New Business Hawk

Ad Agency Growth: Training vs. Consulting

Our most valuable assets walk out the door at five o’clock

American corporations dole out an estimated 15 billion dollars per year on training and consulting for up-and-coming mangers and leaders. Sadly, most marketing firms spend very little on developing their staff. It’s the one thing most leaders tell me is on their yearly goals, and yet somehow it always fades by the wayside.

However, a few highly successful firms target high performers and potential leaders within their organization and work with them to develop their skills. These are the firms that make up most of our clients.

We have been arguing and writing about the science and practice of new business since the early 1980’s all in an effort to demystify this critical element of agency operations.

Our experience as managers, leaders, and consultants, both nationally and internationally, have helped us to understand the nature of that work, and the science behind it. Over the past several years we’ve seen the growth of many new business consultants. However we do see a unique difference between most of them and Sanders Consulting: few if any offer detailed training programs.

In this latest economic downturn marketing firms are asking their leaders to take new business seriously – a critical success factor to organizational growth. Learning leads to more effective action and, therefore, improved performance – and is no longer an option. More and more of the firms we interact with are recognizing that the roles of new business and agency leadership are different, and the skills required to be a great agency leader do not necessarily transition into the world of new business.

What To Do?

Invest in your staff. Your leaders. Yourself. Your agency.

Photo By woodleywonderworks

Old New Business: Organic Growth Rules of the Road

Over the past few years Sanders Consulting Group has worked with many marketing firms, both small and large, and they all share the same problem: How to get more value/recognition/reward for what we do for clients.

The Old or Traditional Way to Get More Business From Clients

Agencies grew on the basis of getting clients to buy more services from their marketing firm. This is a value-added approach that is aggravating to many clients. And it’s lost its power in the market place.You know what Value Added is. Like my ads? Then buy my PR! Like my PR? Then buy my direct! These are called Value Added Services.

A Different Approach to Organic Growth 

Agencies have many opportunities to develop high-value solutions for existing clients called Value-Based Initiatives (VBIs). These contribute to the success of the client's business and are often process focused. VBIs go after what’s on the client's desk that really troubling them.

These Value-Based Initiatives are built around learning how to explore client needs, problems, or requirements.

The primary skill that generates new ideas for VBIs consists of listening and that means knowing what questions to ask and questions not to ask. VBIs are often the small things that trouble clients like improving their way of working. For example, helping them manage projects inside their world better with an online traffic system. Or helping to get all the different departments approvals under control.

Account managers with a VBI take control of these problems for clients, offer solutions and solve the problems on a consultative arrangement. Usually fee-based and calculated on time.

VBIs add up quickly and the revenue drops to the bottom line. And not only do they add additional revenue to the firm, but VBIs increase overall client satisfaction a lot.

VBIs are one part of the total organic growth approach. Here are a few rules of the road.

The Organic Growth Rules of the Road

1. Organic growth is a game of singles and doubles. They are small day-to-day wins and quick suggestions to changes in the market place that build the foundation for both retention and new organic growth.

2. Keep any homerun ideas in your back pocket. Too many firms keep waiting for a big idea or homerun to suggest, and then rush out and toss it on the client's desk. They miss the point that singles and doubles are the foundation for home runs. Singles and doubles get the client in a receptive mood and help the client change perspectives about your value.

3. Singles and doubles provide important discipline. Organic growth requires a new discipline that encourages the constant generating of suggestions for clients. And organic growth requires a discipline of flawless execution of the suggestions to clients.

4. Clients don’t measure how many suggestions they adopt. So don’t get caught up in worrying about whether or not your suggestions are being adopted. The client isn’t counting. They just want the suggestions to keep on coming.

5. Organic growth is everyone’s business. Just as it’s important for all hands to be involved in cost reduction, all hands should be charged with the responsibility of generating new growth ideas for existing clients.

6. Institutionalize organic growth. Build a measure into your evaluations on the number of organic growth ideas offered by each employee. And add in some bonus money for suggestions that were adopted and that added to the firm's revenue. That will help make organic growth part of your DNA and that's important.

Agencies need to understand organic growth and how to anticipate client needs. These agencies must learn how to become involved with clients on whatever terms they seek to have a relationship.

New Business: Five Warning Signs of a Nightmare Prospect

New business sometimes lands you in strange places. This has never been truer than in challenging time like these. Winning is everyone’s objective, but every agency has a nightmare client that was once a promising prospect.

Our clients often ask if there is a way to assess in advance what prospects and accounts will drain profits and drive you to madness once they become clients. SCG advocates the use of an active outreach program for screening prospects. You need a clear understanding of the prospects personality, history, objectives, budget, and expectations for all prospects in your database.

Agencies don’t take on these clients willingly. Dysfunctional, destructive or disorganized prospects slip through the cracks all the time pulling you into lose-lose relationships that drain patience, time, resources and profits. The time to confirm and clarify a prospects “nightmare potential” is during the first visit. Doing so can keep you from investing time and energy into loser accounts.

Here are the five warning signs of a nightmare prospect:

1. You are their first agency. This is a red flag. Take a pass and allow another agency the frustration of training them.
2. The prospect is not clear about what he or she wants, but somehow expects your agency to produce it without detailed input.
3. The prospect reports having had a lot of problems with their previous agencies. A pattern of “problem” agencies could be a sign of a problem client.
4. The prospect is ignorant about marketing, advertising, or the creative process and has no competent staff. This prospect often expects you to wave a magic wand, with little understanding of the complexity or expense of developing and producing effective work.
5. The prospect makes it clear that they are looking for a bargain and focuses entirely on cost.

If you have found one or more of these signs, proceed with caution, if at all.

If you decide to attempt to turn this prospect into a client, here are some steps that you can take to minimize the risk.

1. Document major concerns in writing in a conference report following the first visit. In your reports make sure to outline the framework for a successful relationship.
2. Maintain constant communication becoming their best friend and confidant.We recommend you create a binder and number every conference report, and be over organized!
3. Don’t let problems fester. They are much easier to solve when they are small problems. Keep the focus on relationships not issues.
4. Educate them. Explain the impact of their behavior on schedules, budgets and deliverables.

Search consultants and Cattle Call RFP’s have made it more difficult to identify a nightmare prospect. Many agencies see only the revenue opportunity and overlook or ignore the signs.

To keep a prospect from becoming a nightmare client, you must be extremely clear on what you need from the prospect at each step. You must communicate as often and as tactfully as possible. Communicate these success factors up front is most effective.

It’s important to have a detailed contract covering issues that might lead to problems and exactly how payment will be handled if things do not work out.

By building a graceful exit into the process, you can protect your most important client - you.

The New Business Budget Game: Up to Six Million

To avoid discounting your work, we believe agencies should discuss money whenever a new job or project is brought up, right when the assignment is first mentioned by the client.  It’s a way to open up negotiations over both job specs and job budget.

Our approach is to start by asking, “In round numbers how much are you planning on spending to get this done?”  Now wait until the client responds.  The client has two options. 

Option #1 is to ask you back how much it will cost, and the agency person needs to move towards suggesting a budget range by discussion first the job specs and then by picking a high number to test the waters.  If the client responds, “That sounds about right,” then you know you have guessed too low. 

Option #2A.  If the client faints or grabs for his or her heart, then you have guessed too high, and you need to move down in a series of bracket jumps.  It’s fun to do.  The key point is to remember that you are not estimating the job at this stage, you are just trying to understand the importance of the job.    

Option #2B.  If the client gives you a number, your account staff should be trained to immediately say, “And as much as….?” You are assuming the client has given you the bottom number from a budget range, a normal assumption.  And now you are asking how high to probe for the upper range. If you get a new number at this middle stage, immediately ask, “And up too?”  Here you are assuming there is a very top number in the range, and you need to know what it is. 

This is simple negotiation in a process we call the Budget Game.  And your agency staff needs to be trained on how to play it well.  It takes less than a day to learn and it will make your firm a lot of money over the years.    

Running back to a client with a production estimate when you don’t have any idea what the client expects to pay, as so many agencies do, is very very foolish.  It’s not a smart way to do business because you lock yourself into your own expectations about how important the project is to the client.  And you lock your agency into living off production budgets.

Case Histories  

Our files are filled with actual stories of how well this simple negotiation technique from the Budget Game has worked for agencies around the world. 

Here are some favorites.  A mid-sized agency asked their client, a medium-sized manufacturer in Ohio, a client for ten years, in round numbers how much money were they thinking of spending to launch a new home improvement kitchen product?  The client responded, “Up to $6 million.” 

The account handler was so shocked at the size of the budget that he forgot to ask the follow-on question of “And up to?” as he had been trained to do.  That afternoon the agency president told me by phone, “Guys, do you know what we would be doing this afternoon if we had not asked that simple question?  We would be working on a campaign launch of about $450,000.  That’s the usual budget range we suggest when work with them.  We have had the account for years, and we never knew they could pull the trigger on that big of a new product launch.  Thank you so much for showing us the way.” 

Another $300,000 Found

The president of a direct mail company called to report his junior account executive had just returned from a client office so excited that the Budget Game had worked for her the very first time she had tried it.  She had asked a client the “round numbers” question and the client had said $200,000.  She moved the client up to $300,000 for the next number and been told that the client couldn’t go over $600,000 on the project.  The junior account executive was excited that the Budget Game had worked so well her the very first time. 

The agency president wasn’t excited at that.  He was excited at the new monies that would have been left on the table without his most junior AE asking a simple question, “In round numbers”, and then knowing what to do with the answers. 

Big Black Eye

Before I knew about the Budget Game I got a big black eye on a large regional brokerage company.  I had been part of the team that had won the account and now I had been assigned to work on the client.  I was new to the agency, a junior AE.  The ad manager asked for a media recommendation on using the Wall Street Journal to launch their new brand look we had recommended.  I was young and so charged up.

I bounded back with a media budget recommendation that was six times larger than anything the ad manager wanted to see.  And he ripped me up and down and almost fired us.  We had flashed to him that we really didn’t know his business.  We kept the account for years, but after that I never again went back to a client with any recommendation without knowing what the client expected to pay first.  It was a life-lesson that I never forget.  And the best place to find that number is to ask for it when the client first mentions the job.  Your staff might need to learn all that now.

Fishing in Troubled Waters - New Business in Tough Times

A recent B-to-B Magazine headline shouted, “Desperate ad agencies scramble for business.” There is no disputing that the current climate is the most challenging our industry has experienced in memory.

The traditional advertising agency model is under attack from all sides. From the strategic side agencies are being pushed out with the increasing impact of consultants; search, procurement, brand, marketing, and of course, the big fish, management consultants. On the tactical side agencies have to compete with all types; design, internet, database management, media buying, promotion, direct, special events, sports marketing firms, corporate identity houses, two guys and a Mac, and more. This is troubled water.

A recent poll among advertisers indicates the current tenure for a marketing manager is only 9-18 months. These new Marcom Managers are younger, have less experience in advertising, are more focused on tactical issues, and recognize that they are only there for the short term. At the same time they have a wider span of control over marketing and budgets, and they want their own suppliers – people who think and look like them. Not surprisingly they don’t take advice very well from traditional agency staff that often comes across as patronizing. More troubled water.

Client turnover is among the more serious challenges within our industry. Some recent studies show that for smaller accounts the churn, or client turnover, can be as fast as every two years, while larger accounts have gone from seven years to three. Clients, these new Marcom Managers, are growing more and more impatient and are quick to question the effectiveness of their current agency. The growing percentage of project-based work has made it easier to change – click to what’s next. Yet more troubled water.

Design studios and other low-cost providers have seen revenues increase as their agency brethren have suffered. These creative firms are organized and operate tactically. They are taking business away from traditional agencies on account of price, speed and timely delivery. Many other specialty shops who often work faster, are more focused on results, and offer tangible benefits to clients are also seeing an upswing in new business. Clients are questioning the value of all the layers at the agency; account service, traffic, and all the administration. Further troubled water.

There is a renewed focus on new business, but most agencies have no system for sustained business development and few staff skilled in new business.  What was done 3 years ago no longer works. The troubled water is changing everything. You have probably been frustrated by first-hand experience with all of these changes; but opportunities for new business are abundant for advertising agencies that are prepared.

We believe there is no better time to do new business than times like these; when clients are changing how they spend, when your competition is worrying about staying in business, when companies are changing agencies at an unprecedented rate, and when prospects want to make decisions that enable them to solve immediate challenges. Doing new business now is like fishing in troubled water. Most people don’t even go out – but that’s also when the pros know fishing is best. While others stay home, the smart ones go fishing.

What steps should you take in times like these? Here are six strategies we recommend.

First, make sure your firm is properly branded. Check to see if you are caught up in alphabet soup with a brand that doesn’t say anything. Clients who are looking for a new agency don’t want a “we-are-whatever-you-need” advertising firm. In fact, that turns them off and harms trust. At a recent new business conference hosted by the AAAA, every client and search consultant said “stand for something.” You have to know who you are and why you should be considered. Otherwise, you risk fading into the fog of marketing services lingo. It is better to stand for something and not be considered for one account then to stand for nothing and not be considered for any accounts.

Second, focus on generating leads. That means increasing the number of opportunities to go visit good prospects. Too many agencies only focus on winning pitches, not working to get into more pitches. Beware of the “we’ll win the next pitch” red herring. This is where an agency is busy pitching but not focused on creating awareness and relationships. Unless you are a recognized agency brand (and there are only about 10 in the US), counting on referrals and word of mouth is not a new business program. Many agencies have attempted to flip a new business switch – “we need some new business NOW! Let’s form a committee!” Few are finding success.

Third, sell smarter. Focus on the overt benefits you offer. Make it clear what you do why and how it gets results. Successful agencies do this face-to-face, not by clicking PowerPoint slides at a prospect with lots of case histories and marketing babble. Stop doing capability presentations! Instead show them how you work, specifically with their brand, and how you will impact their business. This means that you have to work hard and listen to understand their problem. This sounds simple, yet it is one of the most common problems in all client/agency relationships.

Fourth, be easy to do business with. Don’t try to sell what clients don’t want to buy. Give your opinion, offer suggestions, but be sure to give them what they are asking for. If they want the logo larger, make it larger and move on. Forget about account planning and stop trying to get clients to pay for it. If you are in a tactical position, play the tactical game better and build trust. Only then can you move up the marketing ladder and start recommending more strategic advice.

Fifth, think about growing the old fashioned way – buy growth. A cross-town merger with another firm in your market can create a wealth of opportunities. There are some good opportunities in every market. You can gain efficiencies and add new services and resources, and create more awareness for your brand.

Finally, go after the consultants and the strategic high ground by offering consulting services of your own. This requires a separate brand that is not linked to advertising or marketing. Too many agencies forget that if you’re an agency, and try to add consulting to your brand, you are still only an advertising agency –Where are my ads! However, if you are a consulting firm, then you can work at the strategic “C” level, and open up a sizable new revenue stream. This provides more opportunities for the agency side to follow once the consulting assignment is completed.

Search consultants are saying new business is slow. They’re wrong. Their business is slow. New business is heating up. The competitive landscape for agencies has been forever changed. As the economy recovers and picks up speed, you will need to adapt to win today and change to succeed in the future.

As you evaluate opportunities and challenges at your agency, never hesitate to give us a call - 800.899.1538

Image Credit: http://www.1st-art-gallery.com/Andreas-Achenbach/A-Fishing-Boat-Caught-In-A-Squall-Off-A-Jetty.html 

The Agency Offsite as Engine for Innovation

Most agencies annually convene a leadership meeting, strategic planning retreat, or brainstorming session dedicated to crafting an innovative course of business strategy. Rarely do these meetings deliver results.

Instead, they produce a pattern of incremental progress. And this does not translate into competitive advantage. Other factors affecting these meetings include planning, organization and leadership. Because responsibility for this meeting most often falls on the agency leader, the outcome is predictable.

The reasons for this are simple. Leaders "know" they know more than their team, so they develop a plan and agenda that determines the outcome - and everyone's frustration. Experience shows most meetings of this type fall into one of two patterns. At the "Rubber Stamp Offsite," the team nods along as their leader uses his agenda to present his assessment of the agency "As Is." He then dictates the action plan and assigns responsibilities. This approach is easily identified by the neatly organized three-ring binder entitled, "Agency Strategic Planning 20XX." Note - look for an accumulation of dust.

The other meeting type, the "March of the Hopeful, Guilty and Ambivalent," is the product of an insightful leader who - tired of the "Rubber Stamp Offsite" - assigns every member of the team roles and responsibilities. The outcome - well - you have been at these meetings, there is no outcome, just a reporting of the past year, justification of the results and explanation of the incremental changes that will be implemented to fix what's broken. Frustrated, the agency President usually sits down following this session; drafts an action plan and dictates responsibilities - see the results of the "Rubber Stamp Offsite."

If you want to break this cycle to create opportunities for innovation at your agency, then change your approach.

Don't go off the deep end and schedule team building exercises through Outward Bound, or book a provoking motivational speaker. These activities make great copy - but rarely, if ever deliver business-changing insights. A growing number of successful organizations are utilizing professional facilitators to assist in the planning and management of these important meetings.

By assigning responsibility for the business of the meeting to an experienced outside party, the group is better able to focus on the business of the business. The role of the facilitator is part emcee, part mediator, and part referee. But more than that, this person frames the discussion, manages interaction and creates opportunities for discovery.

Because innovation is not achieved in-the-box, an agency is better served living the process, not running the process. And agency leaders must understand that insight is achieved through their support, not as a result of their management. Utilizing a resource experienced in facilitation and knowledgeable in the industry changes the meeting dynamics. The agency, as a whole, becomes the focus, not the innumerable piece and parts.

If your agency's strategic planning process is not creating measurable results in growth, quality, productivity, or profitability year-over-year, then you might be a perfect candidate for this approach.

Photo Credit: thedailylondonphoto