The Ad-Agency Magicians of Madison Ave Have Become Obsolete!

July 21, 2009

madison ave 2

Adweek recently published an article titled “The Changing Role of Rainmakers”. In the article they quote Michael Zuna, MD of Saatchi & Saatchi NY as saying “The Mad Men rainmaker days – – that doesn’t happen anymore. It’s a tough job.”

Why, because client reviews in recent years have become more complicated, given the expanded client needs, increased presence of search consultants, holding company led contests and participation of procurement executives.

The new business role has traditionally been an onerous one that was not suited for the feint at heart. Only the most confident and brave ventured to take on the role knowing that they would live or die by the question, “So what have you done for me today?”

In fact only a week or so ago I received an email in response to one of my posts from a new business professional at a leading interactive agency. In the email he said and I quote, “I would like to believe that working on new business in an agency no longer carries the stigma of, your days at the agency are numbered.”

I believe that his words may in fact be prophetic. Today, a knowledgeable and accomplished new business professional today is worth their weight in gold. (And that’s significant, especially at the current price per ounce) In addition, they are few in number and relatively hard to find. The Adweek article describes situations where large agency groups have been searching for the right person for twelve months or more.

What makes these individuals so special and so hard to find? These are my thoughts on what those reasons might be.

The successful new business professional of today has to be skilled at:

  • Leveraging all channels and new media to target the right prospects and start an ongoing dialogue that could ultimately convert to a new client. Everything from social media to SEO/M to network relationships.
  • Building relationships with all levels within the client company. Given the complex client marketing structures, seldom is there one key decision maker any more.
  • Demonstrating broad business knowledge and especially a keen understanding of the target client’s category and business. The slick presentation approach devoid of any real insights no longer works.
  • Listening, reading people and presentingThe ability to ask the right questions and then listen to answers is paramount. So much information is provided by most clients in the early stages however, agency people are usually too busy looking for the next opportunity to talk, versus listening to the answers.
  • Utilizing sales management software and sharing information. It’s no longer about an individual’s personal Rolodex. It’s about efficient targeting and tracking of communications and, involving the right talent from the broader agency team, to help provide relevant fresh thinking.

In summary, the new business professional of today is in fact a hybrid. Someone who is able to combine a selection of skills that you would expect to find in other roles including those of the CEO, business analyst, sales professional, marketing strategist and media/technology expert. This allows them to talk intelligently about the client’s business, across all levels of the organization, and establish a positive perception of agency value.

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The Advertising Agency CEO’s growth strategy Checklist

April 19, 2009

growthChartRobust sustained growth does not happen by accident or maybe fortuitously.

Ad agency growth occurs when you combine a clear vision/mission with a well thought through growth strategy plan. It’s takes focus, preparation, discipline and excellent execution.

In order to succeed agency CEOs need to build their growth strategy on five pillars and execute against all of them. A failure in one can potentially negate the cumulative successes in the other four.

Build your growth strategy on these five pillars and I guarantee you success!

  • Eliminate or reduce churn within your existing customers: Every day treat them like you do new client opportunities. Make them feel important. Be proactive and bring them new ideas versus taking orders. Make their success be your success.
  • Actively pursue organic growth opportunities with existing clients: Develop a key account plan against your top 3-5 clients. Identify the opportunities, assign people to them, agree on an action plan and constantly review your progress.
  • Pursue the right new business prospects for your agency: Spend time up front identifying what categories and what specific clients you want to go after. Do not pitch everything that comes along and make sure that you have a good chance of winning those that you do go after.
  • Optimize your resource management. Every dollar counts to both your agency and the client. Make sure you are getting the most bang for the buck for both sides. Don’t over or under service. Invest in the clients business where it counts and where they perceive the value. Every point gained drops to the bottom line.
  • Expand your capabilities offering where and when it makes sense: Strategically add new capabilities as needed. This does not have to be internally from the ground up but can also be through strategic partnerships. This allows you to sell more to existing clients and attract new clients that may not have considered you up to that point.

‘New Business Strain’… What is it and what’s its impact?

March 10, 2009

business1While all of us like being busy chasing new business opportunities, one thing that we most frequently fail to take into consideration is ‘new business strain’.

New business strain can have such a powerful impact, if not managed correctly, it can decimate what might have been a fairly profitable year. It can also have the effect of making the difference between making your numbers and breaking them in the closing months of the year.

Lets start with a simple description of what ‘new business strain’ actually is.

It’s the total cost (both external or internal) applied against new business development activities in the current year.

Most often these are very real and substantial up front costs incurred ahead of your agency benefiting from the subsequent revenue that will come as a result of the wins you have. It also takes into account the sunk costs for those pitches/initiatives that you did not win and therefore have to just eat the costs. For example, if your win rate is 40%. That would mean that you were unsuccessful in 6/10 pitches but still have to cover the costs incurred chasing them. Believe me when I tell you that this can quickly amount to a big number. Having defined what it is, let’s take a look at its impact.

It all starts with budgeting. Agency leaders are quick to insert new business growth numbers while doing their annual planning and forecasting. We are also quick to assume that this new revenue will produce a similar profit margin to that of our existing business….which in most cases is far from the truth. We might also include an expense budget for out of pocket costs like freelance etc to cover new business pitch activity. That is where it normally ends.

Not too long ago I was asked by the CFO to submit my new business budget for board presentation. I did as requested making sure that it included the estimated budget for staff time costs associated with the new business activity. The budget came to just over $2,000,000 for what I consider very modest activity at a very conservative cost per pitch. Unbeknown to me, the CFO submitted his consolidated budget with these costs excluded.

The result:

  • Inability to allocate resources to support our new business activity.
  • having to assign the team we had available to pitch versus the team to win the business. Subsequently leading to a low win rate and ultimately a disillusioned agency.
  • Finger pointing at new business for the low win rate.
  • Unbudgeted freelance costs.
  • Negative impact on service levels and work for existing clients.
  • Overworked staff that lacked creativity and the enthusiasm needed to succeed.
  • Significant attrition of budgeted profit margins
  •  Ultimately an agency in panic!!!!

All of the chaos listed above due primarily to the agency’s failure to budget for the effect of new business strain.


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.


Existing clients, the cornerstone of growing a profitable advertising agency

December 18, 2008

MoneyTree2There is a way to deliver significant new revenue growth at a fraction of the cost of going after new client revenue.

When you enthusiastically sit down to develop your agency growth plan for the year, do you spend as much time talking about existing clients as you do new business development? Probably not as often as you should!

The analysts who cover the public agency holding companies know just how important existing clients are to growth of a successful and profitable agency. Not only do they look at recurring revenue but also at what level of organic growth did the agency deliver from those existing clients. And should they not adequately deliver, they penalize the holding company accordingly.

It is impossible to grow and be profitable without a stable client base that is also delivering increased revenue on an annual basis. Without it you just do not have the intrinsics to support a robust new business strategy. Yes in a few words, existing clients help you fund new business strain. Without it you need generous investors that are not concerned about returns.

Having said this, one of the major issues most agency principals face today is the fact that many of the key client service executives are accomplished farmers and poor hunters.

Agencies do a great job servicing the clients but are less skilled at identifying and growing new opportunities.

The result can be summed up in a client comment like this:

“Most agencies…. do not listen, do not seem to care about our business, lack creativity, get stale quickly and in general are not moving as fast as consumers and technology”. (Large beverage client)

More so than ever before our clients are looking to us to not only help them grow and be successful, but in many instances just survive the current economic firestorm. They are looking for new ideas and new approaches but they want to know that the accompanying risk is small and that you have done your homework. In my experience, what you do not plan against and measure does not get done. Every year we plug in a number for “Organic New Business Growth” and just hope that it happens.

You may have already found out the hard way but that’s just not going to cut it. If you are serious about delivering profitable organic revenue growth then I recommend that you:

Create an organic new business strategy for all key clients from which you have identified possible growth. This should include elements like;

  • Organogram of the company, including all divisions, key leaders with responsibilities and products etc.
  • Marketing/Advertising budgets, target markets, channels etc
  • Current agency relationships, key contacts both agency/client plus any legacy relationships etc.
  • Company performance status, competitive environment, key issues etc
  • Referral strategy using existing client’s contacts.
  • Assignment of agency responsibilities’ by person, action and time.
  • Monthly client team meetings to review progress.

An organic new business growth strategy will deliver significant new revenue growth, at a fraction of the cost of going after new client revenue.