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Difficulties of running a digital agency in a highly competitive market [PODCAST]

Michał Słupski in

Blog/Difficulties of running a digital agency in a highly competitive market [PODCAST]

Listen as João Freitas from MezzoLab, a full-service digital agency based in Portugal, tells me about the difficulties of running a digital agency based in Europe. 

Listen here:

Here’s a short list of the main issues we tackled during our discussion: 

  1. [00:40] What is Mezzolab and how has it changed since João founded it 4 years ago?
  2. [01:20] Specialisation – the moment it becomes clear to start specialising only on specific types of services and target customers.
  3. [03:50] Cristiano Ronaldo and L’Oreal – should it be your goal to acquire big-name clients like that? Are they worth it? The huge marketing pay-off from big-name clients, and why you might not want to promote big-name clients openly.
  4. [06:48] Beginnings – should you dominate your local market first, or go global from the start?
  5. [08:50] Selling – how to reach your first big client, break through the wall, one cold email to get Duke University as first client.
  6. [10:35] At the beginning companies usually run on recommendations, should that percentage get lower, or are recommendations the only constant fuel for business? Low budgets and growing within your clients.
  7. [13:00] RightHello is a turbo on sales. Define your strategy, services and products and reach customers quickly.

Full audio transcript:

Michal: Hi there, I’m Michal from RightHello, and I’m here with Joao Freitas – CEO and Creative Director of Mezzolab, a full-service digital agency based in Portugal, but they operate around the world. Hi Joao!

João: Hi Michael!

Michal: Good to have you here, thanks for being here, especially since this is our first podcast ever so it’s really brave of you to come here!

I wanna talk about the difficulties of running a digital marketing agency in a highly competitive market.

First of all, could you tell us a bit about how you view your business – how it started, and why?

João: We’ve changed quite a bit since we’d started, we started 4 years ago. We were more of a studio, and we operated locally. We have 3 or 4 different areas – one is video and animation, the other is digital products, and the other two are branding and design, and also strategy.

What we’ve done in the past year and a half is to shift towards being more focused on building digital products for startups and creating explainer videos for startups as well.

Not necessarily startups – but companies that act like startups.

That’s a quick overview of what we do and who we are.

Michal: Pretty interesting, because I’m hearing that companies are specialising more and more. Because that’s a way to get more clients – do less things and do them well.

From what you do I noticed that you have a certain style of explainer videos which is really awesome and I love it! Since you said that you also focus on digital products, what was the moment that it became clear to you that you have to focus, that you have to specialise?

João: We’re kind of a different company, or a not common company, because we do 2 completely different things. We build websites, digital products and platforms, and on the other hand we do something completely different, with different skillsets and people, which is explainer videos.

The reason why we think that this strange mix works is because we’re focusing our offering not on what we can do, but what our target needs.

Our targets are mostly startups or tech companies. What we see is that the traditional model of hiring a big ad agency is broken. Because ad agencies are usually too slow, too costly for a growing startup to hire.

What we looked at is what types of digital products (what types of services, actually) do growing startups need. The two things we feel are the most common, are building websites for selling their products or hiring outside teams to build their products.

The other part is one that a lot of startups struggle with – which is selling their products. Explainer videos go in that direction.

Also, the strategy side and the design side help the sales and marketing side.

Basically, instead of building our services around what makes sense individually, as a company, we’ve looked at what our target needs and built a complementary offer that helps our clients.

Michał: Talking about your clients, I have one question. I noticed that you’ve worked with Cristiano Ronaldo and with L’oreal – one is a big brand, another a footballer but also, in general, a huge brand.

One thing is – did you really make it your goal to acquire clients like that? And the second part of this question is, do you think that big-name clients like that are worth the risk, worth the sacrifice?

Because it must be a huge amount of work to acquire them and serve them. And to provide the best quality service. But then the pay-off must be huge in terms of marketing?

João: It’s actually a very good question! I actually have a dilemma about it now. We did set out to get big brand names as clients, like Ronaldo and L’Oreal and so on.

We did that so we could be a trustable vendor. When we’re talking to a potential client, if we name-drop Ronaldo or L’Oreal, it usually helps.

The thing we’re noticing now, or I’m thinking now, is – maybe we should remove those names from our portfolio? Because they’re not in tune with the types of customers that we want to get.

We want to get clients like startups and tech companies, Ronaldo and L’Oreal are great brands known all over the world, but they don’t fit the type of clients that we are looking for.

As big as a brand like Ronaldo is, it’s starting to seem counter-productive to have a name like that on our portfolio.

Maybe having a name of a growing startup that’s kinda well known in the startup world would mean a lot more than having Ronaldo as a client now.

Obviously, in the beginning it’s very important to have those types of clients – to show that you know what you’re doing and that you can be trusted.

But now we’re at the point where it’s starting to seem counter-productive, as crazy as that might sound.

Michal: Yeah I think I know where you’re coming from, kind of, because small startups wanna see that you can do what they need…

João: Exactly!

Michal:…they wanna see that you’ve worked for similar companies, but I think that you can use those huge clients. They are kind of like your secret weapon.

You don’t have to promote them openly in your landing page, but in a meeting with a client, when he has doubts, you can say – well, we did it for Cristiano Ronaldo and it worked!

João: and he liked our videos!

Michal: Your clients range from startups to those high-profile clients like we mentioned, but what makes me curious is – were you a global business from the start, or did you first dominate the Portugeese market and then branch out?

João: It’s a strange mix. We did get some international clients but very few in the first couple of years. We actually weren’t able to grow locally, because (especially in Portugal), we’re from a city which is the 3rd biggest city. It’s hard to get the big Portugeese clients.

And the structure we have, which is not traditional, not agency-like, it doesn’t allow us to get big clients in Portugal.

For example, we don’t do pitches for big clients. We don’t invest money in creating pitches because we’re against that.

That automatically leaves us out from the competition for big brands here in portugal.

What we saw is that for the type of work that we want to do and the types of budgets we need to get to be able to do good work, that’s basically almost impossible here in Portugal.

So we started to look elsewhere and obviously the US is a good place to start if you want to work with companies with big budgets.

I guess that the hardest thing to do is to prove that you can do what American companies do, without feeling like you’re working with a remote company.

So that’s what we try to excel at, and now we have a good portfolio of US clients, we can show testimonials and prove that we’re easy to work with, even though we’re in another time-zone and never meet face-to-face.

A big chunk of our work in selling is to show that although we’re far away, we’re kind of in your city.

Michal: I like that we finished on selling, because I wanna ask how did you get those clients?

How did you reach them? It might be hard to break that wall, right?

João: It’s funny because one of our first clients was a huge client. It was Duke University – this was in the first month or second month, 4 years ago.

We got that client because I’m a fan of behavioural economist Dan Ariely. He teaches at Duke University, he has a lot of books, podcasts, he’s a very busy guy!

I sent him an email saying “you should build an app”. It was those types of emails that you send and know that you’re not going to get an answer.

But I did get an answer and we closed the deal very quickly. Obviously this was kind of a lucky thing, because that is very hard to do – to sell with a cold email. If you send like 10 per week, you’re going to get 3 clients per year.

But one of the ways we’ve been growing steadily in the US is with RightHello, because it allows us to do it systematically and optimise the campaigns we’re building, so a big part of growing in the States is because of RightHello and the campaigns we do with RightHello.

I’d say that this year, about 30% of our revenue comes from clients we got from RightHello and that’s all growth.

A big part of our growth has been due to using RightHello actually!

Michal: In the beginning companies run on recommendations. You do a great job and don’t have a lot of reach, so you just depend on the people that spread the word and tell their friends.

But then the percentage should get lower, on the other hand – when you do a great job for every client then every client should refer you, right?

How does it work in your mind?

João: What we’ve been seeing is, in terms of growth, in Portugal you have to always be acquiring new clients, because the budget doesn’t get bigger if you do a good job and they might referr you to other clients they may know, but it’s very hard to grow that way.

In the States, what we’ve been seeing is that if we get a client and do a good job, we can grow within that client and grow with that client. I’d say that the cost or difficulty of acquisition when talking about US clients is higher, but the upside, and how much you can grow with just servicing that one client is much bigger.

I’d say that, in the beginning, yeah, you’re right, we probably got a higher percentage of business coming in from referrals. Now the amount of recurring revenue that comes from clients we already have is getting bigger than the revenue coming from referrals. This is something we weren’t expecting!

It’s better to have 3 clients in the US and do good work for them, because they will give you more work, than to have 10 clients in Portugal because it exhausts clients in terms of money they can give you. They basically don’t have more projects.

That’s due to the economics behind companies in the United States and companies in Portugal. The budgets aren’t really comparable.

Michal: It’s absolutely the same here in Poland, you can’t even… it’s a different world, basically.

Okay, I think that’s how I’d like to wrap it up.

Is there any message you have to our potential listeners and the people you’re gonna share this too?

João: You mean for potential RightHello clients?

Michal: Probably, hopefully!

João: Im guessing most of the people tuning in to this are either RightHello clients or people thinking about becoming RightHello clients.

What I’d say is that RightHello allowed us to grow in ways that it’s impossible to grow manually. It’s like a turbo on sales. Comparing RightHello to other ways of increasing sales, cold-calling and doing more calls, or improving SEO on your website, which takes a lot of time and a lot of months before you can see any results.

With RightHello, what I think is very good, is that it’s like a turbo, and you can test the way you’re selling very quickly. Because you contact a lot of people at once, and you can see what’s working and what’s not working quicker.

Which is good for defining your strategy, what your service and product should look like, so I’d say that at least you should give it a try.

Michal: Cool, that sounds nice! I love talking to, we’ve done a case study before, and now this has been great. Thank you so much for being here with me! I don’t know what to say now because this is my first time but – thank you!

João: Okay, thank you!

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