Ad Agency New Business Beyond Web 2.0

September 17, 2009

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Is the role of the ad agency becoming redundant as a result of today’s online customers being both producers, and consumers of their own content? What happens if these consumer experiences and content become more interesting than the advertising and marketing being produced by ad agencies? Will there continue to be an agency business at all, let alone new business?

As consumers embrace more Web 2.0 experiences, they gain more and more brand control. Even as a write this post, 25% of search results for the World’s Top 20 brands are links to user generated content. Consumers are doing things that marketers don’t expect and don’t necessarily want them to do. Their perspectives are trusted by fellow consumers far more than any company advertising or marketing messages, and those perspectives are normally brutally honest and very quickly disseminated. The reality is that brands cannot outspend or out-shout this consumer generated content. They have to find a way to try and be a part of it and proactively manage the conversations as best as possible.

That being the case, how do agencies generate new business opportunities and continue to provide a valuable and relevant service to marketers as Web 2.0 quickly accelerates into Web 3.0? Here are a few thought starters:

  • A key challenge for marketers (and opportunity for agencies) remains the need to identify the key insights on which to build the brand upon and then decide where they want to take the conversation from there.
  • According to respected social media blogger, Jason Falls (www.socialmediaexplorer.com), there are conversations happening everywhere and most brands don’t have the right people to manage them. Who better to provide the right people than the agency?
  • Listen! Your agency should have a formal process and tools to support listening to what consumers are saying about the brand/product/service, and then utilize this information to generate ideas that help get you a foot in the door.
  • Two recent studies conducted by Altimeter Group /Wetpaint and Razorfish indicated that the stronger the brand’s social media presence, the better the brand performed – whether measured in conversations or in financial performance. A great segue into new business discussions with both existing and prospective clients.

 

 

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Ad Agency New Business Conversion Rates…The Real Numbers

August 19, 2009

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I am certain that we have all been involved in discussions about agency new business conversion rates or asked by management to justify our own. The answer to the question invariable triggers more questions, like: Is this a good conversion ratio and are we competitive? How did you calculate it? Do all disciplines experience the same rates? … I thought it might be time to try and put this one to bed!

It really all boils down to how you measure them.

  • If you define conversions as the number of pitches (pitch being defined as a presentation that in most cases requires speculative work and leads directly to an appointment decision) then the range varies from 25% on the low end to just over 50% on the high end. According to Cleve Langton, in the early part of 2009, DDB were running at about 50%.
  • Alternatively, if conversion is measured all the way back from the RFI stage, then the percentage drops dramatically. The reason being that in the early stages there are so many more competitors, variables and steps to get through before making it through to the final pitch.

The final pitch stage is all about making a final decision as to which of the agencies already selected, is capable of coming up with the superior idea and work to support it. Whereas the first stage is defined by the questions; does the client think you have the right capabilities to handle their business, and do they feel comfortable with the chemistry?

In addition to how you measure, there are also many other factors that can materially affect your new business conversion ratio, either positively or negatively. Here are a few examples:

  • How aggressive your pitch approach is and what type of risk you are prepared to accept going in?
  • Are you breaking in to a new category or are you a known and respected player?
  •  The number of pitches you are involved in at any one time and the depth of resources to support them.
  • Your pricing model and flexibility to negotiate the fee. ( I have had personal experiences where we won the pitch, but decided to withdraw afterwards due to pricing and contract issues)
  • The type of accounts/work you go after. Are they all large budget AOR type assignments or rather multiple small project assignments?
  • Do you have a proprietary system/software that is not available through other sources?
  • Your agency is part of a larger group that consistently refers business to you.

The reality is that there is no one size fits all. Every new business professional and agency CEO will tend to calculate their new business conversion ratio, in a way that reflects their agency in the best possible light. So the next time you feel inadequate during cocktail conversation with industry piers about this subject, just calculate yours again using different measures and assumptions. After all, it’s the bottom line and agency profitability that really matters.

 

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