Has the PESO Model become a necessity for modern agencies?

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Chip Griffin: You’re listening to the Agency Leadership Podcast on the FIR Podcast Network. Each week we bring you actionable ideas to help PR and marketing agencies grow and thrive.

Hello and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.

And I’m Gini Dietrich.

And we’re here today to give you a PESO for your thoughts or take a PESO for our thoughts or

Gini Dietrich: You and Martin Waxman need to hang out and work on your segues together.

Chip Griffin: Wow. That seems particularly harsh.

I feel, I feel very bad for Martin. Because, I mean, my segues are just really, really painful. His are pretty bad as well. Well, oh well, what are you going to do? So yes, we’re, we’re going to, because there’s nothing else going on in the world, we’ve decided that we’re just going to, we’re going to talk about whatever we feel like.

And so last week we talked about my rebranding. And so this week we’re going to talk about something near and dear to your heart because you know. It’s got to be an even trade, right? So we’ll talk about the PESO model. And the PESO model, of course, is something that we’ve talked about before. But, you know, since we’re in the midst of a new year, new beginnings, people have gone through 2020 and are saying to themselves, you know, You know, what do I want to do differently?

So, so maybe there’s some people who are listening, who are thinking about starting an agency today or pivoting their existing agency or who knows what. And so what I really wanted to focus on for this conversation was if you were starting an agency today, does it have to be a PESO agency, or is there some other kind of agency that you can still build and be successful in 2021?

And beyond.

Gini Dietrich: It’s an interesting question because obviously I believe in the PESO model.

Chip Griffin: That’s a good thing, because your life would be pretty darn miserable if you didn’t. Right.

Gini Dietrich: if I personally were starting, if I were starting my own agency right now, I would just, and this is personal because it’s my core expertise and what I’m good at, I would create an agency that’s focused, of course, on the PESO model, but our, internally, our expertise would be.

Owned media, and then we would bring in partners to do the shared, earned, and paid pieces of it. We would also sit at the center and make sure that it’s all integrated and everybody’s working together and it, you know, it’s all working the way it should. But for me to have, for, if I were starting completely over or starting fresh, that’s what I would do is I would hire people that had the content marketing expertise.

And then I would partner with other agencies to do the other three media types.

Chip Griffin: And partnering agencies together is something that’s become much more common. I mean, when I first got started in agencies 20 years ago, it was, it was not unheard of, but it was much less common than it is today for agencies with different specialties and expertise to come together to, to work really collaboratively, not just because the client has hired you individually to do different components, but because perhaps you regularly work with them.

with certain partner agencies, or you’ve got those kinds of relationships so that you’re really delivering what the client needs in a much more integrated fashion without having to have all of the staff needed to do that at a robust level.

Gini Dietrich: And I think there’s also, it also provides an opportunity for you when you, when you’re accustomed to partnering with other agencies or other solopreneurs or other contractors or whatever happens to be, and the client has their own preferences.

It’s easy for you to sort of slide into that and say, okay, well, we can work with them. That’s not a problem. You know, and, and you work with their ad agency and their digital agency or whatever happens to be. We have one client like that, that brought us in to do content. And they said, You know, we know that you already have sort of this structure set up, but we have an ad agency we really like.

We have a digital firm. We’re really like, we have some writers. We really like, would you consider working with them? And we were like, yeah, so it, and they actually said, wow, you really play nice in the sandbox together. but that’s what it does is it gives you that opportunity to not compete and to, to really do the best work for the client versus the best work.

That maybe makes more sense for your

agency.

Chip Griffin: Well, a couple of things pop out from what you’ve just said. And the first is the playing nice in the sandbox. That’s something that we’ve talked about repeatedly and how important that is, particularly as there are more partnerships going on, either by necessity or by strategy.

And so, you know, finding ways to not treat every other agency that you come across as a threat. In the course of a client engagement as the enemy is someone that you’re trying to steal business from, which I mean, frankly, that happens a lot in the agency world where, you know, you’ve got two agencies working on a project and one of them is always sitting there saying, geez, you know, how can I get just a little bit more of the business?

I mean, I’ve been in plenty of agencies over the years where that, you know, we thought that way. You start start to say, well, we’re in here doing the crisis work, but You know, could we take over some of the, the general brand communications or vice versa? and so, you know, that those are, those are things that while it sounds good in the near term, it, it builds a bad reputation for your agency.

If you’re always looked at as the person who’s in there trying to undermine your, the other agencies that are working on that account. So, so first and foremost. Absolutely learn to play nice in the sandbox. You’ll get much further that way.

Gini Dietrich: Much further that way.

Chip Griffin: Absolutely. Plus it feels better. I mean, it just, it feels kind of dirty going in there saying, you know, I just, I just want to steal someone else’s business all the time.

you know, that’s just, that doesn’t make a lot of sense to me. But the, but you know, one of the other things that, that you talked about there was if you started an agency, you would, you would build a PESO agency. focused on the O and, having partners for a lot of the rest. I think that one of the things that.

Agencies should understand, or really anyone who uses the PASO model needs to understand is while O is probably the most common hub, and it’s certainly what I would prefer as the hub, you can really come in from any point on the angle. So if you’re, if you’re a paid media firm, you still want to try to find ways to use the ASO, as part of what you’re doing in some fashion.

So, you know, you don’t have to think of it as you always start with one letter. It’s not. It’s, it’s not that way. It’s really, how do you blend these things together in the right way to get the results that your client is looking for? Which at the end of the day is what matters, right? You need to understand what the client is trying to achieve.

And, and you shouldn’t be sitting there saying, well, you know, I have one way of doing things and that’s, we’re going to, you know, engineer what the client is looking for into that. No, you actually need to listen to what the client wants and figure out. Not just how, but even if your services are the right fit for that client.

And the more that you’re using the PESO model, the more likely it is that there is a piece for you in that.

Gini Dietrich: Yeah, and I think you’re absolutely right. This actually came up in a conversation I was having. It was a webinar I did before the holidays, I don’t remember now. but they, one of the questions from the audience was, You know, if I’m using a pay as loan model program, where do I start?

And like you, I think that if you’re starting from scratch and the client has some specific goals in terms of awareness and search engine optimization and, even driving marketing leads, then I think you start with owned. There are exceptions to every rule, and one of the things we talked about is you may actually start with paid because the client’s goals are to generate as many leads and conversions as possible.

And in that case, it doesn’t make sense to, to spend all the time to build all this other stuff that has a longer tail. Maybe you start with the shorter tail, shorter term stuff, and then add in other, other things. I think you’re absolutely right. I would prefer it starts with owned because I think that builds a nice foundation.

But. There are certainly times, you know, a client may call, a prospect may call you and say, you know, we’ve got this huge event coming up and we really need to be in our local media in the next three months. Then you would start with earned. So I think it, it just depends on what it is they’re trying to achieve for sure.

Chip Griffin: Right. Well, and, and so I think that brings us to the question of, you know, specialist agencies and, and how, how much can you specialize in your services? We’ve, we’ve talked plenty about, you know, the value of, you know, finding some sort of a market niche, whether that’s by industry or type of company or size of company or location or all that.

But, but from a services perspective, you know, the. How specialized can you be today if you want to build a successful agency from scratch? Can you be hyper focused? Do you need to have PESO at your core? Do you just need to know where you fit into the PESO model so you can play nice in the sandbox? Do you need to have partnerships?

I mean, you know, what’s your thinking about that and where PESO fits in from the specialization standpoint?

Gini Dietrich: this answer sucks, but, It is, it is core to what we discuss all the time. It depends for sure. you know, there is something to be said 100 percent for having a focus. Yes, for sure. Typically we see the focus in an industry or around a product or a service.

That’s typically what we see. I think the challenge with having a focus in one media type without bringing in the other media types is that it’s It’s challenging to get the kinds of results that you need to get and have a client feel like you’re a partner in their, their growth by only doing one thing.

And that doesn’t necessarily mean that you have to have paid or insured and owned inside your agency. But I do think it means that you need to have, maybe you have, like if we were doing it, our core expertise would be owned and then we would bring in partners. to do the other three media types. Same kind of thing.

If your core expertise is paid or earned, then you have partner agencies or partner solopreneurs that can help you fulfill those other pieces.

Chip Griffin: But so, I guess, if, are you better off being Really, really good at the P, the E, the S, or the O, or being pretty good at all of them. you know, which, which one is a more successful, and I mean, obviously it depends.

I mean, it, you know, we can put that asterisk to absolutely everything that we say, but I’m going to put you on the spot. Would you rather be super expert in one of the letters or just pretty good in all of them so that you knew sort of how to pull it all together?

Gini Dietrich: Okay, there’s, I think there are a few ways to approach this.

Number one, if you’re going to be very good at all four of them, your agency is big. It’s a large agency. It’s, you know, 50 employees or larger. So if you want to do that as a smaller agency, You probably have partner agencies or you work with contractors or solopreneurs who have that expertise and you’re bringing, bringing those expertise, that expertise into your agency.

Where I think a PESO model led agency needs to focus is we do one thing really well internally. And we also have a really deep understanding of how the other three media types work so that we can make sure that not only is everybody doing what’s best for the client, but it’s integrated well, and it’s working together.

And I’ll give you a really good example. We have a huge client that we pretty much run the, I mean, not pretty much. I serve as their chief content officer right now. And they’ve brought in a PR firm that’s only focused on media relations. And they’re having a really hard time with it because of everything that they, that, you know, you know, maybe it is dissolving.

There are roadblocks put up. Like there’s all these issues with just focusing on media relations. And they keep saying, well, can we do social? Can we do content? Can we, can we, can we, can we, which is what they should be doing. But the client already has those pieces already has those pieces. Handled by other agencies.

So I think there’s something to be said when you’re starting a relationship to say, gosh, you know, we’re really great at media relations, but we believe in the paystone model. And so this is how we work. And then even you, you decide, is it a client that we want to take on and only do the media relations for, because they have these other partners or they’re doing it internally, or do we say, no, that’s not how we work.

And. Then you pass on the opportunity. Mm hmm.

Chip Griffin: So, when you say that you have to be a big agency, 50 employees plus, in order to be, you know, really an expert in all elements of PESO, I mean, that feels, I don’t know, my initial reaction is that that may be, I agree you can’t do it as a one or twosie, right?

I mean, there are, none of us have the level of skill or the time needed to stay on top of all of the trends and be an expert in everything PESO at a high level. But couldn’t you do it, you know, as long as you had, you know, one or two experts in each within your agency? I mean, couldn’t you attain, you know, real expertise in PESO at a much smaller level?

Gini Dietrich: Yeah, I mean, you, I, yes, sure. I think you would probably need. At least 10 employees to be able to do it and do it well, but you, you also are looking at a pretty high, payroll because those people are going to be experts, right? So there, I will tell you from my own experience, it was really challenging for us to offer all four media types.

As one agency until we reach 30 people, we just, I couldn’t do it. Just from a payroll, from an HR, all those pieces, we just couldn’t get there. Once we hit 30, that’s when we started to, to be able to do it. that’s not to say that you can’t. And you might be, that might be. There are people out there who are considerably smarter than I am and probably can figure it out.

But I just, from my own experience, it took us 30 people to get there.

Chip Griffin: Mm hmm. So how do you, you know, if you’re going to, acknowledged that you need to partner with people to be truly expert in delivering all elements of the PESO model to clients? How do you, how do you avoid falling into a trap where, you know, one partner becomes more dominant than the other, right?

Where, you know, where you’ve sort of brought the people to the table, perhaps, you’re working together, you know, is there a risk that the client sees one of you as potentially a threat? Is more important or do you try to keep the partners behind the scenes? How would you structure that if you were creating your agency?

How do you make sure that You know, you’re you’re driving the ship Initially, and you don’t lose control of it. Does that make sense? It does because I think that’s one of the fears a lot of folks have when they start partnering with other agencies

Gini Dietrich: The way we handle it and the way it typically works.

It just sort of works this way is that If I bring the business in then i’m sort of the lead If my paid media partner brings the business in, they’re the lead. and it just naturally builds. It naturally falls that way because they’re typically the ones who have the relationship with the client. And so the client is always very happy to have the other expertise, but typically the agency that killed the business.

The business who brought in the business, right? We’re the ones eating it, right? So they’re going to bring in the partners to help fulfill it, but they’re typically seen as the lead That’s just been in my own experience

Chip Griffin: Now, how often have you been the agency brought in? Because that’s, you know, one of the things that I talk to a lot of agencies about, that, you know, when they do subcontract work for other agencies, that often becomes a very difficult proposition, particularly financially, right?

Because, you know, if you’ve got a situation where one agency is the primary and then you’re subbing it out, You know, how does, how does everybody get their margin on the client? Doesn’t feel like they’re getting ripped off. So, you know, how do you, how do you look at it from that perspective, making sure that everybody’s getting fairly compensated as part of this broader PESO approach, or do you, or do you treat it as, you know, if you’re the primary and you’re partnering with someone else that you’re not as worried about making as much margin on the piece of work that you’re farming out, really, you’re making your money off of the work you’re doing and the strategic component and on all of that, how do you think about that?

I mean, we’ll just, we’ll just, we’ll record all of our podcasts now in five seconds. We’ll just say, we’ll, we’ll ask the question. You’ll say it depends. I’ll say it depends. And we’ll just wrap up. Yeah. We’re all, we’re all set. We’re all set. And for those of you watching on video, you’re, you’re enjoying seeing a, a cameo appearance by, is it, is it still hope the hamster or do we have a

Gini Dietrich: different name?

It’s still Hope.

Chip Griffin: Hope? Wow. Wow, I’m shocked. I’m shocked.

Gini Dietrich: Yeah, it’s still Hope, I guess. We’re trying to think how to answer this. It really does depend because, In some cases,

Chip Griffin: well, I mean, let me, let me just step back. Do you agree with the premise that it can be difficult to figure out, to figure out a financial arrangement that works for everybody?

Gini Dietrich: Absolutely. Yeah. and I, I think it depends. So we have one client that’s a government agency and they have a very specific way that you work, that you build everything. And they have said, this is, This is the maximum billing we have to bill by the hour, which is crazy. But this is the maximum we’ll pay you.

So in that case, it’s lower than my adding fee still. It’s lower than my hourly rate. But then I get the markup on others who’s higher than their normal hourly rate. So there’s like, it kind of balances, actually more than balances out in that case. And then we have some clients that are like, how much does it cost?

And we give them a scope of work and a cost and they just pay it. And so I think it depends. It just, it depends on the client. I think you have to be flexible. You have to have a good enough relationship with your partner agencies to be able to say, listen, this is what they’re offering. I can’t go higher, and I know that you normally, let’s say it’s 200 an hour and you normally pay bills 250.

Do you want the work and we can figure all this, this out, but you know you’re going to have a consistent paycheck every two weeks for the next three years? Or are you, you know, you’re not willing to take the, the cut on that because you’re not willing to take the cut. So it’s, I think you have to have a good enough relationship to be able to have those really honest, transparent conversations.

Chip Griffin: Now, so what do you say to agencies that today are, you know, they’re, they’re ad agencies, they’re media relations agencies. They’re, they’re folks who are hyper specialized, and, and they say to you, look, Jimmy, you know. PESO model’s great, yeah, the client should be thinking about it, but it’s not my job to do all bits of this, and so, you know, I still want to stay in my lane, it’s what I do well, clients like what I do, and so it’s not on me to be thinking in a PESO mindset.

Gini Dietrich: I think that’s fair. I mean, there, and I have had those conversations. I mean, just because I think that you should evolve your agency to do all of this doesn’t mean that’s necessarily the case for everybody. Do I think that you will eventually have to? Yeah.

Chip Griffin: And that’s that’s really my question, right? I mean, you know, do you think that I mean, obviously, everybody gets to choose what they want to do, right?

And none of us are in a position to tell everybody this is the right answer. It always does depend on so many different things. But, you know, it sounds like your core belief is that that all agencies will need to evolve to this in some way in the not too distant future.

Gini Dietrich: Yeah, I think so. And, you know, you and I both work with.

agency owners. And what I have found over the last two years is the agencies, and I know there are some exceptions to this rule, but the agencies that focus only on one thing are really having a hard time right now. They had a hard time last year. It has not changed. I don’t think it’s going to change for 2021.

So I think what, if, if you have an opportunity to sit back and say, what do I want my agency to look like by 2022? And how are we going to continue to make money and grow? These are some of the things that you can consider.

Chip Griffin: Right. Well, I think that makes sense. And we certainly have seen, I mean, certainly, you know, 2020 ad agencies in particular got, you know, just whacked with a two by four.

Others did as well. But, but in particular, I think that space has been especially harmed by the environment that we saw develop, during the pandemic period. you know, they’re obviously beginning to recover and, and I’m not saying that this is the death of advertising or anything like that. I’m not, I’m not one of those insane peoples who says, who says that, that, you know, this is the, this is the death of, you know, I, I still remember the death of the press release so many years ago.

and that whole, hubbub, shall we say. Yeah, that was a hubbub. The kerfuffle over the, the death of the press release. And, and yet we still have press releases today. Obviously they’re, they’re different than they were fifteen years ago. And they need to be different. And they’re distributed differently.

Blah, blah, blah. All that kind of stuff. But they’re still not dead. Radio, by the way, still not dead. Newspapers, still not dead. All these things that were supposed to be dead are not dead. So, So I would never be crazy enough to say something like that. But, you know, I think that the real virtue in the PESO model is it gives you an avenue to make sure that you’re continuously delivering results for clients, which helps you build a more stable relationship.

growing business over time. Yes, it requires some more knowledge, some more expertise to some degree. You know, you don’t have to become, you know, an absolute specialist. But if you look at most agencies, a sort of primary care physicians at base, they have to know enough about cardiology that they, you know, that they could have that conversation.

And even if you’re a cardiologist, you needed to know enough about, you know, I don’t know, pulmonary stuff or neurology so that you know where, where, where you have to go if something’s not, you’re not able to solve the problem yourself, right? So everybody needs to have some, some degree of knowledge of what’s adjacent to them and how that fits in for the client so that you can deliver the results.

So I think, you know, the PESO model. Has to be something that you’re comfortable with familiar with I think particularly for the folks We work with a lot which are tend to be sort of PR agencies and things like that. I think PR agencies Absolutely need to lean very heavily into the PESO model because if you’re a traditional media relations firm You need to have a hyper specialty to be successful today, you know, I think generalist media relations firms are, you know, generally speaking, having trouble, generalist, anyway, you get the idea, right?

So, but, but even with a hyper specialty, I think it’s still so valuable to have, you know, particularly the E and the O, the, the, the P, You know, we can debate that a little bit, right? I mean, I still think there’s a useful way to use it to amplify your earned media message. But certainly, if you’re not, if you’re not using social to promote your earned media coverage with the client, that you’re not collaborating with the client and their employees in order to be able to do that, that just, you’re missing the boat.

And if you’re not using OWN as a hub to help promote your, again, you’re missing the boat. So you absolutely need to be using the PESO model. If you’re coming at this, I think from a traditional PR agency perspective, you need to get much more heavily in. I think if you’re, you know, an SEO firm, a paid firm, a digital firm, you still, those are pieces of it that you need, but it’s not as urgent as it is for a traditional PR agency.

Oh, I agree. 100%. Yes. So, if you’re starting an agency today, these are things that you need to be thinking about. you know, hopefully we’ve, you know, our, our two PESOs have given you a little bit of an idea of how it can help. See, there’s a terrible segue to, to get out of this.

Gini Dietrich: I was, I was trying. I wasn’t going to say it.

Chip Griffin: Yeah, I don’t even know what two PESOs are worth, so, but, anyway. So, on that note, we will, we will wrap this up. Of course, if you want to learn more about the PESO model, where can you go to learn more about the PESO model? Gini,

Gini Dietrich: there

Chip Griffin: you go. A great location, a great resource. And of course, if you’re not part of the Spin Sucks community, you should absolutely be joining that too, because next week we’ll be getting back to.

questions, that we come across in, in our work. And a lot of those come out of the Spin Sucks community because people ask great questions there. So if you want to be there to see the questions and the answers before we even have a chance to talk about them and many that we don’t even cover on this show, that’s where you ought to be.

So, on that note, we will bring this episode to a close. I’m chip Griffin.

I’m Gini Dietrich.

And it depends.

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