I’ve recently been writing about Wine Regional Marketing Organizations (RMOs). I’ve been pointing out the dichotmoy of small wine growers relying on good regional branding to assist with marketing and yet small wine growers don’t have the profits to fund the Wine RMOs to a high enough level.

The same thing applies to agencies. Not just for wine growers but all for most industries. Agencies (PR, Digital and Ad) are where the marketers-for-hire gravitate to as account managers, strategists and sometimes creatives. And yet agencies charge fees that only large companies can afford (or the aggressive medium size company).

Similarly web designers. This is usually a couple of designers and a couple of developers jointly running a web designer agency or led by an older designer. They don’t have the charge-like-a-wounded-bull philosophy of an ad agency but their fixed costs (salaries, equipment, and office space) can be about $300,000+ pa. If they have 30 clients they need to be charging on average $10,000. They then throw in a Adwords person for 5 of those clients and that’s anothe $10,000 on top.

Likewise consultancies. A wine grower has to hire at least an accountant and probably a occassionally a lawyer, essentially financial and legal consultants, but they do so reluctantly. They may receive advice from their accountant with cost-volume-profit calculations and cash flow analysis that are very useful but at $350 per hour or more there is only so much a small winery can bear.

In terms of wine specialist consultants, there are only a few multi-partner wine marketing agencies in the world, mainly in the US. Often the small wine grower will lean on distributors, importers, Wine RMOs, neighbours to tap into wine marketing but their profit levels do not allow extensive use of consultants.

Now let’s flip that.

What about the agencies, why do they have to charge such high rates?

Dr Pete is a well known personality in online marketing circles and has explained the rocky reefs of his early days being an SEO agency.

Firstly he makes the point that he needed to spend half his time finding clients. That 40 hour week dropped to 20 hours. Then when he found clients he had to deliver the contract and … so forgot about finding clients. To avoid this he had to keep working on the “sales pipeline” and dropped those productive billing hours to 10 hours per week.

Then his fixed costs increased. He needed a new computer, software upgrade, to go to a conference, pay tax and health insurance. He now needed to work more hours per week.

So when he got really busy his last few hours became very valuable, indeed he’d prefer not to be working those last few hours. His conclusion was, “Be realistic about your costs and the number of hours really left in the day after sales and marketing are done (and you need to do sales and marketing every day, even when you’re working on deliverables).”

So let’s do the maths for him. He wanted to make $50,000 per year and perhaps had $10,000 of expenses. He can only bill 10 hours per week. This means he has to charge $60,000 / 50 weeks = $1200 / 10 hours per week = $120 per hour.

Indeed a survey found this to be about the average rate. In the western world SEO agencies charged about $100-$150 per hour.

Market Failure

The small wine business wants and needs the agency help however the small wine business can’t afford to pay fees. The agency wants and needs these clients but can’t afford to charge less! I think economists call this market failure?

A New Model has been developing

Instead of relying on an agency to do the work, the small business person learns the 20% of marketing that will give them 80% of the results (hello Pareto). They have access to an expert and other people like themselves. The expert can answer many questions efficiently and quickly using forums with the help of the wider community. The expert creates courses, how-to videos and articles that teach that most important 20%.

Which is what I’ve done. Rather than set up an agency or consultancy which forces me to charge the higher rates needed to be profitable, I’ve used forums to allow efficient advice to be given by myself and others. Rather than give wine businesses “fish”, I’ve taught them “how to fish” through resources including more than 20 videos on wine internet marketing.

Check it out now as membership of the Wine Marketing Pros community closes on Tuesday 14 May (PST). Then reopens in a few months time.