The hidden cost of hiring a wrong digital marketing agency

Quite often, for a company, one of the most expensive business decisions isn’t hiring a premium agency that will take care of its digital presence, but hiring the wrong agency that talks a lot and delivers nothing. A bad experience can lead to losses, from lakhs to crores. This is a serious concern.

● According to a 2024 report, businesses partnering with the wrong service provider cost the global economy more than $300 billion. Source

● Working with low-cost providers, businesses are 3x more likely to see negative ROI in the first year, and 65% end up spending more to fix the problems than they would have if they had hired a good agency instead. Source

● 30–50% of ad budgets are wasted because of poor targeting, lack of tracking or ineffective content. Source

● In the first quarter of 2024, businesses wasted more than $100 million on digital ads, which amounts to about 42% of the total audited spend. Source

The outcome of hiring the wrong digital agency results in misjudged budget, poor ROI, low-quality leads and bad brand reputation. If you think that’s all, the article has just begun.
Let’s understand the hidden cost of choosing a digital agency that’s all talk and no action with examples and a brief coverage of the overall situation.

Understanding a typical loss in numbers

Suppose, a small business that makes around ₹5 lakhs/month hired a digital agency for ₹25,000 a month retainer. The agency, because it underperformed hugely, was fired after 4 months.

Now, it looks like the business only wasted ₹1 lakh on the agency fees.

But, add 20% revenue drop the business experienced over four months working with the agency

₹5 lakhs × 20% × 4 months = ₹4 lakhs

Not just that. Now, add an extra ₹1.25 lakhs that the business spent on choosing a new agency and fixing the damage.

So, total hidden cost = ₹1L + ₹4L + ₹1.25L = ₹6.25 lakhs

So, what looked like a big ₹1 lakh spend turned into a 6.25x bigger loss. That’s a whopping 625% penalty for choosing the wrong partner.

Understanding losses in words

● You keep on spending on campaigns that don’t bring any substantial returns, while important leads go to your old competitors.

● If the agency positioned you poorly in messaging and execution, it can damage your brand image, and months are lost before you finally understand that the strategy isn’t working.

● Once the partnership ends, don’t think the losses are over. Businesses need to shell out more in extra expenses to fix mistakes such as hiring a new agency (as mentioned in the example above) or engaging Internal teams with more tools and resources.

● While you redo campaigns and try to make things better, competitors explore advanced strategies. You lag behind.

● Wrongly executed campaigns also confuse and disappoint customers and it may be hard to win them back in the future.

More hidden costs

● The agency owns your ad accounts, creatives, analytics and other insights
● Legal and contract exit fees are extra
● Every month an action is delayed is another month added to the losses.

Behaviours before loss (Red flags)

● When a delay should not take more than 24-hours, it is taking 3-5 days
● Work requiring 2-3 rounds of revision instead of approval on first draft
● Meeting new account managers of the agency every 2-3 months
● The agency is taking more time explaining failures than delivering results
● They are presenting vanity metrics instead of your known actual KPIs

There could be several other instances you can mark as red flags. The best way to get rid of an agency that overpromises and underdeliver is to take timely steps that we will discuss in our next article: How to regain control after a failed partnership with a digital marketing agency.

FAQs

1. How do I know if I’ve hired the wrong digital marketing agency?
Frequent delays, poor communication, lack of results, tall claims and overuse of vanity metrics are red flags.

2. What is the biggest hidden cost of hiring a bad agency?
Loss of revenue that exceeds the actual fees paid.

3. Should I avoid low-cost agencies?
Not all agencies offering affordable digital marketing services are going to offend you, but it always helps to double check their claims.

4. I worked with the wrong agency, now how to recover from the losses?
To stop incurring further losses, we recommend you act immediately. If you think we may help, don’t hesitate to ask for a free, no obligation quote!