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How can agencies make client relationships more profitable?, with Chris Merrington

By January 11, 2022No Comments
Chris Merrington profitable client relationships

Welcome to Episode 53. In this episode we talk about making client relationships more profitable.

Business growth consultant, Chris Merrington, shares some golden nuggets of advice about how agencies can be more commercially savvy.

We covered so many different areas including:

What clients really value and how to talk the client language
Why you need to raise your prices and how to do it
Why you need to establish and nurture senior client relationships

and so much more…

At the end of the podcast, Chris makes a special offer to send three copies of his book to 3 people selected randomly who sign up for his monthly bulletin.
This offer is valid until the end of January 2022 (although we do say the end of the year, because we recorded this episode in December 2021).

So I’m going to give you a spoiler and suggest while you’re listening to this fantastic episode, you go to Chris’s website and be one of the first to sign up for his business insights bulletin. Please email him at chris@spring8020.co.uk to let him know you’ve signed up as a result of listening to this podcast. http://spring8020.co.uk/.

 

Transcript: 

Jenny  00:02

Today, I’m absolutely delighted to be speaking to Chris Merrington. Now a lot of people listening to this will know who Chris is because he’s very well known in the agency industry. He’s a consultant, a speaker, a trainer for marketing and communications agencies. He specialises in helping agency leaders and their teams negotiate more profitably. He’s also the author of the brilliant book, ‘Why do smart people make such stupid mistakes?’ If you haven’t read this book, you really should. I’ve had it on my shelf for a few years now and it becomes a reference guide for negotiating. So Chris, welcome.

 

Chris  00:44

Good morning, Jenny. It’s lovely to see you. And I hope you don’t mind that I brought my friend along Actually, maybe he’s not a friend. He’s the enemy. And we’ll talk about him later. But he was determined he wanted to say hello to everybody today. So we’ll talk about him later. Is that okay?

 

Jenny  00:59

Okay. And for those listening, can you explain who your friend is just briefly?

 

Chris  01:06

He’s a vampire. And one of the things that I talk about, Jenny kindly mentioned about my book, are vampire clients. Now some of you may have vampire clients, because what they do is they suck the profitability out of your business. And as well as sucking the profitability, they suck their mojo, they suck the fun out of your business. And so, and you know what, at the same time, they’re the most loyal client. They’re the most loyal client, because they love what they’re getting, because they’re getting it cheap. So we need to resolve, you have to take responsibility to resolve how we deal with our vampire clients. And I’ve worked with 150 agencies over the past 18 years. Maybe more, I don’t know. And I’ve never had an agency say, I don’t think we have any vampore clients. It’s a question of how many and how bad they are. We’ll talk to him later.

 

Jenny  02:02

I know there must be so many people listening. just nodding right now Chris saying, just the case. Yes, we have. So listen, before we kind of dive into the questions, I’d love you to spend a few minutes just talking about you, your background, a bit about your experience and how you help agencies.

 

Chris  02:17

Sure. So I come from an agency background, about 20 years working in agencies, at director level, client service and new business. And actually, new business was the area that I probably learned the most in, which is maybe, Jenny, maybe that’s another podcast, because new businesses is a whole new skill that I had to learn. And I guess during that time, I made so many mistakes. And I think those mistakes, that when I stepped out of the agency world became more clear to me as I thought, Why on earth did I do that? Why didn’t I push back? Now, I would love to be able to say, Jenny, it was so much tougher in my day. It’s not, it is so much tougher today for agencies. I work with agencies like I can’t believe some of the things that I hear. And so it is, it is really tough. So I came out of agency world and thought how can I work with agencies because I knew a lot of people in agencies, how can I add some value for them? And one of the things that I did was work with a firm of accountants, Kingston Smith, who do a lot of work with agencies, and we did a number of studies together. Two of them in particular, where we looked at agency profitability, one was called Fortune Favours, the Brave, and the other was called Survivor to Thriver. And essentially, what we were looking at, we went and interviewed 21 of the most profitable agencies, the CEO, the MD, the finance director, asking them, what is it you’re doing that is enabling you to be one of the most profitable major agencies, PR agencies, digital agencies, design agencies, creative agents? And do you know what the things they talked about, were all the things that if I ran through the list, you’d go, well, they’re obvious. And they are. There aren’t secrets. But I think what they’re doing, what the most successful agencies are doing, is they’re doing the right things consistently. And a damn sight more than the agencies that aren’t. I’ll give you one example. What I’ve called Over Dependence, where we’ve got a client that our business is over dependent on. And we can discuss what that figure should be. My belief is somewhere around about 15%, no client bigger than 15%. And I’ve come across agencies where the client is 50% 60/70, the worst ever was 85%.

 

Jenny  04:50

Wow.

 

Chris  04:51

And probably the look on my face when the MD of this agency said to me, Our biggest client is 85%. And he said it proudly. I kind of looked at him and he said, Chris, we’ve had it for 10 years. I thought, Either you’re mad, or you think I’m mad. The fact that you’ve had this client for 10 years, that’s no guarantee. In fact, if anything, I think is probably even more risky. So I loved working in agencies, it’s a wonderful industry to work in. And I love working with agencies now. So the areas that I now work with agencies are two. Negotiating to become more profitable, have better relationships, increased pricing, which some agencies are not very good at. And the secondary is what I call being a trusted adviser to our clients. How do we connect with those senior clients and grow our clients, and I tailored the content to suit their needs. It’s very practical, you can apply the stuff straightaway the next day, and agencies typically get paid back in a couple of weeks, my best ever, is 24 hours. But I don’t give that as a kind of guarantee. It blew me away when a client phoned the next day and said, Chris, we paid for the workshop and some.

 

Jenny  06:16

Brilliant, brilliant.

 

Chris  06:18

But that’s not a promise for everybody else.

 

Jenny  06:21

Not at all. And I wanted to chip in really, because I came to one of your workshops, and you probably didn’t know that I was there, but I remember how engaging it was and how much value you give. And it’s so practical. It’s so hands on. It’s not theoretical and that’s reflected in the book as well. So I think this is a must read for anyone  who is managing client relationships, for sure. Chris, just before I go on to the other questions you said, Today, it’s much tougher. What are your main reasons for saying that?

 

Chris  06:58

You know, I would say that two years ago. But now, after COVID, lockdown, I say it’s even tougher than it was two years ago. And clients are behaving, not differently, but I think they’re, as they come out of lockdown, they are more demanding than they ever were. And they were pretty damn demanding previously. They want more, for even less. They’re looking for areas to cut. And certain big blue chips are taking stuff in house. And I’m sure some of your listeners are experiencing that. Now under pressure, because so many businesses are under pressure. And that then leads them to be impatient. And they’re giving agencies shorter deadlines. And the trouble is when we have a shorter deadline, we don’t necessarily do our best work, because we’re rushing. Measureability is even more important than it was before. The world has been taken over by Finance Directors who want to know, what’s the return on investment? Quite rightly, quite rightly. And therefore, I think agencies have to get so much better at that tracking of the numbers. What is our ROI? What’s the business case? Why should the client invest a quarter million with you? What are they going to get back? So that makes negotiation even harder than it was two years ago, let alone 20 years ago. And I think therefore what agencies need to do is be one hell of a lot smarter and more commercially savvy than they’ve ever been.

 

Jenny  08:34

And again, do you find that when you meet people that work in agencies, there’s a lack of commercial acumen? I mean, we don’t want to meet this negative but, I’m just interested in your view on what you tend to find.

 

Chris  08:50

The good agencies are really commercially smart, and really sensible. And they really stop and think about their pricing. However, there are a lot of people, I guess it is that they’re not commercially savvy. It’s that their drive to want to say Yes to clients seems to override common sense. And now there’s, this is a horrible word, this is a four letter word, which is horrible. Begins with F. So your listeners might not like to hear this. And it’s Fear. It’s Fear. Jenny, the look on your face just then you thought I was going to say something else.

 

Jenny  09:34

I was hoping you kind of would. You could say anything you like on this.

 

Chris  09:39

That fear that agencies have of fear of rocking the boat. That fear of, Oh if we increase our fees, then Ooh the client will go elsewhere. And that fear, fear is one of the biggest challenges for most of us in life, not just in terms of how we negotiate.

 

Jenny  09:58

Was that one of the reasons that you wrote the book Chris? Was it that you could see that there was this kind of lack of, or need for more confidence in dealing with clients?

 

Chris  10:10

If you put ‘negotiation book’ into Amazon, I don’t know, there are hundreds, if not 1000s. But there aren’t any for agencies. And I thought there’s possibly a gap in the market. And the phrase, ‘Why do smart people make such stupid mistakes?’ just seemed to resonate, because there are some really smart people that work in agencies, which is why we love working with agencies, but by God, we can make some stupid mistakes. And I have made, I think virtually all the mistakes in the book. So I’m certainly not doing it from ‘Aren’t I clever’. But those mistakes, cost agencies 10/20/30/40% off their bottom line.

 

Jenny  10:58

So let’s go through some of those mistakes that you see people making, because I think this is going to resonate with people listening, and they’ll be able to spot whether they’re falling into this trap.

 

Chris  11:10

A lot of them are interrelated and they come back to this fear thing, which is about your mindset, what’s going on up here? How do we see ourselves and if we see ourselves as a ‘Please sir, what can I do for you, I am your servant?’ that kind of bias supplier relationship, then you start from the wrong place. And so it’s about seeing your client as an equal. So this is my favourite phrase of this year, which is, ‘Clients don’t want to deal with a subservient’. They want to deal with an equal. And you’ve got to get your head around, how do we become my clients equal? And it’s not about the title on your business card. It’s about your thinking. It’s about your thought processes. So what are the mistakes that we make? So there’s this buyer/supplier relationship. Or are we in a peer to peer relationship? This wrong mindset of seeing ourselves as this supplier, I’m here to do and implement. And that doing and implementing and not taking time to stop and think, what clients want to buy from you is this stuff. It’s your thinking. That’s where your real value is. Another problem is we slide down the food chain. Now, you might get appointed by a marketing director or an MD. And then over time, we don’t see that marketing director and we’re now working with the team of managers, perhaps. I don’t want to upset them, and they’re lovely. But their perspective on value will not be the same as the C suite. And therefore, we have to get back up the food chain without upsetting the level person, because they can be quite sensitive. They think we’re somehow going behind their back. And this is therefore a skill of how do we keep that connection up at the top? Jenny I’m sure you’ve seen that in your agency career? And you don’t keep it there because of your title, you keep it because you’re adding real value and you’re challenging the clients. So what else? Not appreciating how we add real value and impact to our clients. And because of that, because we don’t understand how we’re impacting our clients business, increasing their sales, attracting new customers, increasing their market share, these are the things that the C suite want to know about. And because we’re not tracking that, so what that means is our ability to negotiate is just reduced and procurement just kind of played with us. I remember reading, I think he was a procurement director, global procurement Director at P&G. And he described agencies as like lambs to slaughter. Yes, because this fear, which is scary and we become commoditized. You’re getting a bit of a list here in terms of the things that, they’re all kind of interconnected, we become commoditized, we think we’re just the same as every other agency. So again, that brings down our confidence. We then don’t charge the right price. Now don’t get me started on price. Agencies, too often, they don’t give enough thought to their pricing. Mark Ritson, who you may well know, who was professor of marketing at Melborne Business School, I think he still writes in Marketing Week, he said about pricing – so most businesses, not just agencies, most businesses, strategy for pricing is a mixture of voodoo and bingo. I just love that – a finger in the air – What did we charge last time? What are we charging that client?

 

Jenny  14:58

On pricing? Can I just ask you a question. So I’m really curious to know your thoughts on this, we’re probably going too far down the rabbit hole on this, but value based pricing for agencies? You’re nodding, alright good, because but at the same time, if you’re negotiating with a client who has a procurement department, they want to squeeze you into their spreadsheet don’t they?

 

Chris  15:22

Yes,.

 

Jenny  15:23

So have you seen agencies successfully negotiate using value based pricing with procurement?

 

Chris  15:32

I have, it is really hard, for a number of reasons. If you want to charge by value based pricing, you’d better be so good, you’d better be either the best in your discipline or the second best in your discipline. You better be connected with the C suite, and possibly even above the marketing director, because it’s then that CEO, that MD that sees the real impact of value that you’re going to bring to their business. Just for anybody who’s listening, who is kind of wondering what value based pricing is about, it’s where we’re not working it out based on the number of hours and days, and that has some merits. But this would be that we look at a particular project for a client and we say this is going to be a £50,000 fee or an £80,000 fee. And it’s not broken down by the number of hours or days we spend on it. It’s much more connected to the value that we’re giving our clients. But your right procurement will say yes, how many FTEs? How many full time employees are you going to put on this? And how many days is it going to take? I don’t think it should take 8 days, I think it should take 5? How do they suddenly become experts? I don’t know. So I think there’s a quasi midpoint, which is for the majority of us, I think it’s really hard to do value based pricing. But I think there is a midway point where we still work our fees out based on number of days and hours but we also think about what is the impact I’m having on my clients business? How much did I increase their sales? What if I put on their bottom line? What increase in the number of customers? Have I taken my client from number 3 to number 2 in the market? And it’s looking at those things, what’s their impact? And therefore when we present our fee, which might be worked out on number of days, we also, beforehand, mention about how we have put a million pounds on it online, which now frames our fee, that whatever it is, is actually quite reasonable. Because if I put a million pounds on my client’s bottom line, and my fee is 50/60/70 grand, sounds quite good. Sounds alright, doesn’t it?

 

Jenny  17:50

Yes. Great advice, Chris. Thank you for sharing that. And okay, so there’s a multitude of things that we’re doing wrong, we’re making these mistakes. If someone’s listening to this thinking, okay, I can recognise myself, can you give some kind of tips on how you can change the situation for agencies?

 

Chris  18:16

This is a charity collection box, and it says, please be generous, give your time and money to the poor clients of your agency. Your clients aren’t poor. Your clients aren’t poor. And you’re not a charity, you’re here as a commercial business. And it’s about stopping to think about your commercial reality. It’s about stopping and thinking, does this make sense? Am I about to set a precedent that in six months or years time I’m going to regret? I touched on fees a short while ago and pricing. Inflation, the current inflation rate is over 4%. They’re forecasting 5% for next year. The US is at 6%. Inflation has been bumbling along at kind of a quarter, half a percent for the past five, six years. It’s now going up to 5%. Agencies cannot afford not to increase their prices and their fees. Well, you can if you really want to go backwards, and you want your profitability to decline.

Some work was done by McKinsey and also a Bain consultant called Rafi Mohammed. And what he looked at were 27 different business sectors. And what he was looking at was the relationship between price and profit. And he looked at 27 different industries, really different, diverse – aviation, retail, biotech, telecoms. And what he found was a really close relationship between them all. And his figure was, this is not a law, it’s more of a kind of rule of thumb. What his figure was, each 1% increase in price typically will impact your bottom line by about 8 or 9%. The reverse is also true. So what that means is that if you can increase your pricing, it is one of the most powerful techniques to improve your profitability. So start with getting the pricing right.

And I think the next one is about recognising that to me great client service, and by the way, I hate the term client service.

 

Jenny  20:30

Do you?

 

Chris  20:30

Yes, because it’s got that word ‘service’ in it.

 

Jenny  20:33

Yes.

 

Chris  20:34

I think it’s about client business growth, client business development, although business development then suggests new business so I’m not trying to come up with a new title right this second. I think the mindset of client service is not good especially when we think it always means saying yes to clients. And agencies need to learn how to push back and say, No. They need to learn how to come back to this word. People that are trained in sales, so real sales people that are out there selling insurance and double glazing and tins of baked beans, they’ve got the three rules of sales for them – qualify, qualify, qualify. And it’s about qualifying the clients and opportunities that you’ve got in front of you, I think it’s about the most successful agencies are really selective about what they say yes to. About what they pitch for. So in Campaign, typically in January, there’s a list of the top ad agencies in terms of its strike rate. And some of them have got like 80% new business conversion rates, some even higher than that. They turn down the vast majority of opportunities, they’re really choosy. The next point is to

have better relationships with those senior clients, especially the decision maker. Got to do it. But you’d better be really good when you’re in the room with that C suite. Because otherwise, just get out. So it’s not about going in and talking about media, direct marketing, digital, design, PR. It’s about being a business advisor who uses those particular disciplines to help with the business growth.

And the final one, I hope I’m allowed to use this word. It’s about having some cojones.

 

Jenny  22:38

O si, senor. Claro que si! I lived in Barcelona for three years, I speak Spanish, but I love it, cojones, claro!

 

Chris  22:54

Have I pronounced it correctly?

 

Jenny  22:56

Perfectly. Yes, I was going to say perfectamente. Perfectly!

 

Chris  22:59

Can we continue in Spanish?

 

Jenny  23:02

Shall we?! No, Chris, honestly, this is gold, everything you’re saying I’m hanging on your every word because it’s the first time someone has verbalised what I’ve thought. Now, obviously, I train account managers and they do have that service mentality. But I’m always trying to drag them from being an order taker to a trusted advisor. That’s where I want them to be. And I love that you’ve said the big thing is mindset. And just having that subservient… they don’t want that, clients actually don’t want that. So I’m loving everything you’re saying. Can we just step back to pricing for a moment because you made some really good points? I mean, yes, look at inflation. So can you kind of share some rules on raising your prices? Like, how often? How much? I mean, do you have any kind of advice for agencies that think, oh, my gosh, Chris has just said something. We haven’t raised our prices for ages. How do I do that? How often? Which clients? Like, where do they even start thinking about doing it?

 

Chris  24:24

One of the first things is work out your day rates, and how many hours it’s going to take, that’s fine. But look at two other things, the value that we’ve just talked about. What’s the value of the impact we can have on the client’s business, and also look at your expertise. So many, many years ago, when I was working in an agency I had a big project that I was working on, over a million pounds, and we had a legal issue that the client was just very twitchy about. And they said, Chris, we can’t progress with this because we’re nervous about the legality of it. Unless we can get some reassurances we can’t progress. And I’m thinking I’m seeing a million pound project go out the window. So I said, let me talk to our solicitors. I went to our solicitors and they said, Chris, this is outside of our expertise. This is not an area of specialism for us. I said, I need to get a solid cop robust advice on this. And they said, then we recommend you go to this guy. He’s a queen’s counsel, a QC, a barrister. He’s the top guy in the country. If anybody can give you an answer he can. So I said, great I need to see him. They said, Chris, he’s seriously expensive. £700 an hour, this is probably 20 years ago. So £700 pounds an hour then, I don’t know what I was earning it’s probably only about a month, so I went to see him. And he greeted me in Lincolns Inn Fields , where all the lot of the barristers have got their closters or whatever. And he had on his wig and his silks and everything. And he was probably in his 60s. And he looked over his glasses at me. And he said, ‘You’re the young man who thinks at £700 an hour is a lot of money,’ because I was younger then, 20 years younger, I suppose. That’s incredible. He said, ‘You’re paying for the hour. More importantly, you’re paying for my 30 years experience to give you the right answer’. And it’s about that experience to give your clients the right answer. And suddenly, it was like an epiphany. It’s not about the hour, we’re not plumbers, it’s about the impact of value, the quality of our thinking, our expertise, that’s where the real value is. So maybe some more tangible techniques, options – hree, not two, not four, three. Harvard did a whole lot of work on its threes – I call it a good, a better and a best. And I’d have them relatively close together. So maybe in a ratio of 5/6/8. So I’m deliberately positioning the most expensive one as a little bit further, because I almost don’t want the client to buy that most expensive one, what it does is that it now frames that middle one. About taking a bit more time with your budget, so don’t do it the night before. And copy and paste from some stuff you did earlier. Just give it the same love that you give your strategy and your creative work. What else? RPI, inflation, we’ve talked about. Think about that. Rehearse. A lot of us before we talk about price, we get a bit nervous, surprisingly, not surprisingly. So rehearse it. And it’s funny,

I was talking to an agency yesterday, and they say, Oh, my God, we rehearse presenting the creative and the strategy, and who’s going to do that. And they said, We don’t rehearse presenting the budget. And actually what happens is we’ve been full of excitement and energy and confidence and then we go and the budget isn’t the takeaway document. Which sends the wrong message to the client, it sends them a message of Oh, you’re not that comfortable with it. You’ve got to be as comfortable with your budget as you are with your strategy and creative work.

 

Jenny  28:17

Talking of budget, because I think this is this is going to resonate so much with everyone listening, I’m even reflecting on my career, where we used to roll out the same cost estimate based on one particular deliverable. And we’d never sit down as a team and look at like, consistently have these deliverables that they’ve been costing or pricing this way, do they consistently come over budget or under budget? Are we are we accurate? So there is no reflection time. So I love that you’ve brought this up. And again, mindset. A lot of account managers, one of the biggest things, I think is, talking about money sometimes. If a client pushback pushes back on a cost estimate, for example, it’s one of the most awkward situations account managers tell me. So do you have any kind of tips on how to deal with these kinds of scenarios?

 

Chris  29:16

It’s about stopping and thinking. It’s about anticipating, I don’t think we anticipate enough.

So, Jenny let’s imagine that you and I, we’ve got a presentation that we’re doing later this week to a client, and you know the client quite well. And you’re putting together the presentation. And I might say to you, Jenny, what do you think are the three curveballs that they’re likely to throw at us that are really going to kind of knock us off balance? And you’ll say, Oh, there’s bound to be one on price because they always moan about whatever it is, something else, something else. Okay. Let’s tackle those. And let’s have a cup of coffee and let’s spend 15 minutes trying to work out what we’re going to say in response. Now, will we get exactly those three? No, but I bet we’ll get at least one of them, maybe two. And what will happen is we’ll go into the presentation feeling so much more confident, because we’ve kind of unbundled and faced what is scaring us. And we’ve thought about how best to answer it, rather than trying to do it straight from the hip.

So that anticipation can be useful. And what I would suggest that people do, is they develop their own personal, or their agency’s list of, it’s not a very snappy title, responses to tough client curveballs. And you can keep adding to that, and that will build over time, and it will just give you so much confidence in terms of how we respond to those lovely clients.

 

Jenny  30:50

That’s so true. I think that is probably the key thing, that going into those discussions, ill-prepared. And actually, you don’t have to do it on your own, do you? It’s a matter of thinking, rehearsing, preparing, and helping, maybe there’s another one in your team or client services director or managing director who can help you anticipate the potential. So that’s a fantastic piece of advice.

 

Chris  31:15

A couple of other things. Go back to what I call step one, go back to the original brief. Ask better questions, push for a better brief. A two minute phone call with a client, a two line email is not a brief. And it’s the agency’s responsibility to turn a core brief into great brief. And it all starts with getting a good brief if you’ve asked great questions. If you ask great questions and if the client is incapable or unable to give you the answer, I’d be very afraid. Because I think you’re dealing with either somebody who’s very junior, doesn’t know what they’re doing, either way, whose time is going to get wasted? Yours. If I get a good brief, I can then start thinking about the money. Now, just a secret for everybody, is that clients are told not to tell the agency what the budget is. And if they do tell you what it is, they typically give you a different figure anyway. I won’t go into all that. So once I’ve got an idea as to what the real brief is, I can then start to think about someone will know what budget will be, so I might, if a client won’t tell me, and if they say, ‘Oh Chris blue sky thinking’. That’s BS. So I’m going to say to them well, I reckon what you’ve just described is somewhere in the region 150k 160, 170? How does that sound? They say, Oh, yes, a little bit higher than we’re expecting, that’s good. Or then if they say, Chris, we were expecting 30. Fine, I’m glad that I’ve got that into the open air now. Rather than I’ve done all the work, because do you know what? Spending two weeks working on a proposal, the strategy, the creative, going and to presenting it to the client for the client to say, We can’t afford that, whose time has been wasted? Mine. And I suspect that your listeners haven’t got time to waste. We were talking before the call about talent. The war for talent, the shortage of people is a real challenge for agencies. And therefore agencies need to be more ruthless with where they spend their time.

 

Jenny  33:34

Totally agree. And I keep coming back to what you said originally, Chris about mindset. Because, I think it’s down to the individual, like if they feel comfortable talking about money Because I’ve literally got in my mind, all the account managers that I kind of train and around me, they do struggle, talking about money or anything that’s potentially and again, maybe it’s comes back to this service mentality, I don’t want to ruin the relationship with my client, it’s this is a service relationship, rather than them seeing me as an advisor. So that shift in mindset all of a sudden, raises the bar a little bit, doesn’t it for people to think actually,  I’m the expert. I’m the one that’s dealing with all of the other agencies. I’ve got the experience, I know what I’m talking about. But instead of that, it’s more servant mentality. Would you agree?

 

Chris  34:27

Unfortunately, yes. And that takes time to build that experience, the confidence to have those kind of serious business conversations with clients. And because if you’re hiding behind a cloak, and it’s really not real, senior people, the C suite will spot it very, very quickly, that you really don’t know your stuff. So it’s got to be real. So you need to do your research. You need time to stop and think And I think part of the challenge, there’s a real paradox for agencies, that because they’re so busy, and they’re running so fast, and because they’re short of staff, they’re running even faster. And because of that, they’re not stopping and thinking. And it’s where you get your best thinking, it’s actually not looking at your PC and your computer, your laptop, it’s actually getting away from it. So this morning, I had a swim before eight o’clock this morning. And I get some of my best thinking, it’s my kind of bit of escape, where I’m kind of counting my breaths, counting the laps, but also stuff flows into my head while I’m doing it. So you’ve got to find what is yours, it might be taking the dog for a walk, it might be going for a run, or cycling or whatever it is, it might be with a glass of wine, who knows. But it’s that quality thinking. And that’s where we all get our best thinking from. I’ve never had anybody say, I get my best thinking looking at my PC, or my laptop, or Mac.

 

Jenny  36:09

So true. I mean, you’re looking at the barrage of emails coming through, everything’s urgent. A lot of the time in agencies, you’re in firefighting mode, aren’t you? So you’re absolutely spot on, I think, again, like stepping back, looking at the bigger picture, analysing, is this working? Because clearly, it’s not. And like you said, with the talent shortage that we’ve got at the moment, we have to be more efficient in how we run our agencies. And I mean, to that point, what do you think is needed today to grow a successful agency?

 

Chris  36:47

Some of these things we’ve already touched on. And I guess I’m particularly addressing this to the senior management team, because they’re the ones who are going to be able to influence some of these things. First of all, no client bigger than 50%. So if you’ve got a client at 50, I’m not expecting you just overnight to bring that down, but at least have that as a two year/ three year plan, whereby you hang on to that client, but let’s grow everything else we’ve got. And so that’s number one. The next thing is really understanding your impact and value. The impact and value that you’ve had on your clients business. And that you do by having conversations with those senior clients, asking them questions. So you can say, So Jenny, I’m curious this year, what kind of impact have we had on your business? What are the results saying? And what they say, collect this, this is dynamite, this is put it in your what I call your ‘value bank’. This is so powerful, because it reminds clients about how much you’ve impacted their business. Push for those senior client relationships, increase your prices, you asked me about how often we should do that, I think minimum once a year. Secretly, if you do it every nine months, then you kind of get a kick out of that – every four years, you’ll get a five price rises.

 

Jenny  38:20

What a tip that is!

 

Chris  38:22

Yes. Agencies become fitter, and they develop their kind of financial six pack, as they become fitter their confidence grows. And guess what, clients can smell your confidence when you walk in the room. They can smell a new agency that is on the front foot, or use an agency that’s been beaten up. So what happens then, is that if an agency then wants to sell in three years time, if you have grown your profitability and not just growing the top line grown the bottom line, then you feel better, you feel more confident, you’re more attractive to other agencies, or quite often, I can help agencies get themselves to have the equivalent of that six pack. But just like when we join the gym, they’ve got to do the exercise. They’ve got to do the hard work, they’ve got to do the heavy list lifting, I can show them the exercise I can show them this. So Jenny, one of the things I’d say to your audience is, in three years time, in 2025, where do you want your agency to be? What do you want it to look like? What kind of clients do you want to be working with? What kind of skills do you want to have? What kind of relationships, what kind of contracts? What kind of rates do you want to be at? So have that vision of where do you want to get to and then okay, so how are we going to do that in the next three years?

 

Jenny  39:53

I bet you’ve seen some transformations working with agency leaders, haven’t you Chris? Because I do remember the feeling of coming out of your workshop actually, and just feeling really empowered, feeling like, wow, yes of course, this makes so much sense. And it kind of gives you that sense of right, come on. And obviously, you work with clients over a period of time. So you must see that they implement something and then grow in confidence themselves and probably, that’s self perpetuating, isn’t it?

 

Chris  40:22

It’s one of the most exciting things, apart from a client paying an invoice, is seeing an agency, I guess it’s a bit like seeing your own kids grow up. And that it becomes more profitable, which is nice, but that’s almost a byproduct. And I think it’s that their confidence grows. And it’s almost like they grow a couple and you go Oh they’re wearing heels or something! Because they feel better in themselves. And they’re qualifying better, and they’re attracting better clients. And because they’re confident, they’re coming up with better strategies. So it’s like an ecosystem that keeps feeding in on itself. And I’m sure you’ve seen this, when we have more confidence, we’re more attractive. Don’t be cocky and arrogant. But when we have that confidence, we feel good. We come up with great stuff, great ideas and great strategies, great ideas, great creative work. And now clients want to work with us.

 

Jenny  41:33

And the cojones are bigger! And I agree with you. And do you think Chris, sometimes it’s just being someone externally like you, who is very experienced, that’s got all the expertise, giving them permission to kind of do it? I mean, partly how to do it, but also, this is okay, you can do this.

 

Chris  41:56

Yes. It’s about empowerment. And I’m often quite surprised because agency MDs, CEOs will then say to me, they didn’t feel empowered, but they do now. I gave them permission, but I don’t know, maybe they didn’t hear it. And I think there is something as an independent, that you have a certain objectivity, I guess. Having worked with 150 agencies or so then you have that objectivity. I’ve seen the mistakes. And one of the scary ones is when an agency goes down, I call it gets stuck in the mud, their profitability goes down to below 10%. And what happens then, is that they – have you ever been in your car, and you get stuck in mud? And you rev up and the mud is flying everywhere, and you make a lot of noise, but you don’t get out of the mud. And the danger is that an agency therefore makes a lot of noise, but carries on making the same mistakes that don’t get it out. So it keeps accepting poor quality briefs, poor quality clients, not increasing their prices, etc. And then wonders why it’s still stuck in the mud. And one of the hardest things for an agency is to get out of the mud. Really, really tough. I mean, you must see it because you’re you’re doing some amazing stuff, working with account managers in terms of building their thought process. And I bet one of the things that you see, you look at certain people, and you think if I worked for an agency, I’d love you in my team. And you can just spot it, there’s a certain something, they’ve got that magic, that glow in their eye.

 

Jenny  43:48

I agree. And I always talk about the story of why I do what I do. And the turning point was a bit like you said at the beginning, about having sales training. Sales training changed the game for me. And I felt a bit, it was almost like, once I’d seen it, I couldn’t unsee it. And then I would actually look at some senior people within my organisation, who were in a new business role, who were committing all of the stuff that I knew was wrong – being too subservient, agreeing to everything, being pushed over. And it was embarrassing, and I actually felt a bit ashamed. I thought really, we’re better than this. We’re giving so much value. So maybe some people that go through your training also feel a bit the same as I did. To think, come on, we do do great work, and we’ve got to get smarter about how we run the business for sure. I mean, we talked about the situation we’re in right now, this lockdown, coming out of lockdown. And you listed some of the things that clients are expecting more of from their agencies. And how have you seen agencies responding to this behaviour? Have you seen agencies stepping up? Or are they still struggling? What are you seeing?

 

Chris  45:09

A whole mix, a whole mix. I’d love to be able to say agencies are stepping up. Some are, some are, but some of them, it’s that F word that we talked about earlier. The fear. Barack Obama talked about ‘hope is not a strategy’. Hoping it gets better next year is ridiculous. It will only get better if you do something about it, if you take responsibility for how you work with your clients. When I was at school, I remember my English teacher telling me you must never put the same word in a sentence twice. I took that very religiously. And then I came across a phrase, which I love, because it’s got the same word in it three times, which is, ‘The business of business is business’. And it’s about recognising that business is a game. And it’s played for incredible stakes, fantastic stakes, and you’re in competition with experts. And I’ll come back to those experts in a moment. And therefore if you want to win, you’ve got to learn to be really good at the game. So whether you are watching football or rugby or tennis, it’s about understanding the rules of the game, and how do you manipulate those rules for you to win. I said about, you’re in competition with experts. Not only have you got what are called the traditional competition, you’ve got new competitors coming in. So the last I heard and it’s probably increased since I last heard it, Deloittes had bought something like about 180 digital agencies worldwide. Now, the interesting thing about a company like Deloittes is that they’re going to have people who think very differently to agency folk. And so they’re going to bring in much more of a kind of discipline, financial discipline, they’re going to know how to argue a business case, they’re connected up at the top table at C suite level. And therefore, I think that they’re going to bring in, I think that discipline will be great. Whether they have the same level of creativity, I don’t know, we could argue about that. But I think they’re going to bring in some discipline and commerciality that is going to be really good.

 

Jenny  47:32

I’m so glad you brought this up. I interviewed a friend of mine, Richard Long, who many years he’s worked agency side, but he’s also worked for a management consultancy. I agree, Chris, the top four global agency groups, digital agency groups are all management consultancies, Accenture, just as you said, Deloittes,  PWC and I think the other one was IBM. And he talks about their land and expand strategy. When do you hear agencies agency folk talking like that? It’s a completely different mindset, isn’t it? And I agree with you, it’s only a matter of time before their philosophy on getting into businesses and helping them financially, dealing with the C suite is going to infiltrate, and then that’s our competition now, isn’t it? Do you see it that way?

 

Chris  48:23

Yeah, absolutely. The ability to be really numerate, really understand and be commercially savvy, that puts them at a huge advantage. Because it’s a bit like getting into a fight with a martial arts expert. If I’m going to be on the floor looking up wondering what happened and that martial arts expert is just going to look down and smile, because they just did a couple of moves on me. And I did not know what was happening. And the likes of both the four companies that you talked through, and I think WPP was the fifth, I couldn’t believe it when I saw that list – what? How has that happened? Basically what they’re doing is, they are taking your lunch and your dinner and maybe your breakfast as well. As so it comes back to what I was saying about the businesses again, if you’re playing against experts, you’re in competition with experts, so you’d better get really good and get smart about how you’re going to win the game.

 

Jenny  49:35

I totally agree. We haven’t really talked a lot about procurement, but procurement’s a bit the same.

 

Chris  49:43

Do we have to?!

 

Jenny  49:43

We do actually! Like management consultancies, they’re very highly trained aren’t they, they’re very commercially astute? Procurement teams don’t end up in a procurement role without having had a huge amount of negotiation skills training. So can you just share a little bit of insight into or tips, how agencies can better prepare themselves for discussions with procurement?

 

Chris  50:17

I love that last phrase that you just said which is, How agencies can better prepare themselves? Because that preparation is a key part of it. So what are the things that I would recommend that you do? You’d better know your numbers. And then again, this comes back to square one. Talk to your clients, your marketing clients about how much have we impacted your business? Get some numbers from them and monetize that value, that impact, so that when procurement coming knocking, you can have that conversation with them. Talk to your own finance director about how best to present your financial information. Because financial folk and procurement, their brains work very differently I think to the typical agency person and therefore we need to get good at knowing how to talk to people who are much more black and white, who are much more financially astute. Actually, one of the things that I have seen over the past five years increasingly, but it’s still small I think, is commercial directors in agencies. And I think that’s a really good thing, that the days of the finance director being held back, playing a kind of a backroom role is certainly going if not gone. I think finance people have a much bigger role to play in terms of how we talk to our clients financially. So I’d almost be tempted to get them involved in your discussions with procurement. Try to get your marketing client to be at the same meeting with procurement. And I know sometimes marketing people say Oh you must go and talk to my procurement people, come back and tell me. The trouble is procurement is, they’re very popular with the C suite, the CEO, the MD, they love them, because they’re putting money back into their business. And they’re helping them procure and buy stuff. I think it’s about knowing how to have a conversation with them. And therefore your ability to negotiate is going to be absolutely crucial. Many of your clients, many of your agency’s clients will be very well skilled in how to negotiate. And a bit like that martial arts expert, I was just talking about, that if you’re not, you’re going to be at a huge disadvantage. Huge disadvantage. So preparation, anticipating.

 

Jenny  53:03

Absolutely agree. Chris, you and I have been around for quite a while in the agency space. How have you seen agencies change over the years when it comes to client relationship management? And also, how do you see things changing in the future?

 

Chris  53:19

I think the relationship has always been important because it’s about the big T word. It’s about trust. Because if clients don’t trust you, they’re not going to buy from you. And how we build trust. It’s not about taking them out for drinks and lunch. That’s not really where you build the trust. It’s about delivering on what you say you’re going to do. Being in the room is probably easier to build trust. It’s about building the right relationships with those senior clients. And the stronger that is, then the less important price becomes. Because some work that McKinsey did, they spoke to B2B buyers, and they were looking at where is price in the current list of criteria that buyers are looking for, not just from agencies. And typically they found it somewhere around about number three, number four, sometimes number five. So what we’ve got to get good at is understanding what’s above it. So what are the two or three things that besides price are really important to our client? The relationship is crucial. It’s about building that trust. It’s about your questions. It’s about listening. And like any relationship, relationships aren’t static. They’re either in the process of going up or they’re going down. And therefore, you need to be thinking about how do I build it up? And if you haven’t seen your senior client for six months, do not assume it’s the same level but it was six months ago. You need to be, agencies need to be working really damn hard on how do we build that connection? I mentioned Kingston Smith earlier, the firm of accountants who are now called Moore Kingston Smith. And one of the things that they track is agency profitability. And I’m pretty sure I’m right in saying over the past 25 years, every year average agency profitability has declined. Average agency profitability has declined. Now, that doesn’t mean all agencies profitability has declined, it means on average. And therefore what that means is that if you don’t want to be declining, you’ve got to think smarter. You’ve got to be more commercially savvy, which is what we’ve been talking about for the past hour or so.

 

Jenny  55:47

Agreed. I think I went to an IPA event, I think it was only two years ago, where they talked about the profitability of an agency and their average was 9%.

 

Chris  56:00

Outrageous.

 

Jenny  56:01

Isn’t it?

 

Chris  56:02

Really where you want to be, is 15% as a kind of minimum. You want to get to 15 because now your confidence starts to grow. If you can get to 20%, now you feel really good. Because it gives you the ability to say thanks, but no thanks. To push back because you’ve got that kind of backing behind you. In fairness, it’s really hard to say no, when you’re down at 10 or lower. You talked about seeing agencies that have really kind of grown, and the ones that are coming to my mind, I’d love to mention their name but I won’t, that where I’ve seen them grow, one of them from 2% to 28%. Now that took six years to do. That incredible, fantastic management team, the MD she was brilliant. Her name was Nikki and I won’t say any more than that. Just superb in terms of how she built the business, their retention of people was superb, her churn, I remember her telling me it was 7%. Clients wanted to work with them. And once you get into that situation, then you can start to not dictate but you can be much more stating what your price is going to be. And that’s where you want to be You want to be the choice of one that the clients want to work with you, not you or your 10 competitors.

 

Jenny  57:44

Absolutely. Chris, you’ve shared so much value, there’s so much here. And I’m sure everyone’s kind of hanging on your every word now, because you’ve just dropped so many value bombs as we’ve gone through, but I’m conscious of your time. Any final advice for agency leaders who want to set their team up for success when it comes to negotiating?

 

Chris  58:11

You’ve got to resolve them. You’ve got to take responsibility for these clients. I wrote an article a couple of weeks ago, and the name of the article is, ‘Agencies scramble attract talent amid the shortage’. And there are six tips in there and you can go to my website, and the article is there or if you drop me an email, I’ll send it to you. And on that note, if you want to subscribe to my newsletter, which is about once a month, specifically articles about agencies, predominantly commercially savvy ones, then send me your email, and I’ll put you onto the list. Between now and the end of the year, I’ll send three copies chosen at random from the list of people that send me their email. And I hope that will help in some way. So what is my email address? It’s chris@spring8020.co.uk, website is spring8020.co.uk

 

Jenny  59:30

Fantastic, Chris, thank you so much. We’ll obviously put the links in the show notes. You’ve shared so much value and I personally, a huge recommendation from my side because I’ve seen Chris in action. His delivery is superb. He’s got so many great stories as well that he throws in, but you come away with a practical approach to making your agency more profitable. There’s no doubt about it. So Chris, thank you so much for taking the time to join me today. I really, really appreciate it.

 

Chris  59:58

Jenny thank you for inviting me and from what I can see you are doing some brilliant work yourself, working with account managers, which is just superb and you’ve brought, I think, a real kind of freshness and enthusiasm to what you’re doing. So I wish you well. Hey, maybe we should do another one of these at some stage?

 

Jenny  1:00:18

I agree, definitely a round two in here. There’s so much here. Thank you so much

 

Chris  1:00:22

Great, you take care.

Jenny

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