Perry Nalevka, CEO at Penguin Strategies, has almost 20 years of working in technology at various start-ups, with the last 10 years in sales and marketing. For the past 5 years, he has run Hubspot’s first Israeli Partner, Penguin Strategies, a niche agency for technology firms with its “packages” named for different species of penguins. Why penguins? “They’re just a cool bird,” Perry says.
Penguin Strategies’ website is very transparent on how much a client is buying of what and for what price. Using a system of “credits” enables Penguin to be far more flexible, transparent, and nimble in its response to market conditions. Penguin can adapt its strategy to changing customer goals as needed on a month-to-month basis. Posting the prices for the its services means that, if clients want to add something extra to the mix, they don’t have to haggle over what it will cost them . . . they already know. Posting prices also has the benefit that clients can see that they aren’t being charged any more or any less than the next client.
Initially focused on Israel’s technology firms, Penguin bridged to the international market when tech firms sought it out. Ten time zones between Israel and Silicon Valley proved a challenge, so Penguin opened a subsidiary in the U.S., which has greatly facilitated scaling.
Perry believes that focusing on a niche, “on something smaller, you’ll get more.” When Perry took on some manufacturing companies, the methodologies he had set up for the tech companies did not work, and his employees started to leave. Perry considered setting up a division to work with the manufacturers, but, in the end, decided to stay true to his vision. Divesting Penguin of the manufacturing companies led to some hard conversations and cut revenue 15 %, to the tune of $25,000 to $30,000 a month.
Perry says most agencies know marketing tactics, how to use the marketing automation platforms, and how to create beautiful designs. Yet, very few agencies have the creative and strategic thinking to help companies get “to the next level.” Creativity and strategy are what “really make the difference.”
ROB: Welcome to the Marketing Agency Leadership Podcast. I’m your host, Rob Kischuk, and I am joined today by Perry Nalevka. He’s the CEO at Penguin Strategies, based north of Tel Aviv, Israel. Welcome to the podcast, Perry.
PERRY: Thanks for having me on, Rob.
ROB: Fantastic to have you here. Why don’t you start off by telling us a little bit about Penguin Strategies and what makes Penguin great?
PERRY: We could talk about penguins all day, but I’ll talk a little bit about Penguin Strategies. [laughs] We started the agency just about 5 years ago. Having spent the better part of my 20-year career in technology companies, startups of different sorts, leading to the last 10 years of working in sales and marketing, I felt that there was this need for a better consultancy or a better agency that would cater just for this niche, for this market.
I started out thinking it would be a very small agency that would take care of the niche needs of these types of companies and quickly saw that there was a big appetite for these types of services, and we’ve grown quite quickly over the 5 short years that we’ve been around.
ROB: What do you love about penguins, while we’re talking about it?
PERRY: They’re just a cool bird. [laughs] Pun intended. They live in cold areas, and they’re just cool. It’s incredible – when we were thinking of the name of the company, we just wanted a cool animal to represent us. I didn’t realize the effect it would have. I get people sending me pictures of penguins from trips that they take all the time, and it seems to have been a good choice.
ROB: Sure, and it makes for fun things on your website. On it, I noticed your pricing plans are named for penguins.
PERRY: Correct. Yeah, exactly. We took our favorite penguin names and put them in our packages. [laughs]
ROB: One thing I think people would find interesting if they went to your website and looked at this is these pricing packages that you have that are very transparent on the, “how much am I buying, what am I going to spend?” But then it’s really interesting with this system of credits. Talk about what pricing with credits is. What does that mean, how did you arrive there, how is it good for everybody? That sort of thing.
PERRY: It tackles two things. First, one of the issues I had with agencies when I was on the other side was the lack of transparency. “We’ll do this, we’ll get you these results. Don’t ask us how, we’ll just go and do it.” Those are especially in different lead generation tactics or SEO tactics, things like that, but in general it was you pay a bunch of money and you get hours in return.
I wanted to create a platform or system that would be much more transparent. That was one thing. When we started, we tried to be very transparent with the scopes of work that we worked with our customers, beginning with more project-based, but then moved into the retainers.
But, then, we ran into a second problem which I didn’t realize when we started: marketing is an art science. It’s not an exact science. It’s an art-science, and it requires you to be very nimble and agile from a month to month basis.
If I would close a retainer with a customer and we’d say, “We’re going to do this amount of blogging, this amount of social media, some emails,” and off we go to the races because we think that’s going to get you to where you need to go. We’d quickly find, even as early as 2-3 months down the line, that we were going back to the customer and saying, “Yeah, this is working okay. It would be great if we could do more webinars.” We found ourselves trading with ourselves – “Let’s trade three blogs for a whitepaper.”
Our business model was slowing us down. We needed to find a way to allow our business model and our philosophy in marketing, which is an agile philosophy or experimental philosophy of how to do marketing – and that’s when the credit system was created. I’ve love to take credit for it, but actually we were working with a partner of ours and I saw other agencies that were using it, and I just used similar terminology but focused it in on the way I thought it would need to work for my customers.
ROB: I have seen this a couple of other times, although I’m not sure I’ve seen quite the transparency of how many credits you get for your dollar as I see on your own site. How has this model evolved since you first adopted it? What did you learn?
I think some people want to do this, they like the idea, but actually understanding how to activate such a plan, how to not be locked into it, is something that they worry about. So, what were some tweaks that have happened along the way? How has it evolved?
PERRY: Transparency is a core value for me and for my company. I think it’s a scary thing, and I understand it. I was having a conversation with a person a little while ago and they were telling me that the managers in the company are afraid to give too much praise to their workers because then they’ll raise their heads and ask for things.
I’m fundamentally against that. I think that being transparent is everything. You tell the good, the bad, and the ugly, and I think it’ll only be for the better – even if it means losing business sometimes because you’re getting into a relationship that wasn’t meant to be.
I think that the customers love it. The ones that don’t love it aren’t working with us, so I can’t tell you about them. But I can tell you the ones that we work with love the credit system, love the flexibility and the transparency it gives to them. There’s no nickel-and-diming, there’s no haggling. Once the process gets going, if they want to ask us to do something, they don’t have to come and haggle for price. They know if they want an extra blog next month, that’s what it’s going to cost them.
I think it’s also great that the pricing is right there for everybody to see, so my customers know that the next guy isn’t getting a better deal than they were. Everybody’s on the same plan, and it works great for everybody.
ROB: Interesting. I had considered before, when hearing about this sort of plan, the value of being able to decouple – you’re not haggling over an hourly rate and trying to haggle over it per person.
But I hadn’t really considered that flexibility and the ability to seamlessly mix services from month to month. You have so much work that fits in the bucket, and the client decides where the work goes in the bucket – although I imagine they have to give you a little bit of a heads-up when they want to change what they’re doing next month. Is there some kind of timeline when they get to let you know the lead time on a strategic change like that?
PERRY: Yeah, it’s month to month. We set up the work that we do with our customers as experiments. We don’t call them campaigns; we call them experiments. We may set up an experiment that will cost 150 credits.
Usually we have multiple experiments going on. Over a 3-month period, we create what’s the purpose of it, what’s the expected result, what’s the effort, and the cost. We’ll usually have multiple experiments in the thinking process, and we’ll always work with the customer to select the highest impact one to meet their business goals.
That allows us to make sure we’re budgeting it correctly. We may decide that we want to do this ambitious experiment over the next 3 months, but it means that we could blog less, or we won’t do SEO for a couple of months. But we’re always having those conversations with them, and the end result is that we feel that we’re always doing what’s most important to meet their goals, not what’s just written on a piece of paper that we wrote 6 months, a year, 2 years ago.
ROB: Very interesting. Thanks for digging in there. Now, if we rewind a little bit, what led you to start Penguin Strategies in the first place?
PERRY: I say that I saw this great opportunity and blah blah blah – which is true, that did happen – but in a lot of ways it happened by mistake.
Like I said, I was working in startups for 20 years, and 6 years ago before this started, if you would’ve asked me what I was doing for the next 20 years of my life, I’d tell you I’d be working on or creating a new startup. That would’ve been my answer – and in fact, that’s what I was doing at the time. I was working on a startup idea that I had at the time.
Now, while that startup was being bootstrapped, I was consulting for a living, because startups don’t make money. [laughs] They just spend money. So, I was doing this consulting work – social media, business development, some different marketing items, whatever the companies that I was working with needed in order to fund the rest of what I was trying to do.
What slowly started happening was, as I was doing a lot of social media, I started talking to some people about the fact that they needed more content for their website. So I said, “You know what? While I’m building my startup, I’ll create this small business on the side,”—a social media and content generation agency. I didn’t call it an agency at the time because I really didn’t know what an agency was, honestly. I was calling it a consultancy.
“I will cater to these technology companies because I have a very technical background. I can get some writers and we can do this service.” The word got out that we were doing this, and people kept coming, and, all of a sudden, the startup I was doing wasn’t working out so well and this was working out much better. So, then I added a couple partners to the business and we incorporated January of 2014, and the rest is history.
ROB: I’ve come from a startup background myself, so I’m certainly well aware that Israel, and in particular Tel Aviv, has a tremendously strong engineering culture and builds some really cool companies.
What I have less of a pulse on, and I think a lot of people might not have a pulse on, is overall – what is the agency landscape? Are you a little bit more, to put a funny spin on it, an odd bird in that environment? Or is it pretty common and you just had less exposure to it?
PERRY: Once we started going, we realized that there are other agencies in the landscape, even those that are focused on a similar niche. But we were focused on what, at the time, we did best, and that was creating social media and content generation for technology companies.
About 6 or maybe 8 months in, we decided to add a technology element to it and get it to marketing automation. That’s when we bumped into HubSpot, and that’s when I started really understanding what running an agency was like. I’ve been selling products all my life; services is just a different animal, different margins. For every customer you bring on, you’ve got to bring on more people. I realized it was time to get organized.
Partnering with HubSpot, the timing was good because they had some methodologies around that. They had a community of agencies that were really open to talk and share from their experience. So, I went into that and started learning more about how agencies should be run – there were a lot of ideas around that – and take it into our own way.
Plus, the partnership with HubSpot was incredibly timely for us because we were the first ones to partner with them in Israel. We were still primarily focused on the Israeli market at the time. The scaling started happening really quickly at that point. We started the company with two or three people and we finished that first year already with like five or six people, and then the following year, in 2015, we finished it with like 15 people. It was a very fast scaling up.
And then another interesting thing happened. Geography stopped mattering because we started getting a lot of leads from the U.S., Silicon Valley, especially from the West Coast, from companies that were looking for an agency that could really handle the tech marketing for them.
ROB: I was going to ask what helped you bridge that geography, and it sounds like part of what helped bridge that geography is that you understand technology. That probably goes deep into what Penguin is capable of. You are not trying to market something that you don’t understand. Is that part of what helped you break out geographically?
PERRY: Yes. At first it was opportunistically. We started working with companies that found us or knew about us or heard something, so it was very word-of-mouth. It was slow – one American customer, two, three, four. They would also need to be willing to work with us on the time zone constraints, because there is a big time zone constraint. There’s 10 time zones between us and the West Coast.
But once I saw that there’s this opportunity – I always think of Americans, who knows how to market better than Americans? Who would go and take a marketing agency from Israel, of all places, outside of the U.S.?
But I realized that there’s this opportunity because the agencies that we’re up against in the U.S. market are agency people. No offense, of course. I know that we have an agency audience here. Sorry about that. [laughs]
But really, when I dug in, I understood why these companies wanted to work with us is because they felt that they were working with one of their own. My three partners, they’re all ex-CMO, Director of Marketing people, and a lot of people that work here are the same pedigree. Save maybe one person here, we have no agency experience people, and in fact I don’t look for that when I hire.
I think that was fundamentally important. When companies worked with us, we got that a lot. “We worked with an agency.” I almost need to change the name, take “agency” out of the name, I think. But I think it really works, and when I talk to other agency owners that come from an industry and work in that industry, they have a very high level of success. Not to say you can’t be successful otherwise.
Eventually we had to make the investment because the time zones were getting a little bit out of hand. One of the partners relocated to the U.S. We started a subsidiary in the U.S., and now we have employees there and are able to scale even more on the U.S. side.
ROB: Sure. Congratulations on that part. I think it’s a really important lesson to take away to think about customers you can serve where you can speak their language, where you understand what they’re doing. Maybe you’re experimenting a little bit on a particular tactic or on a particular initiative, but you’re not just making it all up as you go along. You have that combination of flexibility but also experience.
What are a couple of lessons you’ve learned while building Penguin Strategies that you would do differently if you were starting over?
PERRY: I talk a lot about the niche. I know that a lot of companies are afraid to focus on a niche, that they’re going to miss out on other opportunities, maybe they won’t grow as fast. I compare that to lead generation or to content generation. We hear all this talk about blogging. You need to blog all the time, the right amount of times to blog every month – 8 times, 12 times, 4 times, 20 times – and to me, less is more.
In my opinion, the answer to that question and to your question – and we’ll get to the mistake in a second – is when you focus on something smaller, you’ll get more. I think when you try to be all things to all people, you may grow faster at some point, but you’ll see your churn will be faster. At the end of the day, you’ll be spinning wheels. That’s my opinion.
The mistake we made is not taking that advice. [laughs] A couple years ago we saw an opportunity – we were approached by a manufacturer who convinced us that they were a technology company. They convinced us because they had big budgets and they said, “Yeah, we want to work like a technology company. Even though we manufacture, it’s kind of technology.” You could argue almost anything is technology, right? We took it on.
To be honest, we were pretty good. They were really happy with what we did for them. We felt that we could be more successful; we didn’t see the results that we were used to seeing in other companies. But big manufacturer, they were happy. Things were moving really slow. They started singing our praises, and other manufacturers started coming to work with us.
We found ourselves about 12 months later with a number of – in fact, the manufacturing businesses that we were working with was about 15% of our revenue or something like that at the end of last year. But an interesting thing was happening. Two things were happening: my employee churn started increasing, and my profitability was going down.
I realized that the cause of that, when I dug into it deeper, when I took the blinders off – because these companies have big budgets; the numbers were blinding – that everything that I did with them, all the models that I set up, the credit system, things like that, didn’t work with them. The employees that I’d hired, they’d come to work with us because we were the B-to-B tech company. They wanted to work with technology companies, not with boring manufacturers.
I had to make a decision. Either I create a different company, different division, whatever you want to call it and make it work, or stay true to our strategy. I made the hardest decision that I had to make since the beginning of the company, and that was to part ways with 15% of our revenue, which was at the time somewhere in the neighborhood of $25,000 or $30,000 a month.
Obviously there was some employee turnover that I had to handle as well, and I had to go to these customers that had signed long-term contracts with me and talk to them and explain to them why we were doing – it was a mistake, and the longer you make a mistake, the harder it is to fix. It was a hard fix. But that definitely was a lesson learned: staying true to your core, staying true to your strategy and to your passion.
ROB: Right. Also, a great lesson, I think, in – sometimes we just have to learn the lessons that we already know. We should know better, but we still have to make those mistakes sometimes. Probably a little bit disorienting for those customers. Sometimes you’ll fire a customer for being a bad customer, but it sounds like these were good customers that you were firing for strategic reasons, essentially. They were probably just sitting there trying to figure out what they did wrong, and they didn’t do anything wrong.
PERRY: Right. [laughs]
ROB: You mentioned earlier, and I think this would be a little bit of a foreign language to someone who’s listening and doesn’t know – you mentioned partnering with HubSpot. I think from the outside looking in, most people would say, “What do you mean, ‘partnering with’? They’re a big company. You tell your customers to go buy HubSpot and they buy it, and that’s it, isn’t it?” What does it look like to partner with someone like a HubSpot? I think that would be kind of confusing to someone on the outside.
PERRY: I’ve worked with technology companies, and I think many companies – HubSpot’s strategy is they work with two types of sales, just like a lot of companies: direct sales and channel sales.
The channel they use are marketing agencies. They have a very robust program. In most companies that I’ve worked with – we actually have sold other marketing automation platforms, and usually it’s, “Hey, go sell it, we’ll give you a piece of the action, see ya later.” With HubSpot, they’ve built a much more robust platform or program where they’ve created training programs on every aspect of marketing, including running an agency.
When you join their program, they require you to buy their software for your company, which is not typical for a channel. You have to actually buy their software, and of course resell it. But, you’re part of this community of agencies, and all this training and webinars and content – which, by the way, we use to onboard our employees. Employees that come here, the first 30 days they’re taking HubSpot certifications and trainings.
Then they provide a lot of other benefits as you become a more important partner to them, meaning you sell more dollars for them, and they allow you to put content on their website. They give you special treatment and different support elements. It is the best channel program I have ever seen. In fact, we’ve gotten so spoiled, a lot of times we sit around at these partner events and complain about stuff, and we have to remind ourselves that other channel programs are nowhere near what this program has.
ROB: Right. It still could be better, and there’s lumps and warts, as with anything, but it’s pretty good, it sounds like.
PERRY: It is.
ROB: What is coming up, either for Penguin Strategies or more broadly in marketing in general, that you are excited about?
PERRY: I think it’s technology. I think there’s always an element of creativity and strategy that the human element will be needed for, but I think as marketing automation and technology evolve, we’re going to be applying more and more of it to marketing. I think it’s a no-brainer.
Probably the buzzword right now is AI or artificial intelligence and how it applies to marketing. As it’s applying to every other part of our lives, I think it’ll be the same – it’ll get applied here as well, having more automated functions.
Today, marketing automation is like typical technology. It only can do what you tell it to do. It can’t think too much. But we’re seeing more, especially with chatbots and different elements, some of the artificial intelligence is getting built in there so that a lot of these tasks and ongoing services that we could do for our potential customers is happening more automated. I think that’s a big part of what’s coming.
ROB: What do you think are the parts to strategically double down on with people, where automation isn’t going to be able to get through?
PERRY: I think the areas that are hardest are strategy and creative thinking. People always go to their comfort zone and do more of the same. It’s trying to figure out what you can do to get it to the next level.
A lot of agencies do really well in the first 6 to 12 months because they come in to a customer that’s doing nothing, and now they do something and the results are incredible. But then you spoil the customers. They’re used to getting whatever number of leads is impressive to them – because the number doesn’t matter. Let’s just say it’s 100 leads a month now from 10, and they’re so happy. They’ve scaled up.
How do you get them now to 200? And how do you get it without tripling their budget? You’ve got a decreasing return, so what can we do now that can get them to the next level? That, I think you can apply technologies, you can apply a lot of things, but it takes that creative thinking, that strategic thinking to make it happen.
I think that’s the missing piece. There’s thousands of agencies out there who all know how to do the tactics, they all know how to use the marketing automation platforms. They know how to create beautiful designs. But I think the ones that can do the creative thinking and the strategy, there’s few.
ROB: Got it. Good stuff, Perry. When people want to find you and want to find Penguin Strategies, how should they get in touch with you?
ROB: Get on the website, see their pricing plans named for penguins – complete with pictures to help remind you of what those penguins look like. Although the King Penguin has a crown painted on it. But that’s cool. [laughs]
Thanks so much for coming on the podcast, Perry. Thank you for sharing the journey of Penguin Strategies. And a special thanks to our prior guest, Clodagh Higgins, for this introduction. We couldn’t have so many great guests without great introductions.
Thanks so much for coming on, Perry.
PERRY: My pleasure.
ROB: Take care.
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