest thing for them to emotionally decide upon, I would say.
Mike Allton: Other than price, how else did your positioning evolve in those early years?
Garrett Mehrguth: Mostly just was always “keep it simple, stupid.” My brain is so simple-minded that I don’t get too confused with things. So at first, I was in Azusa Pacific. I was doing my master’s. I was 21 years old, and I was helping local businesses. Those are the people that I thought I was qualified to help. I didn’t have any real skills. I just knew that I could help businesses grow. So, I mean, my very first one was a shawarma shop. I helped him with a Facebook page and Yelp page, by handing out flyers. I went back on the 30th day to get my check. He said, “Come back tomorrow.” And the whole place was boarded up.
So I started with local SEO. I got stiffed on my very first account, and then I got a hookah shop, and then I got a plumber, and then I got a stereo business for in-home stereo. So I was all local and grew up with that. And then what happened was I realized that the local businesses, I needed multi-location, but as you did multi-location, they wanted a discount for each location.
And the discount was almost always greater than the efficiencies gained by servicing multiple locations. So the servicing franchise and multi-location local SEO and paid media accounts was inefficient. So from there, we went to B2B. We had a couple of B2B accounts that were good. So we said, “Hey, look, we’re B2B.” We got a bunch of B2B accounts and then I looked at all my best B2B accounts and they were software. So eventually I said I was B2B software, and here we are today as the market leader in B2B software.
I just ask myself, “Who am I good at getting results for? Who do I enjoy getting results for? And who pays me the most?”
Mike Allton: So you basically developed that ideal customer persona that ICP as a B2B SaaS for you, for other agencies, or even your clients.
Can you walk us through how you might identify an ICP for them?
Garrett Mehrguth: What I usually do is I just have them enrich their current client base. So most agency owners haven’t necessarily taken the time to understand, of [their] top-end clients, how many employees do they have? So you can take your account list. You can enrich it in zoom info, and you can start to look at the firmographics because you want to use this to then go find other companies in the U.S. or the regions you operate in that share that same criteria for your ideal customer persona.
So for me, when I looked at mine, they’re all B2B SaaS. They had over a hundred employees. They were using Marketo, HubSpot, or Pardot at the time. And then I essentially built a list of all the other B2B SaaS companies in the U.S. using Marketo, HubSpot, or Pardot with over a hundred employees. And we had a pretty customized go-to-market strategy that I now help others with. But in the first 18 months, we held sales calls with 6,800 of our 10,000 target accounts, and that pretty quickly propelled us to be the market leader.
Now, what I would say, though, is at the time when I chose B2B SaaS. Nobody else had chosen B2B SaaS. Everybody else is just B2B. So you have to be a little confident in yourself and your ability to go get a SaaS company. And then (once you feel you could actually go get your ideal client) saying you’re exactly for them is definitely in your best interest, whether that’s through service line positioning, or industry-level positioning, or even maybe title-based positioning.
You help CMOs, you help directors, you help VPs, you help SaaS companies. You do paid media, you do LinkedIn, you only do Facebook. Wherever you can find your differentiation is important.
And then your service should actually be different because of your differentiation. And that’s the biggest part: Your differentiation has to be real. It can’t just be lipstick on the pig.
So for us, we actually have a different way of servicing SAS companies than we would a different business. We have different KPIs we track than a different business. We have different labor we hire because we only service SaaS. We have service delivery models that are different because we only service SaaS.
Everything we do is tailored to them, and it’s authentic, and that’s why it works.
Can you share some examples of how your services or the personnel are different that are specific to B2B SaaS?
Garrett Mehrguth: I mean, SaaS is nasty, man. SaaS is nasty. It’s hard. I mean, there’s a ton of churn at the point of contact level, so you have to be in good relationships. You actually grow through the churn, ironically, if you’re good enough. Because when people leave their SaaS companies every year and a half, it feels like these days, they bring you with you to the next one.
Relationships are growing. It’s a very small industry that’s also very large. But when it comes to service delivery, they have this problem of innovation. So software and technology companies, for the most part, are based on innovation and most performance marketing agencies. Core competency is demand capture.
The problem with demand capture channels review sites, Google ads, and SEO is that if your client that you’re servicing, their value prop is based on innovation, then their audience doesn’t know to search for the thing they sell because they don’t even know it exists. And so Directive has to get very good at channels, LinkedIn advertising, programmatic, and other demand creation channels, as well as demand differentiation.
In other words, I do everything for Gong. And what you learn as a marketer is if you get humble enough, anything I do for Gong works. Gong’s the market leader, they have a great brand, they have a great product, they have a great price. Anything I do for Gong makes me look like I’m great at marketing.
But if I get Gong AI, I look like I’m terrible at marketing because no one’s ever heard of ’em. Nobody knows what they do. Their product market fits average at best, and they haven’t mastered their pricing, and they still don’t have an above-competent sales org. And so in all these moments, you have these co-dependencies—and your job as an agency owner is to figure out where you’re successful, who you’ll say yes to, who you won’t, and then how you can start to scale that success in a repeatable way.
The Don’ts of Positioning
Mike Allton: Now, earlier you were talking about one of the mistakes a lot of agencies and businesses make where they have not only identified their positioning, but they’re not actually changing, to your point, their actual services and articulating those.
What are some other common mistakes that you’re seeing either other agencies or businesses make when they’re trying to position themselves in the market?
Garrett Mehrguth: One of the things I did about three years ago, so we’re at about six million in revenue. (We’ll do almost 25 this year, just to give you context.)
When we were six, I hired a product guy. So what I wanted to do is any time I service an industry, I want to emulate their reality in how I operate mine. So there’s greater resonance when I work with them. And so one of the things I realized that software companies do very well is that we as agencies don’t have any agencies as a utopic or general statement.
And as businesses in general, we are very bad at the things that we underfocus on, underinvest in, and undermanage. In other words, we don’t (as agency owners) put a lot of effort into the productization of our services. Even if you’re a high-end vendor myself with large average contract values, there’s this idea that everything we do is custom. Well, that’s incorrect. This idea that we can productize everything? That’s also incorrect.
“The real thing you have to get great at in an agency, in my opinion, is [to] have a standardization of how you solve problems more so than standardizing what problems you solve. So that—when you onboard new consultants and strategists, and your onboarding is the number-one driver of your churn and your retention—nothing drives client churn more than transitions (aka strategists,) moving off the account, whether they get promoted, whether they move horizontally, or whether they get let go.”
And so the biggest thing you can do as an agency, in my opinion, is starting to standardize how you do things so that new people can ramp quickly up to your standards and that you have exceptionally strong onboarding, as well as training materials on how you do everything.
The way I say it as an agency owner is my aunt or my uncle or my brother or my dad could hire my agency. I could close my eyes, and I would trust any strategist to service them. I don’t know a lot of agencies that can say that. And with Directive, I can actually say that because of how thorough we are in our onboarding and how much we’ve invested in our product marketing and our training so that we have that consistency of delivery across multiple strategies.
Mike Allton: I talk to agencies every single day, and I’m always impressed when someone I’m talking to starts talking about the framework that they have internally for working with customers. And it’s not that the framework itself is that impressive. I just think I’m impressed because they’re a minority to your point. Most agencies don’t have a framework. They don’t have those kinds of processes in place.
Scoping Out Competition
Well, one of the things I’ve heard you talk about a couple of times is this concept that you seem to be very familiar with your competitors. Would you say you’re doing competitor analysis and how has that helped you strengthen your market?
Garrett Mehrguth: When we started, I was focused on it, but there weren’t any competitors. I’m the first and only agency in SaaS with over 100 employees. The ones that I’ve competed with have gone up there, and then they collapsed unto their own success.
That’s the thing about agencies no one ever talks about. This achieving success is a heck of a lot easier than sustaining it.
Sustaining success in the agency game is brutal. Oh, you have to rebuild your executive team multiple times. You have to constantly raise your standards. You have to be willing to be the bad guy on behalf of your clients because the bigger you get, especially if you, let’s say, get 10 million as an agency, the agency starts to focus inward.
It becomes this organization, a financial instrument, that is self-servicing. In other words, the people and employees and the culture and all these things start to become more important than client results.
And so what I’ve learned about an agency is the number-one thing you have to do if you want to sustain your success or any types of projects or initiatives or processes you roll out as a visibility system. And so, in other words, people do what you inspect, not what you expect, and people stop inspecting things pretty quickly, I felt, so we launched something as a group. We build a new process. “Here’s how we’re going to do QBR as a Directive.” Within two quarters, the system’s dead if you don’t have visibility into the adherence to the process. Everybody was so excited about it when it launched. And so visibility systems to me are pretty crucial.
Mike Allton: I love that statement: “People do what you inspect, not what you expect.” I don’t know if you invented that, but I’ve never heard that before.
Customer Feedback’s Role in Strategic Positioning
Mike Allton: So, Garrett, we’ve talked about, looking at the firmographics of your existing clients to help identify which ones are the most successful ones to go after. We talked about looking at competitors.
What about customer feedback? Has that played a role in your strategic position in the past? And if so, how?
Garrett Mehrguth: A hundred percent. We track three things that are bigger. I was saying, I try to not look at them too much. Well, lately, they copied us. So when you’re the market leader, I look at them less when you’re the challenger. I looked at them a lot more. So competitors, the way I’ve treated them, has changed over the years.
- But when it comes to client stuff and feedback, we run what’s called a CSAT score. I found that to be way better than NPS. So the problem with NPS is it asks the question of how are you to refer? Clients to treat agencies a secret. They feel if they refer you to anyone else, they’ll get less time and attention on their account.
- So we instead ask how satisfied they are with Directive. So that’s the customer satisfaction score from zero to five, and then we designed to ask that question at different strategic moments in the engagement. So we asked them, for example, after our project phase, we asked them 90 days after the start of the engagement, we ask them at the six-month mark. And then we ask them again, 60 days before renewal, so we also can reprioritize what accounts might not renew or what’s going on. And we run those all the time, as people hit those triggers. We use a software called Ask Nicely for that, and then we have another score we use called the customer experience score that’s done by the strategist.
- The beauty of that is that it creates an accountability system where the strategist can say the client’s great. And then if the client, so if the strategist keeps saying their clients are five out of five, and then the client keeps saying they’re three or two out of five, now that cognitive dissonance gives you a coaching moment with that consultant and that strategist.
- And then the last thing that we’re looking at is what we call North Star metric attainment. And so the reason Direct has been able to sustain its success is that over the years we’ve actually gotten better at getting results, not worse, despite our size. And we track that. And a Northstar metric is the goal for the engagement.
- So when a client hires us, we try to create a sales or revenue-related KPI for the engagement. So for a B2B SaaS company, that might be sales-qualified leads, that might be closed one bookings that might be demos generated or given. And then we’re going to review that every quarter, every month, every week that becomes the cornerstone of our reporting. And I can also track that internally. So for example, in Q1 of this year, Directive hit its paid media clients, North Star metrics 78% of the time. What that means is that 78% of the time we’re hitting a goal that the internal team has never been able to accomplish and the previous agency failed that.
And that is something I’m proud of.
Success Stories About Positioning
Can you think of some specific examples or an example with a client that you’ve worked with on positioning and how you’ve been able to help them see some success?
Garrett Mehrguth: We don’t get the freedom to help off position. Positioning is hard. I do a lot more positioning work with my agency coaching business because I’m invited to do that with the CEO of the consulting business on Directive. When I serve the SaaS businesses, I would say, I interact with CMOs less than 10% of total interactions and with CEOs less than 1% of total interactions.
So we do live in this director to VP level of execution work we will get hired for go-to-market. Calendly will hire us when they go on a go to market with a new product. AWS has leveraged us for something similar. Outreach, the sales outbound software, leveraged us for that. We get that a lot, and those are big engagements. But they’re more about amplifying the positioning they’ve chosen internally, and they want us to distribute it. And then with our start-ups that we get, we now have a start-ups business unit. It’s been a big success for us. It’s grown rapidly. We have over 40 accounts now that we’ve been servicing since launching in November. And that’s just month-to-month fees: $5,750 a month. And that’s for people spending less than $40,000 a month on ads.
That one will do more coaching on positioning. “Hey, what do you want to be known for? Are we going to be the cheapest?” ‘Cause that’s not bad. As long as we’re actually the cheapest, we lead with that. Do we want to be that, but we have to have an angle, right? Because you’re a challenger, you’re not the market leader, so we have to have a way to take market share.
Getting people bought in on that is exceptionally hard, and that’s one reason I love coaching agency owners because I have the freedom to help them make the decisions that actually matter versus the decisions that are still predicated upon your positioning. In other words, I can manage your Google ads, but if nobody wants what you sell, your prices are bad, and your sales process doesn’t work.
Those are all outside of my scope, unfortunately. as a customer generation agency. So if I don’t get invited into those moments, I have to do the best I can with what I’m given. And that can always be tricky. So, still 79 percent of the time, you’re able to figure it out. Not always, though. And that’s where we’re always trying to get to our goals a hundred percent of Northstar metric.
Mike Allton: Right, right, right. That makes complete sense. So when you’re working with companies like Calendly, Gong—these are companies we work with at Agorapulse. We’re clients at those firms.
How are you measuring the business impact of social, for these kinds of firms?
Garrett Mehrguth: For my own agency in 2022 and a bit of 2023, before the economy collapsed, I spent around $3 million on LinkedIn ads for Directive itself, and I made about $18 million a year in bookings, give or take.
So, I would say, we have a very mature and robust way of advertising on paid social here. But we’re not pros of organic social. I don’t totally understand organic social as well as I’d like. I have 14,000 followers on LinkedIn I just learned about myself. So I wouldn’t say I’m exactly a golden child of what strong organic social looks like. Some of my competitors are far better at that. I’m more talented or gifted at social media advertising.
But that, to me, still, the best channel on B2B bar none is paid social. It does, though, come down to your positioning. It comes down to using your own data, not the LinkedIn data. So when I advertise all that money on LinkedIn, I’m only doing that to my named account list that I’ve manually verified. So right now, I have about 14,000 SaaS companies I’m trying to break into, and I advertise to those every day across LinkedIn, Facebook, and Instagram.
How to Start Improving Position ASAP
I’ve got just one more question for you, Garrett. I’m wondering, on behalf of our listeners, the folks who are looking to improve their positioning, what do you think some of their action steps or first steps should be if they wanted to start improving their positioning today?
Garrett Mehrguth: Buy my course? (I have a course on positioning at garrettmehrguth.com.) But, no, honestly, what I would do is: First, you have to find your passions [and] software.
Another question I wish I would have thought of is: If you get to the top of your niche, assuming your own success, how big are the ad spends?
One of the disappointing things about choosing B2B SaaS, for me, was when we got relatively near the top of where we were going in our positioning in the market and where we were as an organization at our size. I was surprised at how little B2B SaaS companies still spend. I thought Gong would spend more than Gong spends.
The biggest driver of EBITDA for agencies is ad spend under management. It’s theoretically the only mechanism of billing in the agency world (that I’m aware of) that is increasing marginal returns. This means that we can charge more for managing larger amounts of spend without having to incrementally increase our cost of goods sold at the same rate. So, in other words, I can charge 5 percent more while working 2 percent more hours. That 3 percent there in billable utilization creates that even a margin.
- And so I would say that’s the number-one thing I would think about—knowing what I now know, going through so many different pivots in my positioning over the last 11 years—is making sure that the total economic size of the ad spend of the industry matches my ambition, and that’s unique to every person’s ambition.
- Number two is I got to go through my client list and just see what industries do. A lot of times people don’t even realize it, but half their revenue or 75% of the revenue or 25% of the revenue already coming from a service that they’re great at, or a vertical that they love to service, or that they just somehow naturally grew into through success with early accounts in that space.
Looking at your existing client base, understanding the gross margins of those clients, understanding the ad spend of those clients, understanding the firmographic traits of the clients, what tech stacks they run on, how many employees they have, and things like that. And then, after all that, you have to make a choice, you have to stand for something or else never be able to allocate your own capital back into your growth.
See, I invested about 30 percent of our top line of total revenue into sales and marketing for almost nine years straight, even more than 30 percent a lot of years.
And so in other words, I ran us on almost zero EBITDA. So my corporate strategy was to have three months’ cash in the bank and then essentially put all the EBITDA back into sales and marketing to grow top-line revenue so that I had enough top-line revenue that when I wanted 20 points EBITDA, my 20 percent of EBITDA would cross that 5 million threshold that would allow me to become a platform company and start doing M&A instead of my agency being integrated into another.
But positioning is just: Look at your clients, understand what you’re passionate about, understand if the size of that vertical or that service matches your ambition, and then commit your capital, your finances, and your energy into taking market share, and you can totally do it.
Mike Allton: That’s so important. I appreciate that you’ve raised that point because it’s not something we’ve typically covered on this podcast. It’s not a line of conversation I see a lot of agencies having because they come into the business, to your point, [and] maybe they were managing a couple of accounts. They probably came up just as you did, and they’ve grown their agency organically, and they’re just figuring out. So these are valuable insights. Thank you so much for sharing them, Garrett.
And thank all of you for listening. We’ll have all the links to everything Garrett mentioned in the show notes. Don’t forget to follow us on Apple at the Social Pulse Podcast: Agency Edition, and leave us a review. We’d love to know what you think. Until next time.
