The ad agency sales cycle can be long. The average tenure of an agency-client relationship is about three years. The average CMO tenure is about 3.3 years. What's worse (or better if you have one), according to R3, the Top 40 client-agency relationships last an average of 22 years. So, when an agency leader says let's find a new client, what they are really saying is let's find a needle in a haystack.
Research suggests that only 3% - 5% of marketing decision-makers are in the market at any given time looking for a new agency. That alone has significant implications for advertising agency business development but needs to be more noticed and understood. 3% is a tiny slice of all potential prospects, yet many agencies focus on that. It's not zero, but very close. Agency leaders too often expect their business development people to shake the trees, dial for dollars, and hunt and capture anything out there. If they aren't successful, it must be a problem with them. No wonder business development people turn over more frequently than their prospects.
We all know that only some marketers are actively seeking to hire an agency at any given time. Too many are optimistic about how many actually are. So few that it seems hardly worth the time and investment to pursue. The idea of cold calling as a method to catch random prospects looking to buy seems incredibly ineffective. What often ends up happening with that 3% is your outreach is too late, so they are not interested or never reply, and you move on to the next. The engagement rate is low. The close rate is low. You fire the BD person and start all over again.
This approach has a lower success rate but vital for agencies in a slump that need revenue quickly. But it should not be the only strategy. It is much better to align with the actual dynamics of the market and go after those clients who can help the agency grow and mature. But then again, we all want new clients right now, so let's all fight over the 3%. Really?
Can that percentage be correct? If the average agency relationship is three years, half are three or more years; half are less than three and distributed across the timeline from three to zero. That means 75% are currently in a relationship of 1 to 3 or more years and are not thinking about or open to exploring a new relationship. Your outreach will be ignored. Could the remaining 25% be in play? Some portion of those may have committed all their budget and won't change until the next budget cycle, or their funding has been reduced, making it too hard to find a suitable replacement. Some percentage are actively looking for a new job, considering taking the buyout or retiring, and don't care about changing. Again, your outreach will be ignored.
Whatever the actual number, it seems small. In uncertain or recessionary economic times, that number will likely decrease due to company belt-tightening. If only 3% are actively searching, what about the rest of your prospects? They are operating on their timeline rather than yours, defined by the cycles of their business and the marketplace. You can be sure the majority already have an agency or agencies under contract. Unless something goes sideways in the relationship, they will only change agencies once certain events occur. You can't make it happen with aggressive prospecting. Unseating the incumbent between cycles is almost impossible; however, a need will arise eventually. If you aren't on their radar, you may be overlooked, your outreach may be ignored, and you'll be back in the 3% group.
Think about it this way. For those 90%+, you have ample time to make sure they know you (out of sight, out of mind has never been so true) and understand why what you do can help them. Between now and whenever their needs arise, your goal should be developing a relationship, shaping perception, and demonstrating value. You may have a quarter to do it, a year, three years, or even 22 years if you go after one of those top clients. The point is that you need a prospecting strategy that casts a wide net to engage those few in need right now and a different approach for those who aren't ready now but will be in the future. Prospecting should never be a one size fits all strategy.
What circumstances keep a marketer from responding to your expertly crafted outreach? Some marketers might want to change their agency but can't because of company budgeting cycles. Whether annual or fiscal, they may be locked into their current agency for the budget cycle and focused on achieving their KPIs or saving their job. They would have no time or interest in talking to other agencies in the near term. But there will come a time when they do, and you will want to be top of mind when that time comes.
Some small fraction may be in an extended 22+ year agency relationship, committed to keeping that agency forever, and have no interest in talking to others. These marketers often bring those agencies with them when they change jobs. Unless something catastrophic occurs in the relationship, these marketers trust their agency partner beyond reproach. These prospects waste your time, but the brand might be different. If the senior marketer changes roles, leaves, or gets fired, their long-standing agency will likely go too.
Don't forget new marketing hires. According to research, 10% - 20% of professionals are thinking about or actively seeking a new job and not thinking about changing their agency. Of those who find a new job, about 80% will change their agencies within the first year. According to Winmo, it usually happens about 6 – 8 months after they start. I like those odds much better than the 3% agency shopping right now. It is always a good idea to set google alerts about marketers in your industries and new hire alerts so you can respond to changes early and begin building awareness.
Understanding how this marketplace works will improve your business development success. Many agencies I talk to put all their efforts into pursuing the 3% - 5%. Their business development strategy looks more like the Whac-A-Mole game, pouncing on whatever pops up in the press or a tip from a vendor. This results in a constant fire drill or, worse, periods of no activity, much navel-gazing, and aimless networking. I'm sure these agencies recommend something other than a Whac-A-Mole strategy to their clients. Why not themselves?
Given these dynamics, agencies that want to grow must adopt a longer view of success. For example, when a company begins its budget planning, say four months before the fiscal year-end, you can spend your time between now and then shaping the perception of your agency in anticipation of that time. You can demonstrate value while staying top of mind. A new budget may signal a new agency search. If you started with an educational approach months ago, you'd have a better chance to be on their radar or at the top of their list. Suppose you know when an incumbent agency was hired. You can predict when their contract comes up for renewal and strategically work towards that date demonstrating creativity and value to compare with the incumbent. If you track new hires, you know that changes will likely be coming soon and focus on developing a relationship ahead of the search.
Creating a two-part strategy allows you to work whatever opportunity is available short term and pursue strategic prospects according to their needs and schedule. A Prospect Opportunity Timeline is a tool to organize critical dates, contract periods, budgeting cycles, and other significant events to plan your strategy and approach to win the kind of clients you want. You can also forecast future revenue more accurately using historical engagement, budgets, and closing rates data. Applying more of your time and resources to the kind of clients you want to work with will allow you to control your agency's growth strategically and get out of the Whac-A-Mole fire drill. Of course, any prospecting is no silver bullet, but there is a silver lining. Instead of chasing anything that moves, pursue what matters most to your agency's vision.
Time To Reset!
Are you debating how to reshape your business development approach? Are you considering a specific consultant or firm? Need a sounding board? Regardless of whom you are considering or where you are in your planning, I promise an honest, objective POV no matter which path you take. Check my calendar and find a time most convenient for you. Remember to sign up for my new business newsletter if you aren’t already. Find me on LinkedIn for daily tips and insights. #LetsGrow!