With an increasing number of agencies competing for valuable clients, why is the sector failing to fight to keep its existing lucrative accounts? Rob Furber reports on the temptation to relegate the old as soon as the new is won
Direct Marketing agencies are failing to recognise the importance of nurturing existing client relationships, with less than one per cent of them having a dedicated client retention budget. This is just one of a number of damning findings revealed by Relationship Audits and Management (RAM) in its Client Retention Report 2000.
RAM, a marketing services consultancy, surveyed more than 2,000 client companies who were either in, or in some cases getting out of, an agency relationship.
"Agencies invest inordinate amounts in chasing then new when it's significantly more profitable to build on the existing," says Carey Evans, RAM joint managing director. "In spite of the belief that we in this country are becoming more service-orientated, the ability to provide good service to existing clients isn't getting better." RAM's findings point to many agencies spending little on actively maintaining existing client relationships, with service levels tending to dip following an enthusiastic courtship period. "Many clients have said chief executives within the agencies are all over them at the pitch stage but as soon as the business is won, they're not seen for months," says Evans.
The RAM report further reveals that a regular appraisal of client relationships means once a year to many agencies. "We see the agency head twice a year when it wants to renegotiate contracts," comments one client who wishes to stay anonymous. Evans suggests the culture within many agencies is wrong, with the onus on new business won, while assignments from existing clients aren't lauded nearly as much.
He believes the neglect shown towards existing clients is partly behind the high average yearly churn rates revealed by RAM's survey - 20 per cent for direct marketing services. Evans says that for every five per cent agencies can reduce their churn rate, this can improve profit by as much as 20 per cent on an annual basis.
Not surprisingly, agencies are quick to deny that existing clients are being treated poorly in favour of pursuing new business. Ward Mulvey, Draft Worldwide Edinburgh managing director, cites the fact that it has worked on behalf of Scottish Courage since the agency was set up 12 years ago, and for Whyte & Mackay (now called JBB Greater Europe), and the Scottish Salmon Board for more than eight years. "First and foremost you have to look after your existing clients. The reason we've retained these clients for as long as we have is that we've consistently over-delivered and surpassed their expectations," says Mulvey.
He suggests its good client retention record has also been aided by putting only its best people on these existing accounts and by focusing on the bottom line of how much more product it can help the client sell.
"Some agencies will put their most dynamic staff only on new business and that partially accounts for the high turnover in accounts," he says. "We can grow more effectively by looking after existing clients, rather than putting a lot of resource, time, effort and money behind cold calling."
Terry Hunt, Evans Hunt Scott chairman, says of the RAM report: "It's a valuable slap on the wrist, but it's not appropriate to us. Our major clients - British Gas, Tesco, The Economist, BMW - have all been with us over eight years. We make sure our core business, which is our current clients, takes priority at every stage, and is served by long-standing and experienced managers.
"It's never allowed to be neglected in favour of pitching for new business. The energies of this agency are 90 percent behind existing business and 10 per cent new. Last year was a very good new business year for us. We got 12 wins out of 14 pitches. But if you looked at income, I'd roughly calculate that over 70 per cent of agency income comes from clients of more than five years duration."
Some clients do, however, report bad experiences with agencies, in line with RAM's findings. David MacMillan, Standard Life sales and marketing director, says: "The client has to work hard at the post-pitch relationship. If you expect the agency to be motivated on your account 12 months on from the pitch, some simply are not.
"Some agencies' emphasis is 'once we've signed you up we're pretty confident we'll have you for a couple of years, but in terms of driving the client's business for them, they just aren't up to scratch. That said, our current agency has been first rate in terms of managing the relationship and it has been true to our expectations." Macmillan also points to the fact that churn rates can be affected by factors out of the agency's control such as the client deciding it wants to move in a different marketing direction, or a change of marketing director.
Evans adds that clients are sometimes guilty of not communicating what they want effectively or that the agency hasn't understood properly. "Agencies think they know what's going on but the reality is they often don't," he says.
Andrew Brown, marketing director at Manor Bakeries, the cake division of Rank Hovis McDougall, suggests it is up to the client company to ensure its ongoing relationship with the agency is up to scratch. "There is value in a formal appraisal and I think clients should drive that whether it's every six months or once a year. A format process is worth the time invested in it."
Brown has also had experiences of agencies not maintaining the level of service promised at the pitch stage.
"I think that there's a danger for all businesses to concentrate too much on new business at the expense of existing business. I'd be very quick to tell an agency if it's not providing the service level I'd come to expect.
"There have been examples of that which I wouldn't like to comment on. What it has got to present (at the pitch stage) is what the client is going to get," he says.
Overall the message is clear. Agencies need to work much harder if they are to sustain long term relationships with clients, but it is also up to clients to ensure they maintain an ongoing and frank dialogue with the agency if their expectations are to be met.
TEN ROUTES TO HAPPINESS:
1. Always check for understanding
2. Involve the client in the creative development process
3. Over deliver what you promise
4. Admit mistakes
5. Do the chemistry test frequently
6. Keep on top of detail
7. Make you client's life easier
8. Avoid system incompatibility
9. Incentivise your staff to manage the relationship more effectively
10. Ask for regular feedback on how you're doing
TEN ROUTES TO RUIN:
1. Assumption
2. Hearing but not listening
3. One-way communication
4. Finding out and doing nowt
5. Doing without telling
6. Not understanding the client culture
7. Unilaterally (and frequently) changing the account team
8. Consistently not answering the brief
9. Blaming the other side
10. Doing the reverse of the 'Ten Routes To Happiness'
PRECISION MARKETING 15/05/2000
