The biggest problems currently plaguing agencies stem from a single source: loss of power in their client relationships.
Issues impacting day-to-day operations such as agency burnout and the “great resignation” are handicapping many agencies because they’ve caved to client demands that they should do more for less. It has pushed agencies to the breaking point, with staff bearing the brunt of it. Understaffed agencies then struggle to service existing clients and win new business.
How can agencies break out of this self-destructive cycle?
Nothing will change for the better until agencies regain their power. It’s easier said than done, but there are clear steps to get there.
The ability to show proof of results, ROI, and demonstrated value sets the table for how an agency will be regarded by prospective clients at the start of a new business relationship. Clear proof points that tie to business outcomes allow an agency to enter from a position of strength. Not only is demonstrated value a key differentiator, making the agency more desirable, but it also gives the agency more power in contract negotiations.
Though the most important differentiator is arguably the ability to demonstrate value, any unique quality that is desirable to prospective clients and differentiates the agency can give the agency power in contract negotiations. The idea that “we’re the only ones that can do this” (or “offer this,” or “do this as well as we do”) can be compelling if prospects perceive it as a necessity. That might be creative talent, niche expertise, or a combination of service offerings.
The problem with relying on a unique offering is that it may be difficult to maintain over time. Talent can be poached, and other agencies may be able to build up expertise or duplicate your offerings, and then your “special thing” loses some of its luster. But if you always connect your “special thing” to demonstrated business results, then it matters less whether your agency is a true one-of-a-kind because it will also be desirable based on its business value.
Access to data and proof points
Not all agencies have equal ability to demonstrate value. And it’s not just because some work is more effective than others. The ability to prove ROI and tie creative campaigns to business outcomes depends on access to data often controlled and owned by the client. Whether they share that data or approve it for public consumption can be a real roll of the dice. It puts agencies at a major disadvantage when seeking new business.
Agencies must proactively address reasonable access to and use of data and proof points in contract negotiations. Don’t underestimate its value for future growth and revenue potential. There are many ways to tie creative work to business impact. Think about how you will do that upfront rather than on the tail end of a project or a client relationship. Seek advance approval instead of chasing down permission after the fact.
How do you secure that access to critical data upfront? And how do you leverage your position of strength to push back on the “more for less” machine to arrive at reasonable contract terms? Get better at negotiating. Become an expert in it. It starts with not saying “yes” to everything.
“Agency people have a reputation for saying “yes” to prospective clients when they’re anxious to win them over. To show that an agency is gung-ho and easy to do business with, agency leaders say “yes” to spec work, late hours and unreasonable deadlines.” — Jody Sutter, The Sutter Company
Agencies have historically been weak at new business negotiations. Peter Levitan’s book “The Levitan Pitch” includes insights on negotiations, compensation, and procurement (among them: “Most agencies don’t do any formal negotiating training for their staff.”) It reveals that agencies have significant room for improvement in this area. Building up your agency’s negotiation skills is an easy way to regain power.
Mike Lander, founder and CEO of Piscari (and ex-procurement director), has also recently written a series of helpful articles on negotiation tactics for agencies at The Drum, including one on emotions at the negotiating table and one on negotiating with procurement.
Equal business stature
This is something we repeatedly emphasize at The Duval Partnership. Equal business stature should convey across your communications with prospective clients, but it is vital in negotiations. It goes beyond “not saying ‘yes’ to everything” the prospect asks. More than that, you have to believe in your agency’s worth and your own.
All of these key elements to regain power in client relationships build on themselves. It is certainly easier to believe in your agency’s worth when you can walk in the room with clear proof of value...and you need access to data in order to do that. But if you haven’t already created this repeating loop for your agency, it has to start somewhere. One of the easiest places to start is with equal business stature (even if there’s an element of “fake it ‘til you make it” in there). Equal stature allows you to enter negotiations from a stronger position, ready to push back on things that matter.
Note: It helps if your agency is in a position to say, “we’d like this business, but if we have to walk away from it because it doesn’t make sense, that would also be okay.” A lot of agencies today aren’t in that position. But taking business at any price, under any terms, can put your agency on another repeating loop — one that accelerates its desperation. One way to prevent your agency from getting into this position is to maintain a strong pipeline through ongoing new business outreach.
What’s the alternative?
Can your agency carry on doing business without regaining its full power in client relationships? Absolutely. It’s exactly what many agencies have been doing to get by for decades. But in the long run, it’s a dangerous course, one that is likely to see you forced to compete on price.
An agency can get new business based on lower costs and compensate by underpaying employees, narrowing scope, cutting corners, or reducing overhead — but getting the business by any means doesn’t earn power and respect.
There’s a world of difference between getting a green light on a project and being seen as a true business partner. The ability to be paid what you're worth and grow alongside your client partners requires a baseline of equal stature.
Which path will your agency take?