Client Churn Causes 70% Of Ad Agencies To Miss Their Numbers!

August 24, 2009

miss their numbers final

If your agency has previously omitted preparing “Key Account Plans” as part of your overall agency growth strategy, these recent survey findings may convince you to do otherwise!  

In my recent national online survey (Ad Agency Business Growth Strategy Survey), I found that 57% of respondents admitted to having missed their financial numbers over the last three years due to an unexpected client loss. Another 12% claimed that while they had hit their goals, the client loss had significantly impacted their overall performance for the year.  

Based on in depth analysis of the survey information, I found conclusively that failure on the part of the agency to include “key client account plans” in their agency growth strategies, was a major contributing factor. Here are some additional findings and supporting details.

50% of total survey respondents indicated that they currently do not have “key Account Plans” in place for their top 5 agency clients. Interestingly, there is a very high correlation between these respondents and those agencies that indicated they had missed their numbers due to unexpected client churn. In fact, 87% of the respondents who said they did not have “Key Account Plans” for their top 5 clients, all had instances where they missed their financial numbers over the last 3 years!

Next, I took a deeper look at those respondents (62% of total sample) who answered yes to having clients within their agency that either run at a loss or alternatively break even at best. Just over 70% of this group also answered “no” to having key client plans in place.  

Finally, I took a look at the respondents (31% of total respondents) that answered affirmatively to having a nightmare client in the agency that their staff hates to work on. In this case, 84% of this group did not have key account plans in place for their top 5 clients.

These survey findings clearly indicate that, the omission of key client plans from an ad agency’s growth strategy can have a significant impact on its financial performance. Absence of these key client plans substantially increases the risk of the agency losing a key client, as well as increasing the incidence of poor performing clients within the agency client roster.

 If you really think about it, this should come as no surprise to any of us! In the absence of a plan how do we:

  • Plan and focus the resources needed to support our clients?
  • Consistently stay pro-active and deliver innovation?
  • Maintain client satisfaction levels, keep ahead in their category and deliver incremental value?
  • Plan and execute against organic growth targets and opportunities?
  • Integrate metrics, measurement and results into our work?
  • Optimize resource allocation and management. Making sure that we do not either under or over service the account?
  • Focus resources and effort in the areas that THE CLIENT deems of value versus what the agency values?

Bottom line! Client retention and churn management is without doubt one of, if not the most important pillar of any agency’s growth strategy. Unfortunately, most agencies do not allocate anywhere near as much focus and resources to it as they do new business. Many even overlook it altogether.

My 5 pillar agency growth strategy approach enables you to consistently deliver superior agency growth and profitability.

 

 

 

 

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Ad Agency Guide To Breaking In To New Categories!

June 26, 2009

Foot in the doorTips on how to maximize your chances for success.

Breaking into new categories can be a difficult and expensive task for many agencies. The current economic environment has made it even more difficult, as marketers look for partners who already have deep experience in their specific category. They do not have the time, money, or risk tolerance to take on a new agency lacking category experience, and show them the ropes. So how in the world do you get in and get new category experience if your agency cannot get a foot in the door in the first place?

Well, it’s not easy, however, here are a few tips that might help improve your chances:

  • Purchase an existing agency: The easiest way to break in to a category is to purchase an existing agency with both the experience and the clients to match. This gives you immediate credibility and critical mass.
  • Partner agency with category experience: While not ideal in the long term, if you need the capability immediately in order to address a current opportunity, then partnership may solve the problem.
  • Hire a team/individual with experience & relationships: Another approach is to identify and hire either a team or individual with both category experience AND a solid personal client relationship. (Category experience of one or two people is not sufficient on its own).  There must be a strong relationship that should at least give you a foot in the door, and some initial project opportunities.
  • Avoid attempting entry in a pitch environment: While nothing is impossible, my experience has taught me that formal shoot outs in a pitch environment is not a successful way to break in. Yes, on occasion a great idea or concept can pull you through, but know that the odds are ranked heavily against you.
  • Forget the category leader: The chances of ConAgra awarding you their flagship Healthy Choice brand, or BMW awarding you their account without any category experience is slim to none. Target smaller brands that are hungry to gain market share, more nimble and less risk averse. Another good idea is to target a smaller sub brand within a group of brands, and cut your teeth on it before moving up the ladder.
  • Consider analogous category experience: Take a look at the skill sets and techniques utilized by your agency on current client accounts. What other categories may require a similar skill set? Consider how to package your experience up in a way that will appeal to the new category prospect.
  • Proprietary tools, software, and widgets etc: If you have a truly proprietary tool or application that would add value to the new category prospect, you will probably have a good chance of getting them interested. Make sure you package the product up suitably to appeal to the new audience.
  • Research and homework: This approach requires you to invest a significant amount of your talent, time, and money doing your homework on the category. What you are hoping is that you are able to find actionable insights (not information) that the client may not currently be aware of.  Using these insights as the reason to secure a meeting, you then have the opportunity to demonstrate your value proposition and “Wow” them with your innovative ideas/solutions.

I hope you find these helpful…. So, the next time your creative director rushes up to you and says “We need to go after the personal watercraft category because I have deep experience and a great reel from my past agency!” take the time to consider the idea before reacting.

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