The first thing everyone thinks about when you mention advertising agency business development is prospecting – the attempt to intersect need out in the wild. Book after book tells us how. Consultant after consultant shows us how. Tools and databases help us be smarter. Agency owners are recommitting themselves to doing it better. But the opportunity for growth is much more than prospecting. If it is your only source, two other ingredients are missing from your new business plan.
Prospecting is very hard. Response rates are declining. Win rates are low. The investment in people and pitches is high. And the disruption to the agency is extreme. Contrary to prospecting, the data tells us that personal recommendations, a friendly introduction, a trusted source, a credible referral are the top factors that lead to new business. Cold calling, lack of differentiation, no awareness, too much competition are the top reasons that new business fails. Putting all your effort behind a BD leader and sending them out into the wild may just be ignoring as much as two-thirds of your opportunity to grow.
There are three primary sources for new business and healthy agencies generally grow in three ways equally. The first is prospecting which accounts for about a third of new revenue. The second is organic growth among existing clients which contributes another third and referrals bring in the rest. Agencies who are aggressive prospectors but leave the second two opportunities to chance are leaving money on the table. In fact, data shows that organic growth and referrals are far more likely to lead to a new client and far less expensive than prospecting.
Why then are these areas neglected? From conversations I’ve had with agency owners, I believe it is a couple of factors which can be resolved pretty easily. It starts with leadership acknowledging the importance of all three channels and developing individual plans to attack each. It may require some training and coaching of staff and incentivize those involved. Most importantly, it is a cultural change. As Philip Kotler said, The sales department isn’t the whole company, but the whole company better be the sales department. Personal connections, networking, and referrals are the richest sources of new business. Developing a strategy and implementing a process to leverage these sources is time well spent.
There aren’t many good resources for organic growth specific to the agency world. This from Prophet is one. Recently I became aware of an interesting new tool for agencies called rova.io the client services engine. It helps to automate, accelerate and track new opportunities with existing clients. The biggest barriers I have seen in agencies is two-fold. They don’t have a good account planning process, and they don’t have account leaders who are aggressive new business hunters. I’ll layout a proven approach to increasing organic growth in a future post.
Another challenge is the lack of time available for account leaders to focus on organic growth. They are typically overscheduled with client work and have little time to think about or plan for new opportunities. Management needs to ensure they have time allocated to client growth. And then there are the endless issues within the client relationship that diminish the account team’s ability or confidence to ask that client for more work or help to introduce the agency to their peers. Having someone other than the primary account person do the hunting helps get the favor out of the fray. It may be the president or head of strategy; whoever can engage the client outside of the day-to-day struggles.
And there are very few resources for activating referrals within the agency business. You can try this from Dave Curie at TheList and this from Hinge. One thing I have observed among agency leaders is an overly humble perspective on the value of their work. They are reluctant to ask a friend or associate to make an introduction because they think they are merely selling something. The right perspective is to suggest an introduction because the agency can solve their business problems. They forget why their clients hire them and why they keep paying them for their service. Agencies generate revenue, increase profit, grow the value of their client’s business and provide a very favorable return on their investment. Why wouldn’t they want their friends and colleagues to benefit as well? I’ll share more about referral strategies in a future post.
Agencies that have strategies to maximize all three channels will see consistent, predictable growth year over year. That doesn’t mean you should be any less aggressive finding new business. After all, it should be contributing about a third of your new revenue. But think about the way you look at your business overall with three distinct areas where new revenue will come in. Diversifying your sources will help smooth out the peaks and valleys in any one channel and provide stronger revenue growth overall.
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