Preventing “Death by A Thousand Cuts” in the Agency-Client Relationship

There’s a reason many corporations prefer hiring communications professionals who The Business Lab ending toxic Client Relationships on a positive note - representative and consultant Katherine Hennessy-resized-600have experience working on both sides of the table: as a client and for an agency.

Perspective.

If you have ever been the client, you know what great and lousy client service looks and feels like.  And if you later made the switch to the other side of the table, to a public relations or other type of agency, you then had the opportunity to serve clients with the same level of customer service excellence you expected (and perhaps actually received) from your agency when you were the customer.

Also, it pays to be familiar with the pressures and challenges of working on the inside and you can only get that from working on the inside.  Too many agency employees have an inaccurate picture of what their clients are up against because they have never walked in their shoes.  Perhaps the subject of a future post.

As for me (thanks for asking!), I’ve split my career down the middle with half of my experience as a client and the more recent half serving clients from big, medium and small agencies.  During the client years, I saw agency-client relationships disintegrate in slow increments.  Typically, it was death by a thousand cuts vs. the result of a single infraction. And sad to say, I witnessed the same phenomenon while on the agency side.

In almost every case, it was the little things that built up over time that led to divorce.

If you are currently working at an agency and have never worked on the client side, here are a few timeless tips — in addition to outstanding results, of course — that will help keep the relationship with your customers on the right path:

  • Acknowledge that you received your client’s email or text with a simple “got it” or “will touch base with you on this” or anything that sends the message you are available. A client’s imagination can run wild when their attempts to communicate with you aren’t reciprocated in a timely manner.
  • On the other hand, don’t get upset if your client doesn’t get back to your emails or calls in a timely fashion. The agency-client relationship isn’t always a two-way street and that has to be OK with you or you will make yourself crazy.  Clients spend lots of time away from their desks, confined in conference rooms for meetings that go on and on and on.  And they have their own internal clients to serve and politics to play. Cut them some slack.
  • Call your client.  Email and team conference calls are great and have their purpose. But some of the best engagements and ideas come about when the account team lead and client chat live. Clients enjoy hearing from their agency, even if it’s just a call to check in.  So pick up the phone.
  • Remember that the client hired the agency, not you.  Show leadership by encouraging all members of your account team to be heard on the weekly group client call. Clients want to hear how every member of the team is contributing.  For a client, there’s nothing more uplifting than when on one of these calls a junior person begins to “get it” and shares a brilliant idea.
  • Get the agency’s most experienced people involved with your client’s account.  Invite them to an occasional brainstorm, especially around the bigger initiatives, and then tell your client about it. Most clients recognize that agency management isn’t involved with their account on a daily basis, but many have the fair expectation that senior agency leaders are making a contribution beyond invoicing.
  • Share bad news with your client sooner rather than later.  Whether it’s a missed media opportunity, the resignation of a key team member, etc., clients have the right to hear about it as soon as possible because it impacts their business.  Too many agencies procrastinate when it comes to sharing negative developments with a client.  Most clients, however, realize that despite best efforts, not everything is always going to go as planned. Work together on solutions.
  • Encourage your client to occasionally recognize the account team’s good work. They need and most often will appreciate the heads up. And your team will do their best work for the clients who appreciate them.
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Customer Retention Is King: Four Steps to Secure the Throne

This post originally appeared on MarketingProfs.com and is authored by Jerry Jao, a co-founder and the CEO of Retention Science, which provides customer retention solutions to some of the country’s largest online retailers. Twitter: @jerryjao LinkedIn: Jerry Jao 

Blogs and communities are always buzzing about one form of marketing or another. And if you listen closely, you’ll notice that most of the marketing conversations going on—whether they’re about inbound marketing, SEM, affiliates, or mobile—emphasize the importance of getting new or more customers, as opposed to keeping the ones you already have.

The same trend can be seen in the way companies reward their sales and marketing staff. Those who acquire new customers are rewarded with generous commissions and recognition, whereas the ones working to retain current customers get a lukewarm pat on the back.

Now, to be clear, there’s absolutely nothing wrong customer acquisition. However, it’s unfortunate that customer retention isn’t getting the same (if not more) attention from marketers—because retention usually brings in more revenue, at lower cost.

New Business Is Great, but Repeat Business Is Even Better

It’s time for marketers to shift their focus to customer retention and loyalty, instead of putting all their eggs in the acquisition basket. The good news: doing so may actually be easier and far less costly than you think.

Not only is it more expensive to acquire new customers than to keep existing ones (acquisition costs five times more than retention, according to Lee Resource Inc.), but current customers actually tend to spend more than new ones.

And if that weren’t staggering enough for you, consider the Harvard Business School study that found “increasing customer retention rates by 5% increases profits by 25% to 95%.”

Why not crunch the numbers in your own business and see for yourself just how important repeat customers are for your company? Quantify your customer acquisition spend vis-à-vis retention, and take note of the revenue that new customers bring in versus how much your existing customers are spending.

First Step in Retention Marketing: Calculate CLV

Now that you’ve established the significance of retention marketing, it’s time to get started on what you can do to retain more customers. Before you start rolling out customer retention campaigns, though, you need to figure out how much you should spend on your customers to maximize your profits.

The first step in setting a budget for your marketing campaigns is measuring customer lifetime value (CLV). You need to find out how much value each customer brings into your business so you can determine exactly how much you should be spending on them.

You can use a variety of CLV equations to calculate the value of your customers. Management Accounting Quarterly, for instance, shares this formula (PDF), where it incorporates contribution margin, marketing cost, and probability of purchase to calculate CLV.

KISSmetrics, on the other hand, uses three CLV equations and averages the amounts to arrive at a final CLV.

Note that CLV depends on various factors, including business type, the nature of its customers, as well as the industry that the company belongs to; accordingly, there isn’t one universal formula that you can adopt. That’s why you should look into various equations and use the ones that incorporate metrics relevant to your business and industry.

You can also seek the help of companies that specialize in data and marketing and let them create a customized CLV approach for you.

Action Steps to Retain Existing Customers

Once you’ve established your budget, the next step is to decide where and how to spend it. Here are a few ideas to get you going.

1. Personalize

The best way to build loyalty with your customers is to make them feel valued. Don’t treat customers like numbers on a spreadsheet. Regard them as individuals by personalizing your correspondence with them (e.g., emails or website greetings that mention their name), or by adding thoughtful touches to your communications with them (e.g., handwritten notes and birthday cards).

You can also customize the offers or website experiences that you provide. Gather as much data as you can about your customers. Track their site behavior, purchase history, demographic information, etc., and use that data to create personalized experiences for them.

For instance, if you know that the person browsing your site is a female who bought shoes from your store in the past, then you should display relevant product recommendations on your site instead of a generic one-size-fits-all page.

The same goes for the discounts and offers you give out. If the data tells you that Person A has a higher chance of purchasing when given a free-shipping coupon, and Person B will appreciate a 20% discount more, then send out a different offer to each customer to increase your conversion rates.

Consider optimizing the timing of your offers as well. Segment your customers according to the time of day that they made a purchase, and reach out to them when they’re most likely to buy.

2. Track and Test

Remember to monitor the performance of your retention campaigns. If you’re sending personalized offers, be sure to take note of the sales that those offers brought in. When you’re personalizing the timing of your offers or messages, track open rates and clicks, then compare them with those of previous campaigns.

Not seeing the best results? Perhaps you need to resegment your customers, change your messaging, or incorporate more data. It could also be a sign that you need to move on to another type of campaign. In any case, the only way to find out is by tracking and testing.

When you’re at this stage, you also need to make sure that you’re setting the right metrics. Getting 10,000 signups in one day may sound sexy, but if those users don’t amount to actual sales, then it probably isn’t worth tracking.

Always be clear on the metrics that count (it could be sales per customer, or rate of repeat purchases, or something else) and monitor only the numbers that matter.

3. Reward loyal customers

The great thing about loyal patrons is that they don’t just give you repeat business, they can bring you new customers as well. Extremely satisfied customers are more than likely to recommend companies to their friends. Encourage this practice by rewarding the people who send new business your way.

You don’t have to create an elaborate referrals program or offer huge monetary rewards to customers if you don’t have the resources to do so. A relevant offer or a token/freebie that you know they’ll love will go a long way.

Be genuine, and remember that simple, yet thoughtful, gestures toward your customers will be recognized.

4. Ramp up your customer service

Providing excellent customer service should be a no-brainer, but some companies don’t seem to spend enough of their resources on their customer support department, instead pouring everything into Sales and Marketing.

Remember, your sales and marketing team can perform a stellar job in bringing in new people, but if your support reps aren’t doing enough to keep those customers, you’re just wasting your resources.

Again, it boils down to showing your customers just how much you value them. Be respectful, treat them well, and go above and beyond to solve their problems. And if you think about it, the bar for customer service is set really low. People don’t expect much from support teams these days, so if you step up and blow them away with amazing customer service, it won’t be ignored.

Avoid These Four Agency Client Types at all Costs

boat for saleYou may have heard the expression popular among some boat owners:

The two best days of being a boat owner are ‘the day you buy it’ and the ‘day you sell it.’

Others use a similar expression. Like those who have purchased a vacation home they never have time to enjoy.  Or that convertible as a full-time car (if you drive in New England).  I’ve heard some hackers on the golf course say the same about their Titleist blades.

And it’s been said on many occasions in the PR agency world; on those occasions when a new client turns out to be everything the agency hoped they wouldn’t be – when the two best days are the day the agency wins the client’s business and the day the agency fires that client.

A boat.  A second home. A roadster that’s to die for.  That shiny new client. All seemed like great ideas at the time. All looked wonderful from the outside. And then the honeymoon ends…and you’re in it for real.

For better or for worse, things we learn in life are often learned through trial and error. While we may try to not repeat the same mistakes over and over (there’s a definition for this type of behavior), we sometimes do.

Unlike the regretful boat owner who is typically one and done, PR agencies have histories of chasing bad client after bad client, deluding themselves into thinking that this time things will be different because they will “control” the relationship and not let the client run roughshod over them.

What do I mean by “bad’ client?  Well they come in many shapes, sizes and disguises.

There’s the client whose initial budget is below the agency’s minimum monthly retainer but promises that the budget is going to increase after the first three months or when the next round of funding comes in.  Three months come and go … another three months come and go … etc.

There’s the know-it-all client who has never worked with a PR agency before but skimmed the Public Relations for Dummies Cheat Sheet which has a section entitled, “Convincing Editors to Print Your Press Release.”  Seriously.  This client knows just enough about PR to be dangerous but still doesn’t make the distinction between an article written by an actual journalist and a news release replayed verbatim on one of those free press release web sites.

Of course, there’s the client working at his third start-up, the first two of which had successful exits and were media darlings and who is expecting and demanding the same level of media interest for his also-ran entry into the dying market du jour.

And finally, there’s the worse client type of all: the one who hires you and then disappears expecting the PR program to run smoothly without them having to pay any attention to it now that a firm has been hired.  You know the type … they make a living of hiring and firing agencies as a job protection ploy.  They blow off weekly check-in meetings, rarely return your phone calls or email pleas for information but are fast to get in your face when their company is left out of a story.

But they are happy to take credit for any positive results the agency does manage to generate.  When that happens, it’s time to sell the boat.  Don’t you think?

In The New Normal, Client Retention Means Playing Above The Rim

basketball_rimDenial. Anger. Bargaining. Depression. Acceptance.

These are the five stages of grief a PR agency (or any business for that matter) goes through when a good client takes their business to a competitor.  Each of the five stages were detailed in a recent post in which I promised a follow-up with a few ideas on how an agency can beef up its existing client retention program (you have one, right?).

The problem some agencies and other organizations have is this:  a short memory. What often happens once the initial jolt and after shocks of losing a good client subside and everyone gets back to business, or perhaps even begins work on behalf of a “replacement” client, is that they revert to some of the same bad habits that got them in trouble in the first place, like ignoring the obvious signs of a failing business relationship.

While many of the keys to client retention in the “new normal” are second nature to many organizations and are seamlessly rolled into how they conduct business on a day-to-day basis — like proactively managing and measuring client expectations, the overall health of the relationship and the value that is being delivered while saying “no” to non-aligned business — there are above the rim ideas that can help lock in a client for life.

For example, how about setting a new standard for quality performance? Name it whatever you want (TQM = total quality commitment?).  Pull your senior client-facing managers together once a month for a couple of hours to probe and to get to the root of client issues and problem areas.  Don’t talk about staffing or utilization or new business at this meeting.  Just focus on the organization’s top clients and use the time to share best practices. Chances are you or one of your peers is facing a client relations issue another had already experienced and successfully resolved.  It’s amazing how many important war and success stories aren’t shared in real-time due to the hustle and bustle of the average work day in a typical agency.  Set time aside for this.

Secondly, consider retaining an independent auditor — someone familiar enough with your business to add real value —  to call on your clients a couple of times a year to nip little problems in the bud.  Quarterly reviews and a relationship management tool like the balanced scorecard can take care of the bigger business issues.  But a five or ten minute call or email questionnaire every six months from an independent professional will solicit from clients the type of complaints they might not normally share with their account team.

And how about a customer advisory board?  A board can be challenging to assemble (and a bit tricky regarding which clients to leave in and which to leave out)  but  can be well worth the effort.  A customer advisory board can accomplish a few critical goals as part of a broader customer retention program:

  • the board should be composed of execs from your biggest customers (customers who deliver the lion’s share of your organization’s revenue).  Even if they don’t want to commit the time, any client will be flattered you asked and just by doing that you have deepened your relationship with them.
  • board members can provide your organization with early warning shifts in their needs as well as emerging opportunities and feedback on new services your firm is providing (or should be providing). And for board members,  membership gives them an opportunity to share best practices, network and build new relationships with other executives in and outside of their industry.
  • By following through on customer advisory board recommendations, you’re ensuring client satisfaction, building customer loyalty and reducing attrition among your biggest revenue generators.

I’m always on the watch for innovations in customer retention programs so holler back.

When Losing a PR Rock Star is a Business Opportunity

946302099_ac888c2d2c_zLosing the rock star employee on a critical account can be devastating to a public relations agency – as least as far as that account goes.

Or, it can be a stellar opportunity to showcase to your client other outstanding staffers who have been living in Elvis’ shadow, new or enhanced service offerings and big, fresh, creative program ideas.

Several years ago while working at a global PR agency, the rock star account supervisor on an $80,000 per month tech B2B account announced her resignation.  Shortly thereafter she headed off to Europe with her fiancee who had just landed a financial services job overseas (there was no hope of keeping her at the firm).

This particular account supervisor was not only doing a superb job leading the day-to-day activities of a seven person team and driving superior results, but she had become the confidante, pseudo girlfriend and “shrink” to the primary client contact.  Their relationship was one of those “good problems to have” because as long as this rock star was engaged on the business, the business was rock solid.

At the same time, the client’s over reliance on this account supervisor — and the fact that I let it happen — was a disaster waiting to happen.  Happen it did. Not fun.

What I did wrong

To exacerbate the situation, I scrambled for a plug-and-play replacement for the outgoing employee instead of taking a step back to think about a more effective, more creative, more sustainable solution.  Instead of looking at the resignation as an opportunity to strengthen the client relationship, I was playing not to lose.

I was shackled to the false security that an old, established way of doing something provides.

Although the client was extremely upset that her account lead was leaving the firm, our relationship was deep enough and the broader team proven enough that we’d get the chance to make things right.  As luck would have it, though, the replacement account supervisor (who had been with the firm for a few years) also resigned about one month into her new role.  It wasn’t much longer before the account went up for review.

If I had the chance to do it all over again, I’d do a few things differently

First of all, I would never allow the rock star to “own” the client relationship.  The rock star and client should have a tight and trusting relationship, but a client hires a team and an agency. This means Elvis needs to proactively share the stage with the team to demonstrate bench strength and true leadership.

Secondly, I would not respond to the rock star’s resignation as if it were the end of the world.  Employees come and go and agency leaders have to plan for the inevitable. Instead of rushing to replace one rock star with another, I’d embrace the opportunity to treat the account like new business.  This could be an ideal opportunity to bring the entire office together, to get everyone involved in reinvigorating an account with new perspectives and to share the enthusiasm with the client.

Thirdly, I would review the staffing on all accounts to ensure the agency wouldn’t find itself in a similar situation with other clients.  I bet there were a number of accounts at the time that would have benefited from fresh thinking, new personnel, or at the very least, an office-wide brainstorm.

And finally, on an account of this size I would invite the client to become part of the solution by inviting her to participate in a discussion about next steps vs. assuming that she was OK with my simply replacing the outgoing account supervisor with another.

Live and learn.  Any tips to share re: how you have handled similar situations?

P.S.  The agency was able to replace the account — dollar-for-dollar– with a competitive business.  Phew.

When a PR Agency Loses A Good Client: 5 Stages of Grief (Part I)

stages-of-grief (2)Replacing a good client can cost a public relations agency up to five times more than retaining one.   Ouch.

When a PR agency loses a good client, aka getting fired, it hurts to the quick.  All agencies experience client attrition, some more than others, whether it be for reasons of performance (the ugliest way to lose a client), M&A, personnel changes on the client side, etc.

And while every agency may have a unique methodology for replacing lost business, one thing many have in common is they suffer through the same emotional and intellectual (or stages of grief) phases of client loss.  It goes something like this:

  • Denial – this is the “tell me we just didn’t get fired” stage.  “No, that really just did not happen, did it?  And everything was going so well, wasn’t it?”  Ah, apparently not.  But denial is a natural and immediate response to a client termination and helps get the agency to the next stage – one step closer to acceptance.
  • Anger – this can take a few different forms. Especially in the case of termination for performance, anger inside an agency can quickly spiral out of control if not checked early on:
    • agency principals may become upset with the account director’s ability to proactively address client-agency issues before they escalate, as well as the team’s ability to generate agreed-to results
    • the account director may get angry with the team for not stepping up their game and making him/her look bad
    • conversely, the team may get angry with the account director for not being a strong leader
    • the agency may direct anger at the client too.  “Why didn’t we at least get a warning?’  Well, chances are the client sent multiple warnings.  But the agency just wasn’t paying close enough attention.  Here are a few of the warning signs that are almost always there.
  • Bargaining – “If only we switched up the team a few months ago like we said we were going to do to bring new, fresh ideas to the program. If only we got our CEO in front of the client, like we said we were going to do, to review the program and strengthen the relationship.  If only we delivered on our promises.” If…if…if…bargaining.
  • Depression – with a client termination comes a host of additional issues.  An agency may worry about its reputation after being fired by a client:  “What is the client telling others about why they ended the relationship?” There will be staff billability and utilization concerns now that a client is leaving and the resulting dash to replace the lost business means less time will be spent on other things, like agency marketing, new service offerings, etc.  And all–too-often an agency will replace good business with bad business bringing with it a new set of challenges and problems.
  • Acceptance – There are times when a client will completely blindside an agency with a termination.  This is the most difficult termination-type and the most challenging to accept.  But more often than not, good clients signal their dissatisfaction with an agency.   For whatever reason an agency is terminated by a client, by the time an agency reaches the acceptance stage it is finally ready to move forward, has conducted a thorough post-mortem and is putting plans in place to reduce client attrition.

Part 2 will explore several programs to reduce client attrition.  In the meantime, I’m interested in your experiences in dealing with client loss and what formal programs you may have put in place to minimize attrition.

The Balanced Scorecard: Guaranteed To Reduce PR Agency Client Attrition

4978686242_3213d97e16The balanced scorecard (BSC) measurement system, which measures a business and business relationships across four critical categories, will absolutely positively save — and even grow — accounts when appropriately tailored and implemented for your public relations agency and clients’ needs.

I got religious about the BSC scorecard during my tenure with global PR firm Porter Novelli.  Gary Stockman, an executive at Porter Novelli at the time, introduced the BSC to the firm in the late 90’s (if memory serves me).  We modified the traditional structure of the BSC to suit the requirements of a PR agency while fully guarding the traditional scorecard’s integrity and intent.

And when we used it properly, it not only saved a number of key, global accounts but uncovered numerous organic growth opportunities that may not never had been uncovered otherwise.

More recently, I was part of a BSC exercise with a firm’s very important (I know, they’re all important) client and the results were less than stellar.  Among the reasons for the surprising results was that the client was “too nice” to be honest about how they were feeling about the relationship and the agency — until the BSC was introduced — wasn’t asking the right questions.

On the surface, the relationship was motoring along nicely.  In reality, the relationship was skating on thin ice (you can read about the outcome in the P.S.).

If you’re not familiar with the BSC (some argue it’s really a management system that has measurement as a key component), it was created by Robert S. Kaplan and David P. Norton of Harvard Business School and was introduced to the business world 21 years ago.

Since then, it has been implemented by scores of organizations around the world as a way to measure the strength of a business and a business relationship beyond financial parameters. Of course, there’s a Balanced Scorecard for Dummies if you’re interested in taking a deeper dive on your own; and related works that could fill a BSC library. There’s also the Balanced Scorecard Institute which apparently has trained more than 5,000 people on BSC practices.

A traditional balanced scorecard has four legs: a measure of a client’s level of satisfaction with a company’s products and/or services; a financial track; the internal business process leg (IE, what are we better at than anyone else?), and finally, the knowledge, education and growth leg (in simplistic terms, how do we improve upon our core competencies?).

For PR agencies, a BSC can be structured similarly with only a few modifications.  It could go something like this: Top-4-Online-Invoicing-Tools-Make-2010-Relaxed-For-Your-Customers

  • 1, Strategy — these are questions that help an agency understand the client’s world. Questions like, “Does the agency understand my business?” and “Does the agency understand my internal challenges?”
  • 2, Execution & Tactics — the goal of this leg is to understand from the client if the agency is acting strategically.  Questions like, “Does the agency come up with program recommendations I would not have come up with on my own”? and “Do the agency’s program ideas reflect bigger picture thinking?”
  • 3, Results/Impact — questions that get at issues around desired value and showcase the agency’s impact among client senior management.  Questions like: “Are the agency’s results viewed by my management as having an impact?”
  • 4, Income & Investment — is the client seeing a return on its investment.  Questions like, “Does the agency do a good job of managing my budget”? and “Has the agency had a positive, measurable impact on my business.”

Any thoughts on using the BSC in your agency or if you’re a client, asking your agency about developing one?  Are the categories reflective of a holistic approach to measuring and managing agency-client relationships?

P.S.  The agency-client relationship that was skating on thin ice just prior to the BSC ultimately survived thanks to the quick action both sides took on the heels of the BSC.