The 5 Stages of Specialization: How One Agency Survived the Transformation

Spencer Powell grew up in the direct mail industry.

His grandfather bought The Mail Room, a direct mail firm, in 1974. Then, his father purchased the company in 1996. Spencer spent summer breaks stuffing envelopes and watching movies.

This experience is also why he thought the family business wasn’t all that interesting, a feeling echoed by many third generation family members and supported by the decline of family-run businesses: 30% of businesses survive to the second generation, and only 3% of businesses generate profits in the third generation.

But after Spencer joined, the company made a transformation -- from a direct mail firm to a network of agencies providing inbound and digital marketing services to home builders, remodelers, and retirement communities.

This move has resulted in an increase in monthly lead generation by more than 1,400% and the Colorado Springs-based agency has attracted a client from Italy in the process. 

They made a choice. Rather than grabbing at potential engagements to keep the company afloat, they decided to focus.

Focus is what many agencies want, but the path to specialization and strong positioning is not always easy. And often, it takes more time than people are willing to invest to see success. 

TMR didn't just flip a switch. It was a slow evolution. Here’s the five stages TMR went through to become what Tim Williams' calls a “destination agency”:

Realize That Your Industry Is in Jeopardy

It can be difficult to own up to the fact that your company isn’t ready for the future, especially if that future is now. Many companies have found themselves spiraling into decline and irrelevance due to changing trends or advances in technology.

This is the reality that Wes Powell, Spencer’s father, faced in 2010. He attended a conference where the speaker basically said: Direct mail is going off a cliff. Change now.

Spending in the direct mail industry declined by 3% in 2008, the first drop seen in more than 60 years. In 2009, Borrell Associates predicted that the industry would shrink by 39% in five years. This decline in demand wasn’t just a result of the Great Recession. It was a total and permanent shift in how businesses were communicating.

Within two months, Wes rebranded the firm as TMR Direct.

"It was really more of a brand change at the time," Spencer said. "It was a signal to our customers that we could provide more and a signal to ourselves that said, 'Hey, we need to figure all this out.'"

Discover What Clients Really Want

Spencer joined the company in 2010 and began providing clients social media support. This was soon after the rebrand of the agency. They wanted to start adding more marketing and digital services to their offerings. 

“I didn’t feel like there was much value there,” Spencer said. “I was like ‘Sure, you can pay me for my time to post to Facebook and schedule some tweets.’ But I didn’t have a way to prove if it was working. It was really frustrating.”

This lack of value and return on investment are a concern of many clients even today. They know they should be investing in this or that tactic. But is the investment really worth it?

Adding a few “new media” services to the agency’s offerings wasn’t going to be enough to make the firm unique or attract larger contracts. Being committed to customer service or providing truly creative ideas wouldn’t gain the attention of the right clients.

They needed to prove the results and therefore, showcase the value of their agency. This was the future of digital. 

Define What Your Agency Is

Spencer had been following the inbound marketing movement. And soon after he joined, he finally was able to connect the marketing tactics to business results when TMR Direct became a HubSpot Partner.

Wes and Spencer started out by approaching their current set of clients with the opportunity to invest in integrated marketing services. 

“That was soundly rejected,” Wes said. “We had been in this [direct mail] marketplace for almost 40 years. Our clients thought, ‘Yeah, that’s pretty interesting, but you guys are a direct mail company.’”

This wasn’t the fresh start they were looking for.

They had to consider whom they could sell to. And while they knew inbound marketing services could be a selling point on its own, they also realized that eventually the market would catch on. One day they would be competing with thousands of agencies selling the same types of services to the same types of client. This would put them in the same position they were in now.

They took a lesson from the direct mail industry in audience segmentation and decided to define a specific segment that could become their ideal customer.

Wes then brought in his side of the family business. His grandfather, father, and brothers were all builders. He was a full-time builder for the first 14 years of his career. He understood the industry, knew their pain points, understand what metrics mattered, and what would create the biggest impact on their business.

The agency would focus on working with those in the builder and remodeler market.

Many agencies find that choosing a vertical approach not only changes the way they market their agency but also their business model. They can reduce competition and charge a premium for services. People will pay for expertise. 

One lesson from this to keep in mind is to choose an industry your agency can be passionate about. You need to be curious about how the industry works; otherwise, you won’t have the “heart” that clients want to see in a potential partner.

Commit to Specialization

It can be scary to start out delivering a new set of services to only a subset of potential clients. That’s why at first, TMR Direct’s website was a mash-up of best practices for the direct mail industry and advice for home builders and remodelers. It was a bit of a mess for people who were just being introduced to the brand. 

Wes and Spencer were cautiously approaching the market until they had built up a library of case studies. This is important for a specialized agency as it will be your point of differentiation when you enter a competitive pitch. It is the thing that will set you apart from full-service, generalist firms.

For an agency to see results from positioning, commitment is key. You need to be driven by one of three approaches: WHOM you are servicing, WHAT you provide, or HOW you provide it. One of these has to lead your strategy, and the agency has to show this commitment through its marketing and value propositions.

“It felt like we were doing it, but we weren’t 100% committed,” Spencer said.

At the beginning of 2013, the company decided to split into four separate brands: TMR Direct would continue to focus on bridging the divide between direct mail and digital. They also launched Builder Funnel, The Retirement Funnel, and Inbound Educators, which provides consulting and coaching for marketers interested in inbound marketing.

One thing that was interesting in the agency’s approach is how they structured this. Builder Funnel and The Retirement Funnel both live under the TMR domain. While many agencies simply list their vertical specialties under a drop-down menu, TMR has approached each like a separate agency with their own blogs, contact forms, and guides. This helped the agency to increase its lead generation -- especially in terms of quality -- in each category, and it provides potential clients with a clear understanding of what the agency does and whom it provides services to.

“If you list your all your verticals, I don’t know that that’s much better than not listing them and saying, ‘We do everything,’” Wes said.

And this makes sense from a customer standpoint. Clients don’t care that you have expertise in the banking industry and the healthcare industry and their specific industry. They care about their challenges, their problems. They want to know that your agency is totally focused on their marketing and business needs.

This separation of agency brands creates a clear message, for both clients and the agency. And it helps from a promotional standpoint, as well. By forming a strong positioning, the agency is able to position itself as an expert on specific topics when pitching industry reporters, writing a byline article, or applying to be a speaker at a conference. It has even led agency executives to write books on their specific subject or approach to marketing -- a powerful new business tool.

Become a Destination Agency

With this approach to vertical specialization, the agency was able to answer a few key questions:

• Who is our target market?
• What services help our “best” clients?
• How does our positioning help us attract clients outside of our area?
• Does this vertical specialization reduce our competition?
• How does positioning reduce our cost to acquire new business?
• Does this specialization increase client trust in our expertise?

“You narrow your focus, but you broaden your reach,” Spencer said.

This is because clients want to tap into the knowledge an agency acquires by working with multiple clients in a specific vertical. They can rely on the agency for insider information, rather than being the category expert in the relationship. 

For TMR, many clients ask for advice on what other builders and remodelers are doing not only to improve their marketing results but also their business.

Spencer has helped clients automate standard procedures, such as the warranty process, by building landing pages and workflows that keep the homeowner and manager updated on the status. 

“I see us going towards, ‘How can we help them [clients] with as many business processes as possible in addition to their marketing?’” Spencer said. “Because then we’re going to become hugely sticky to them if we help them automate all of these things that are costing them extra time or money.”

By becoming ingrained in how clients drive sales through marketing and how they operate and optimize their business processes, an agency can become a partner and an invaluable asset to the brand. And that's how you become a truly differentiated agency.