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My Agency Has to Have a Niche To Be More Successful...Right?

Posted by Mark Duval on Oct 17, 2019, 8:19:24 AM
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Does your agency need to specialize? That’s a question I’ve been revisiting lately. A surprising 60 percent of AdWeek’s 100 Fastest-Growing Agencies are classified as “full service.” If so many of the most successful agencies can out-pace others while positioned as full service, how important can it be to go niche? Have I encouraged agencies to step back from the “be everything to everyone” position, when it doesn’t make that much difference in the end?

specialized niche agency

Are 60% of the fastest-growing agencies really “full service”?

As it turns out, things aren’t always as they appear. There seem to be some inconsistencies in Adweek’s categorization of the fastest-growing agencies. Dark Horses, for example, is second on the list for “full-service agencies,” but it is positioned as “a creatively-led sports marketing agency” (and “entertainment and/or sports agency” is among Adweek’s fifteen other agency categories). Viral Nation, another fastest-growing agency, is classified as a “full-service agency” while positioned as “the premier Influencer Marketing Agency connecting brands to influencers…” (when “influencer marketing agency” is another category option).

When all is said and done, 60% of the fastest-growing agencies may not actually be full service. I’ve reached out to Doug Zanger, senior editor at Adweek, for clarification, and I will update this post with his response if I hear back. 

Among Adweek’s Fastest-Growing Agencies, the fifteen agency categories are primarily based on the type of marketing (e.g., direct marketing, branding, experiential, and strategy). It’s possible for a full-service-categorized agency to also be specialized based on the target industry, geographic area, target consumers, or even a particular service. Additionally, an agency may be correctly categorized but not technically positioned as “full service.” 

Why does this matter? The high percentage of full-service agencies on Adweek’s list may have little to do with the ongoing importance of niche positioning for agency success.

 

Why should you specialize?

While doing some second-guessing over the importance of niche positioning, I happened to read a valuable article about the pros and cons of specializing from my colleague, Jody Sutter. Here are some key takeaways:

  • The more specialized you are, the more efficient your new business investment
  • While generalists differentiate on price, specialists can afford to charge a premium
  • Generalists seek out clients, but specialists are more likely to be sought
  • Despite its benefits, specializing can be risky and expensive. To hedge against that risk, you can:
  1. Explore adjacent specialties (or broaden your area of specialization)
  2. Choose a category AND a service specialty (what you do and who you serve), so you can lean into one if the other slumps
  3. Be ready to adapt

Specialization sounds like a no-brainer. And yet...it can be easier said than done. If you are considering a specialty for your agency, read this post from Databox, and this one from Jody Sutter for tips on easing into it.

specialize for success

Things to weigh when considering agency specialization:

 

PROs of agency specialization

  • You can avoid competing on price and create your own value proposition
  • You won’t be interchangeable or easily replaceable
  • Higher profit margins 
  • Typically means a smaller organization with less overhead, greater efficiency, more value
  • Typically have genuine area expertise and are respected for it
  • Usually more agile (due to smaller, simpler organization)
  • Often enjoy a reputation for being more personable and service-oriented, due to smaller size

 

CONs of agency specialization

  • If not well-planned, there may not be enough business in the niche to support the agency
  • May have to forfeit many business opportunities in exchange for a greater chance to win a more limited number of opportunities

 

PROs of being a generalist (full service) agency

  • Simplifies things for clients to have one agency vs. many
  • Diverse experience can support a more holistic perspective and enhance multi-channel capabilities
  • May support greater consistency of messaging for clients
  • Potentially supports alignment across disciplines and teams (or not)
  • May have better communication and cross-team integration vs. a variety of agencies

 

CONs of being a generalist (full service) agency

  • There are typically weak links with some service areas not as good as others, and it can affect the agency’s reputation as a whole
  • May have inflated billing to support the overhead of multiple departments
  • May not be seen as true experts in any area
  • A larger organization may provide cover for mediocrity and under-performing employees
  • May be too large to make changes quickly
  • For smaller agencies, they may be taking on too much to be very good at anything in particular

 

So...how important is it for an agency to specialize?

I’d argue it’s as important as ever. I still believe (as do most of the agency consultants and industry insiders I know) that specialization gives agencies a valuable edge when done correctly

After reviewing agency website after agency website, I can say with certainty that failure to put a stake in the ground makes an agency forgettable. I don’t recommend it. But does that mean you will fail if you don’t specialize? No, plenty of agencies take the “be everything to everyone” approach — too many agencies. It may make it more challenging to win new business, but that alone (probably) won’t be the demise of your agency.

cobblers children

In the article I referenced earlier, Jody Sutter pointed out that nobody ever asks what happens to the cobbler’s children when they grow up. So maybe your agency doesn’t have the best positioning because you are too busy working for your clients. It doesn’t necessarily mean your children die from a lack of shoes. They may end up happy and healthy, with calloused feet. In other words, your agency may succeed in spite of interchangeable positioning. 

I suspect I may even find some examples of that among Adweek’s 100 Fastest-Growing Agencies. Part of me wonders, if an agency can succeed with bland positioning, what could they do with a compelling position? And the other part of me is just curious to explore what they’ve been doing that’s allowed them to succeed despite a positioning handicap. Stay tuned to explore that with me next week.

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Image credits: specialized niche agency © Adobe Stock / iushakovsky; specialize for success © Adobe Stock / Daguimagery; cobbler's children © Adobe Stock / agcreativelab;

Topics: Agency New Business

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