One of the big problems marketing firms face when thinking about new business is trying to understand the math.

New business math tells us how many clients will change each year.

New business math tells us how many clients will change each year.

Have you ever wondered just how many clients are satisfied with their current agency at present? Or just how many clients will look around at other firms during the next 12 months? Who in your market is going to invite another agency to stop by? Or perhaps go and visit another agency? Perhaps start a search? Or even worse, engage a search consultant? Is your perfect “client” writing an RFP right now that you don’t know about?

Just how many clients will actually change agencies during the next 12 months?

Ad Agency Client Churn.

I was there when Budweiser ended a 79-year relationship with DMB&B. And how many of us remember when Harley Davidson parted ways with Carmichael Lynch after 31 years? Or when Dr Pepper broke up with Y&R after 40 years? How about when MetLife,  after 83 years, cut Y&R? The list goes on and on… We all understand the client-agency relationship has changed. But how many of us have thought about that from the new business side: the math of all this change for new business hunters?

AAR now reckons that the average life of a relationship between agency and client lasts between three and four years. A study of US-based CMOs, commissioned by Adweek early in 2008, asked how many of them planned to change one or more of their agencies in the coming year. Forty-five percent of those surveyed said they intended to fire at least one of their agencies.

Avi Dan’s consulting group Avidan Strategies, a marketing consulting firm that works as search consultants for agency RFP and agency selection reports that:

“Relationships are fraying and turnover is accelerating. Agency tenure has been declining steadily…”

This means that if you have 100 prospects in your target-list, around 30 of them will be hiring a new agency this year. And what if you have 200 prospects in your pool? How about 500?

The Famous No-System New Business System.

Yet, even with all this turnover, we are always amazed at how many agencies have no formal new business system in place. All of their leads are generated from infrequent activity and casual referrals. There is NO system in place to generate leads or referrals. Most firms don’t even have a centralized prospect list!

I recommend that you have between 500-600 strong prospects that you’ve targeted as a good match for your firm, and that you have an active program to reach out and touch base with them every other month or so.

That means around 180 prospects could offer you a chance to win their business in the next 12 months. That is if you have any type of system to reach out, build awareness, foster relationships, and just connect with those prospects.

New Business Is Too Important Not To Be Your Agency’s Top Priority!

  1. There are many, many lead opportunities out there.
  2. There are so many good lead opportunities out there that agencies should not pioneer by trying to win clients who have never had agencies.
  3. Agencies shouldn’t waste time trying to convince firms with in-house agencies to go outside.
  4. Waiting for leads to come in is a luxury few agencies can afford.
  5. Waiting for leads to come in also means letting the market define who you are. And that definition might be wrong, out of date, and not reflective of the “new you” or the “new you” you want to be.

If you’re serious about growing your firm, then hire an account executive for new business called the New Business Spark. The Spark is responsible for building agency awareness and creating large numbers of relationships with key prospects.

The Spark System is a European way of doing business. European agencies work to establish relationships so they will be invited in when there is a good opportunity.

Most agencies need a new business system that generates a steady stream of leads into the agency. If you don’t have a steady stream of leads, you need a Spark. New business is too complicated, too important and too competitive. 

Twist Image President, Mitch Joel, brings a very stark point of view on these numbers here. And as they say, read the whole thing.

 

Photo by Danyal

Bob Sanders

President at Sanders Consulting Group
Our only focus is helping creative organizations develop new directions for growth and operational excellence. We do no work for clients. We're on your side.