No doubt you are in the 4th quarter scramble to capture everything you can from your current clients before the buzzer sounds. At the same time, you try to schedule meetings with your leadership to strategize growth in 2017. But those attempts quickly fade as client needs pile up. So goes the end of the year dance between today and tomorrow. And what will tomorrow bring for ad agencies? Between staffing, healthcare, FLSA, the economy, increasing competition and declining profitability, you will likely need to grow by at least 5% - 10% just to stay even. But hey, it’s just another day in Adland.
When you get to planning, here are a couple of things to think about in 2017.
The competition will be unprecedented
You may recall in a previous post I talked about a survey of more than 500 marketers fielded over the summer that reveals an unprecedented number of reviews, about 65%, planned at some point over the next 12 months. On the one hand, there will be more opportunity for agencies to pitch new clients in 2017. On the other hand, more of your current clients may be planning a change. We’ve all seen recent statistics about agency-client relationships turning over more often – as frequently as 2.8 years on average. I think It is going to be an unprecedented year for all of us.
More often we read news reports like this one of digital agencies expanding their capabilities to compete for more clients and more business. The trend is not new however based on the frequency of reports the impact is growing. Pure digital agencies aren’t satisfied with their pace of growth and are going after opportunities that include traditional services. What used to be a clear delineation between competitors is now blurrier than ever, and marketers may see the advantage of working with these firms as a new solution or different approach.
The research may be a bit extreme but consider all the forces at work in the marketplace which will affect you in 2017. A sluggish economy means marketers will continue to do more with less. Rising business costs put marketing budgets on the decline. An increasing number of agencies start-ups, hybrid service providers, and more digital firms becoming full-service providers. Your slice of the pie just got smaller.
Marketers feel the pressure
The International Monetary Fund downgraded the economic growth outlook for the United States to 1.6 percent in 2016, which is the largest one-year drop seen for an advanced economy. The Global Marketing Index stated that overall marketing budgets have been declining since 2014 and will continue to do so as overall business costs continue to rise and GDP growth remains stagnant. The election is imminent but the impact won’t do much for 2017.
Businesses’ are forced to do more with less. That means marketers are expected to achieve higher results from a lower budget. This is the new normal and continues in 2017. The mandate from shareholders and the C-suite is to invest more frugally and more efficiently. This puts even greater demands on the marketing organization and ultimately on their agency’s performance. Marketers can’t accept this year’s results for next year forcing them to seek new resources with greater knowledge and expertise, try new approaches, and make budget decisions that will achieve better short term company growth. The days of long-term brand building are crushed by stagnating growth and the need for maximizing profits today. The increasing need for short-term results will keep everyone scrambling.
BD response rates are declining
Sales data from many different studies including my own prove the continued decline in response rates. Marketing, in general, suffers from these declines and advertising agency business development is no exception. What used to take three attempts on the phone is now 8 – 13 tries, on average. What used to be 40% open rates for B2B email is down in the teens. All these data points are pretty grim, but the real casualty is your BD people. They have to double and triple their time and effort to get even one conversation going compared to just 3 – 5 years ago. Are you also expecting them to do more with less?
I haven’t seen any data on why these declines are so pervasive, but my theory is that, in part, the increased competition among agencies and the increasing pressure on business development has fueled an overwhelming amount of clutter, cold contacts, worthless content, bad pitches, and spam. In essence, we’ve done it to ourselves. By cutting corners, ignoring best practices and disrespecting our prospects, the result is that they are tuning us out in ever-increasing numbers. And why not? They have even less time to waste. Again, this is nothing new. What is new is the degree of declining response rates. The combination from both sides of the equation will continue to frustrate agencies in 2017. There has to be a better way.
It is a Mobile-first world
Nearly 85% of mobile subscribers in the U.S. now own smartphones. Last year that number was above 80%. You can be sure 100% of your prospects do. Search accounted for nearly half of all smartphone traffic (43%) in Q1 2015, up 5 percent from the prior quarter. Yet only half of websites overall are mobile-friendly. Looking at Google Analytics for my clients, I see about 42% of qualified prospect traffic from mobile devices, a number that is increasing every month. In April 2015, Google said that smartphone visits grew 35 percent year-over-year.
Remember that marketers will check you out on your website from their mobile device before you know they are looking. If your site isn’t optimized for mobile you will make a bad first impression for more than half of your potential new clients or worse; you’ll never even know what you’ve missed. Maybe it’s better that way.
BD tools are improving
Some good news for 2017. The tools and resources available for new business have never been better. I posted a review of the marketing automation system I like, but there are so many to choose from. Data that used to be elusive can now be at your fingertips for smarter decision making. Agency changes, client changes, new hires, promotions, product launches, all the triggers for new business can magically arrive in your inbox. Even better news, these tools are more affordable, easier to use, more comprehensive and better than last year’s versions reducing the time it takes to see value in your investment.
Why invest in these tools? Tasks that used to be time-consuming can now be easily automated so your people can spend more time on the things that really matter. And over time you build rich prospect profiles, an advantage when that prospect is looking for an agency moves up in the organization or moves on to another company. You better understand the behavior of individual prospects so you can tailor your approach to what the data says works best. You gain a data-informed understanding to eliminate the low-return activities and shift your time to the most successful tactics that drive better outcomes and better close rates. These tools give back the most precious asset in today’s business development battle, time.
Change is a real problem
Finally, marketers overwhelmingly agree that “The industry is changing so fast now.” In 2013, Adobe found that marketers believe it had changed more in the last two years than in the past fifty. Imagine what the perception will be in 2017. Agencies won’t be viable if they don’t keep up with the change. Yet too many don’t believe it is a real problem for them. They say things like their clients think they are great or they get compliments on their website or they win awards for their work. This is the classic echo chamber. Again, we are our own worst enemy.
It is imperative that agencies benchmark themselves against market leaders, marketers and the leading edge of the industry to understand why seemingly insignificant things like labeling your capabilities as ‘Interactive Services’ is so 2010. Agencies that stand out and provide the things that are important to marketers in 2017 will get noticed. Read this post to understand why. Those that can articulate relevant and timely value will get marketer's interest. Agencies that demonstrate knowledge and confidence about the things challenging the industry today and tomorrow will get invited and those that can satisfy a marketer’s need for greater knowledge, expertise, and new approaches will win.
Simply put, to separate your agency from the clutter, you have to demonstrate great knowledge and expertise. How else will potential new clients see your firm as a solution to the things they believe don’t exist at their current agency? To make your agency more appealing, you have to champion new thinking and approaches otherwise, you look like more of the same. To make your agency a safer choice, you have to have proof of your effectiveness, data to back it up, and client results to show you get it. You can no longer accept the excuse that your client won’t give you the numbers. Figure them out for yourself.
There is a lot to consider about your new business in 2017. And while the challenges are formidable the opportunity is enormous for agencies that can figure it out. I’ve witnessed the qualities of agencies that somehow seem masters of these market forces and continue to beat industry rates. I've also seen firms who can’t get above the 5% - 10% win rate. The agencies that I’ve worked with share many of the same challenges – no time, limited resources, inadequate tools, poor follow-through, too many misses. Does any of that sound familiar? I help agencies develop business development programs that get them growing. I would enjoy learning more about the challenges you face and talking about my favorite subject - advertising agency growth. Let's connect. Lets Grow! In 2017
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