Insights

The seven most expensive mistakes research agencies make

In my work helping Research agencies be more successful and profitable I often see some classic negotiation and (let me use a really dirty word) sales mistakes.

I’ve worked with around 15 research agencies as well as over 120 other agencies (advertising, media, design, digital, PR, sponsorship and experiential) and see the same mistakes being made.

Making a mistake once is fair enough. Making it over and over again seems nuts! The seven mistakes are inter-connected.

The first mistake is being too focused on the topline revenue rather than on the right balance between revenue and bottom line profitability. As a research agency I believe making a fair profit is a fundamental business goal. As a commercial business profit is vital. It gives senior management options and confidence to make brave decisions. Revenue growth must be profitable.

Not understanding your value is the next mistake. It is easy to become focused on the  ‘doing’ rather than the result or impact of our work. Clients don’t want to buy research. They want to buy the result of the research. Clients want the insight or the knowledge resulting from the research to help them make smarter decisions and gain a competitive advantage. This is a research agency’s real value. The better we understand this, the more money we will make because we then will avoid the next mistake.

Under-pricing is a massive and costly mistake. Mark Ritson once said “most businesses strategy for pricing is a mixture of voodoo and bingo” By under-pricing we set a precedent with that client going forward and it will be hard to increase our price for subsequent work. Price is the No.1 factor to influence profitability. If you don’t get your price right, you will be on the back foot.

What’s special about your agency? Too often research agencies all look the same. If you look the same don’t be surprised if you are commoditised and bought predominantly on price. You can only charge a premium price if there is a real or perceived difference between you and competitors. Price is A factor, it is rarely THE factor.

Over-dependence can be costly. If a client represents more than around 15% of your business there is a danger that you avoid increasing your prices, challenging the client and presenting standout work, instead we play safe avoiding ‘rocking the boat’. When I ask research agencies about this point they often say ‘we’ve had client x for 10 years’. The past is not a guarantee of the future. I have seen too many agencies destroyed or decimated by the loss of one or two major clients. Hope is not a strategy!

Poor briefs are costly to research agencies. What makes a poor brief? A verbal or poorly thought through brief is dangerous. A verbal brief isn’t worth the paper it’s not written on.

Scope creep and over service cost research agencies a fortune. Clients will ask ‘could you just….’ and expect that extra work to be covered by the original budget or fee. Scope creep is like a disease. It won’t get better unless it is treated. It simply get worse. Your ability to tackle scope creep is linked to your confidence, your differentiation, your pricing, understanding your value, the brief …..

Chris Merrington is the author of “Why do smart people make such stupid mistakes?” His company, Spring 80:20 specialises in consulting research agencies in their profitable growth and success. His Masterclasses in Profitable Negotiations, New Business and Sales have been run with over 120 agencies and thousands of agency people.