New business models and revenue diversification are a key part of WEHCO Media’s current and future success. Flypaper, the digital agency business side of WEHCO Media in the United States, is one of those — generating revenue and expanding its footprint beyond its current markets.
Innovation is not limited to large companies — small regional publications sometimes have larger opportunities for success if they are nimble, focused, and provide needed services to their markets.
In an exclusive INMA Webinar on Wednesday Jay Horton, president of digital at WEHCO, explained how Flypaper works and what it has learned from launching a digital agency.
WEHCO is a family-owned media company based in Little Rock, Arkansas, USA. Horton also operates his own consulting business focusing on media.
“We thought it was natural to get into the agency side of the business, seeing the trends of the marketplace,” Horton said.
Flypaper is a SMB direct services agency, positioned between the large-scale, self-service agencies at the bottom and high-end boutique agencies. WEHCO also has a Flypaper agency in Nashville, Tennessee, and is looking to add new markets. They focus on areas in the south/southeast United States that have high population growth.
“Our niche is providing a broad range of services with a high level of customer service,” Horton said. “Reputation is a big part of any online marketing.” And Flypaper is no different.
Flypaper offers the following services:
- Web site design.
- Social media management.
- Social media marketing.
- Reputation management.
- E-mail marketing.
- Content creation.
- Video creation.
Who are Flypaper’s customers?
Going after a consistent type of customer really helps the sales team focus, Horton explained: “We’ve intentionally gone after people who have traditionally gotten their services out of the [telephone] directory. We also like to focus on the mid-size law firms and on high-cash customer environments. We’ve shown that we can deliver a good return on those folks.”
Flypaper also targets home service/repair companies, professionals such as attorneys and consultants, high-ticket retail stores such as jewellery and furniture, destinations and tourism bureaus, and elective medical procedure practitioners such as plastic surgeons and chiropractors.
Flypaper helps customers understand how they appear to their own customers on Google and other marketplaces. Flypaper’s best customers are:
- Local decision makers.
- Have fewer than 100 employees.
- Are within a one-hour drive from Flypaper offices.
- Have a high average value per customer.
- Are in a competitive industry.
How Flypaper is structured
The organisation has various structures for the three sizes of markets it services:
- Blended: small markets. Core newspaper sales team and digital specialists. Agency fulfilment and sales report to core management.
- Competitive: medium markets. Core newspaper sales team and digital specialists versus agency sales team. Agency fulfilment and sales report to agency manager.
- Independent agency: large market. All agency personnel report to corporate agency vice president. No newspaper or traditional media owned.
“This is a key thing I hear all around the industry — how do we do this in a profitable way?” Horton said. Over a five-year period, revenue growth has increased steadily.
“We typically run about US$800-$1,000 per month on our typical order. Our sales executives are out there developing business and the relationships, and then the account manager manages the relationship from there.”
Flypaper limits accounts to around 50 per account manager so service stays high.
Flypaper didn’t start making a profit until month 21. The biggest expenses are the pass-through vendor costs, such as Google and Facebook (49%), as well as salaries (26%), and commissions (17%). The other 8% of expenses are things such as supplies, mileage, telephone costs, etc.
“It takes a little time,” Horton explained. “We don’t get out from under water with our sales reps when they’re hired until around month nine or 10.”
What Flypaper learned
“This business is different,” Horton said. “You can’t run this like you would run a traditional newspaper sales staff. The model is about selling a 12-month package and building one-on-one relationships based on that. We really grew our focus on retention, and fulfilment internally, we feel, is a critical step in this.”
The key takeaways learned were:
- Smaller teams are better.
- This business is different.
- Focus heavily on retention.
- Do as much fulfilment as you can internally.
Focus on retention
“In the beginning our retention rates were not very good,” Horton said. Consistent monthly face-to-face, phone calls, and e-mails with customers helped that.
Almost all cancellations happened within the first few months. “If we can hold onto them within those first 12 months, that makes a lot of sense to us. We strategised around that: how much communication we have with our customers, how we strategise that. Not breaking the bundles [of services offered] also helped us avoid that churn.”
The company offer new customers a 13th-month free programme, which has been very effective at getting customers past that 12-month mark and into their renewal year. Month-over-month churn is now at less than 3%, Horton reported.
As they get customers into year two and beyond, their profit really takes off. “In this industry, we’re used to profit margins of 30 or 40%, but that’s not the agency world. With an agency such as Flypaper, the first year’s profit is between 0-10%, and in the second year that goes up to 10-25%.
“In the old days we could charge 50% margins for agency services, but we can’t really do that anymore,” Horton said.
Customer service is the top priority — and what has gotten the company to that second year of retention and higher profit margins.
Internal fulfilment sourcing
After initially using outside, third-party vendors for much of its fulfilment, Flypaper moved to internal fulfilment. Making this move improved revenue. For example, with Web site design services, internal fulfilment resulted in an increase of profits by 43% per sale. Social management saw a 22% increase in profit per sale, while SEM saw a 6% increase.
INMA: You talked a little about your mix of customers. I’m curious if you’ve built a lead engine to help identify those customers?
Horton: What we do when we look at the various categories that we want to do business with, we do some research to find out what their average order is, and what they typically spend on marketing so that we can right-size our packages to our customers. We also make sure we identify the way people shop for those products and services. I think we’re going to put some gas on that for 2019.
INMA: You talked about making the decision to bring fulfilment in-house. Could you share a little bit more about the challenges you faced when you internalised fulfilment?
Horton: The first challenge was expertise — hiring and training people to make sure we could offer the same quality our vendors had. Issue No. 2 is process; you’ve got to move from having a vendor-led process to rebuilding the newspaper-business-led model. That’s been a big plus for us, in terms of accountability and tracking. Finally, the third challenge is bandwidth, making sure we weren’t trying to do too much, too fast. I would advise anyone to layer in as much time as you can, to make sure that you can implement these processes and they will work. At the end of the day, you want these transitions and processes to be invisible to your customers.
INMA: Could you share a little more about your focus on retention and your reporting side on your customers?
Horton: That all flows back to our campaign specialist position for the onboarding side. But on the initial fulfilment side, they have the support of those product specialists who can jump in and manage it. Campaign specialists and product specialists are all working within the system.
INMA: How do you determine the best product mix for your customers, and the best profitability mix for you? How does that impact how you go to market, to find the right solutions for your customers and your company?
Horton: We bring everybody together once a year and do a big review of all our customers across categories: What are the products and profitability, and how do we need to adjust those packages? We do that as a team so that everyone can go back to their markets and understand how we packaged it. Everybody in all our markets has complete buy-in to what we’re doing and how we do it. We keep very extensive data on it. Most important is what is the effectiveness: Are we seeing the campaigns deliver on what we promised?
INMA: What is your advice for a company who wants to start an agency like this?
Horton: I think one of the most challenging things for folks tied with media and legacy newspapers is to do a gut check on profitability. It’s a tough game, and you’re not going to see profit right away. It’s a long-term model, and you need to have to stomach to stay tied to building the strategy and making the investment to keep the customer and performance focus for the long run. The second thing you need to do is you need to plan to build your expertise. I would definitely invest in building that internal organisation.