Delivering profitable ad agency growth … a client’s perspective

June 1, 2009

As agency leaders we know that we must be effective at profitably growing our agencies if we are to continue to be successful and retain our positions… Clients are motivated to partner with agencies that add value to their business and can help them succeed. While they want the reassurance of an agency that is stable most are not concerned with our profitability. In fact most see us as too expensive and over paid for the perceived value we offer.

The current poor economy has exacerbated the situation and put our client colleagues under even more pressure than usual. Management expectations are even higher for them to cut costs, be more effective with less and produce sales. Yes sales, not just positive brand awareness. Add to this the fact that a poor decision on their part could cost them their bonus, a possible promotion or even worse their job. It should therefore be no surprise that most clients are more conservative than ever and want to operate as far as possible under the radar screen.

A recent AAAA CMO survey highlighted some interesting client perspectives that I feel you should be aware of when planning your current agency growth strategy.

  • 93% of CMO’s  have identified cost savings with over 37% of those planning to reduce marketing costs by over 21%
  • 49% said that within the next 6 months their Ad Budget would be lower
  • 68% of the CMO’s  who responded had already identified agency cost reductions
  • 48% intended to achieve their cost reductions through reduced agency compensation
  • 58% intended delaying or eliminating currently planned projects
  • 44% planned on altering their channel mix.

I am not sure about you, but my reaction was initially one of doom and gloom. That of course does not help as our growth targets remain the same notwithstanding the economic environment.

Here are my suggestions about how to succeed in the current economy.:

  • Add value versus battening down the hatches. You cannot save your way out of this situation. Whether its existing clients or new business opportunities, find where you can add value. Proactivity and agility are imperatives.
  • Solve business issues: Bring them ideas and work that will help them solve real business issues. Show that you know their business, you share their concerns, and that you have been listening to them.
  • Ground your ideas/work on actionable insights. Analysis alone is useless, you need to go the extra mile and find those key insights that can help support your suggested actions
  • Recommendations with proven ROI. Only present ideas and recommendations that have a clear and as proven as possible ROI. Demonstrate that you have researched the idea, and done your homework and that the risk is limited and success is most likely. Demonstrate how you will DRIVE SALES.
  • Consider all available channels. 44% are planning on altering their channel mix. Look at what they are doing now and consider alternative channels that may be cheaper and more effective. Social media is hot topic right now however, measurement and associated sales are difficult to track.
  • Innovation within boundaries. Yes, they are looking for innovation, however, risk tolerance is low. Make sure that you strike the right balance. For most this is no time for courageous risky ideas.
  • Build measurement and metrics into all you do. If you can measure it you can probably sell it.

The work ad agency clients ask for versus the work they buy

April 29, 2009

ad-agency-424Just like the client companies we work for, we too need to make sure that we are growing a profitable and sustainable agency. If we do not ,we will not be around long to service them. A key factor in being successful at this is developing and selling work that the client wants to and will buy.

How often have you heard a client say or read in an agency RFP the sentence…

“We are looking for fresh thinking and bold ideas. We want to shake the category up and stand out as a brand. We want a partner with unusual curiosity and a keen desire to challenge the status quo.”

For my part, I have seldom heard anything different. So, excited by the opportunity, the agency rushes back, tells everyone that this is a no holds barred assignment and that we expect only the best and most innovative work from them.

Usually three to six weeks later (depending on the generosity of the client) the most talented people in the agency descend on the client to unveil their epiphany. Three concepts are presented. The reco is the one that the agency loves and addresses the challenge square on. Concept two is good but not quite as good, and if you are a prudent agency, the third is the responsible one that will do the job but may not generate any fireworks or awards. The client picks the third and the team returns to the agency disillusioned. The CEO returns frustrated by the amount of money spent during the pitch prep searching for that Holy Grail. Sound familiar? I am sure it does and it should not be surprising.

Our clients need for managing risk in order to survive is far greater than that of an agency person.

It is the client that ultimately takes the hit for a failed risky idea and ultimately takes the hit from a career perspective. Yes, it may pay off but what if it does not? Surprised? You shouldn’t be. You have to consider the dynamics/culture in which your client operates.

I am sure that you have heard the statistic that the average tenure of a CMO today is 17 months. In essence that means that if they do not show positive results within 6-12 months of arrival they are doomed.

What you may not know is that in a recent CMO survey conducted by the AAAA’s ,only 21% of CMO’s claimed to have a good relationship with the CEO.

Is this an environment that promotes significant risk I ask you? In my opinion, not very often.

So the next time you are asked for “ground breaking work” I suggest:

  • Assess the client culture and environment for the apparent appetite for risk. Past behavior is often an indication.
  • Right now given the economic environment, everyone is keeping a low profile and avoiding being picked up on the radar screen. This is not likely to change anytime soon.
  • Brief the agency and deploy resources accordingly. You will only lose money chasing work that has little or no chance of seeing the light of day.
  • If you do propose innovative new ideas that require taking a risk, do everything you can to support those ideas with whatever real world proof of concept available to you.
  • Present the solid, get the job done concept first. Get them comfortable in the knowledge you have a good workable solution. Then take them to the higher risk solution supporting with proof of concept along the way.

We agency types often lament the fact that some of our greatest work lies dormant in a job folder somewhere because the client chose the lesser concept. Keep in mind that a significant amount of costly hours (money – your money) also reside in that folder, with no chance of ever being re-couped

So why not produce work that the client can buy and save both of you time and money along the way. 

Good News Bad News!….at any time 30% of clients are looking for a new Agency

January 8, 2009

imagesI first heard this statistic while attending a AAAA‘s New Business Workshop in Chicago this year. The room was full of mainly new business types, who were encouraged by the statistic, and confident that they could attract some of that 30% to their agency. While it was good news in this environment, as a seasoned agency CEO I could not help but also feel a little panicked.

That means on average 30% of my existing clients are currently open to other agency approaches!

I did not know if I wanted to stay and hear more or leave immediately and start focusing my attention on my existing clients.

Unfortunately, most agency leaders believe that new business is the silver bullet to success and the cure to all evils. If you focus on winning new business you will ultimately succeed. In reality, that could not be further from the truth. We all tell our clients that CRM is important, and that it is far easier to get additional business from your existing clients than new clients. Yet once we have a client on board, we too often quickly take them for granted and become order takers.

Proactivity against the account soon diminishes. The top minds in the agency disappear over time as they get assigned to new business pitches and settling in newly won clients. The relationship becomes stagnant and within a fairly short period of time the relationship becomes stale.

 It’s no wonder that the average agency-client relationship is 2 years.

Trying to reduce your churn in existing client business is just as important, if not more so than new business development. The agency can have a stellar new business year, only to find itself treading water, as the hard fought new revenue only goes to replace the business that has walked out the door.  When you add the cost of getting that business in to the equation (new business strain) the agencies bottom line probably took a hit. Even worse is that in most instances you are most likely funding your new business efforts off the back of your key client accounts. Lose one of them and you have your worst nightmare.

Proactively minimizing existing client churn is one of 5 key pillars upon which to grow a profitable agency. To do this successfully you need to:

  • Develop a key account plan for your top 3-5 clients every year.
  • Train your account service staff to be both farmers and hunters.
  • Ideally hold agency-client business reviews twice a year or yearly at minimum. Each time make sure you tell them something new about your capabilities.
  • Have a plan to deliver pro-active thinking against their business at regular intervals.
  • Allow the agency team the time and resources every year to make sure that they are keeping up to date with the industry and competitive environment.
  • Align your key success measures with those of the client. If possible, link at least part of your compensation to their compensation/success.
  • Make sure that your contribution value is recognized at as many levels and departments as possible.
  • Invest against areas that are perceived as valuable by the client versus your internal perspective.

If you can minimize churn you can then focus on organic growth. The next critical pillar on which to grow a profitable and successful agency.