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Based on my experience (16 years) working with agencies and being one for 6 years, I would suggest the folloing course of action:
1. Prepare carefully a rquest for proposal - state all your requirements and what do you want to receive from the agency as a end result.
2. Think of measurable criteria for achieving success - how would you decide that the agency did the job successfully. State these criteria in the request for proposal.
3. Look for a local assotiation or organization of the digital agencies in order to find - if possible - the legitimate ones.
4. Do a research online as well as ask for recommendations from your friends and partners, colleagues and clients.
5. Come up with 5 to 10 agencies.
6. Study their websites, especially in the sections with their teams, portfolio and case studies.
7. See who their customers are and call/mail to some of them to get feedback about the work of this agency.
8. Send the request for proposal to the top 5 agencies you likle most.
9. Compare their proposals, based on the objective and measurable criteria you have stated in the RFP.
10. Look not only for proof about their skills, but about their ability to communicate and to keep their word and deadlines.
11. Do meetings with the top 3 agencies chosen based on the proposal comparisson and spot your feelings after these meetings.
12. Base your decision on your gut feeling + measurable criteria and recommendations.
I would summarize the search in four steps:
1. Definition of what you need: Why you want to hire a Digital Marketing Agency? What do you expect from them?
2. Exploration: What are your options? "Social buying" is a great tool for determining them.
3. Evaluation: Define the parameters for measuring performance and who is giving you the best value for your money.
4. Purchase: Start a formal process with an RFx and invite refered agencies.
Remember always that this is a project: you have an objective and a limited time and budget for developing it. So, ensure you have your stakeholders engaged. They can help you to answer some of the questions I put here and, at the end of the day, this will be answering what does "right" and "best" mean in your case.
With Pleasure I Prefer Launch Digital Marketing based in (US)