How do agency clients behave when there’s economic uncertainty?
There’s talk of a recession, then there isn’t. I’m unsure who to listen to. What I do know is that there’s uncertainty in the economy affecting businesses.
I’ve had a couple of recent conversations with agency heads about the outlook for the coming 12 months. We discussed how clients are behaving and have typically behaved in previous tough times. Now the past doesn’t always predict the future but in this case I recommend we definitely learn from the past. Obviously there will be some client industry sectors that continue to spend or even increase their spend, however there will be many more who tighten their purse-strings.
Conversely a tough year may be brilliant for some agencies who flourish in tough economic times. However, if you suspect this may be a challenging 12 months coming up, then here are some thoughts to help.
I’ve helped several agencies already this year substantially improve their profitability by increasing their fees and rates and knowing how to push back appropriately.
Here’s my top 10 predictions for how agency clients might behave when there’s economic uncertainty.
- Unsurprisingly budgets are likely to be reduced or cut. Or they may be reallocated. Budgets will be scrutinised even more closely. Their approval is likely to move upwards within your client’s company to more senior decision makers. The big lesson is to ensure your work is measurable and focused on mission critical areas for the client so they can see a real return on their money in the areas they prioritise.
- In parallel with point 1 clients will be more focused on your price. At the same time agencies need to focus their conversation with senior clients on Value and Business Impact. Especially where your activity provides a real competitive advantage for your client.
- Previously in times of economic uncertainty there were fewer new business pitches. I suspect this is because clients stick with what they know. “Better the devil you know”. So retention and growth of existing clients becomes even more important. Any new business pitches you pursue must be carefully qualified to ensure you’re investing your time in the right opportunities.
- Clients may become more risk averse. Unwilling to take creative risks (as they may see it) Yet perversely it is often the riskier creative work that provides the standout from the crowd that the client desperately seeks. Generally it is the riskier work which provides the safest solution.
- Short term-ism often prevails. Clients avoid committing very far into the future which can result in ‘knee-jerk marketing’. Clients can become overly focused on today’s challenges and the immediate future. In addition clients will seek an immediate impact from any activity that they do actually run.
- Some large clients may look to consolidate their agencies reducing their overall agency roster partly to get better rates/economies of scale and partly to reduce their time spent liaising with their agencies.
How can you ensure the client continues to work with you?
- Clients often become more impatient when they are under increasing pressure. This can lead to rushing by the client and the agency – that’s when mistakes are more likely to be made. Mistakes are expensive financially and also can affect your relationships with your clients.
- Cash flow may become a bigger problem for agencies as clients hold onto cash just a little longer to access higher interest rates. As I’m sure we all know, turnover is vanity, cash is sanity. Stay on top of your invoice payments.
- Agencies sometimes mistakenly cut their prices when they chase revenue in order to win business at any price. The team is then run ragged. You then risk that your best talent leaves putting even more pressure onto the remaining team.
- Agencies often walk a tight-rope in a uncertain economic times. Review your fixed costs and your more discretionary spend. Where are your priorities? Beware of cutting back your agencies marketing spend and training/L&D – these are likely to be false economies.