A quick skim over last week’s financial headlines in the marketing sector would probably spoil most people’s breakfast: “Dentsu’s profit margins hit by recession: prospects gloomy”,”Chime faces restructuring costs as US Government contract ends”,” cScape to retreat from AIM after another £0.5m loss”, “Hasgrove halves profit expectations”, “Huntsworth lops £4m off profit projection”, and so on. The merger of MRM with Meteorite also smacks of financial disappointment.
Even the annual “Private Plums” report noted that fewer agencies managed to achieve a 15% per annum revenue growth rate over their last two trading years. But before too many depressed readers attempt to suffocate themselves in their bowls of porridge, note that 89% of those privately owned agencies still earned a pre-tax profit in their latest year. And two-thirds of agencies reported an operating profit that averaged £500,000 or more over the last two years.
The fear is that things may get worse before they get better. And that may create some tough challenges for agency managers. For example, when facing a difficult financial position, is it better to accept any business than to turn down even the client from hell that everyone knows pays poorly, pays slowly and works its agency into the ground?
The answer is never completely clear-cut, but the exercise of a big dose of caution would not be out of place, particularly if the new business requires the agency to hire quite a few more staff. Can the agency monitor the client’s profitability reliably? And will the agency have the courage to fire the client if it is costing too much to service, or queries every bill, or takes too long to pay? There really are some clients that should be told politely where to take their account. Ask their previous agencies.
The trouble is that, if over-demanding, mean, troublesome clients start throwing their weight about, they affect the entire agency – damaging its morale as well as its efficiency, and thereby probably harming the quality of work being done even for the valued clients.
And what about the agency’s own reputation? There are no prizes for any agency that sports a hollow arrogance, but there are prizes for those that have gained a reputation for good quality creative work along with excellent client service standards, particularly in a recession. So in addition to seeking out those new clients that are worth winning, cherish the good clients even more and cut out as much unnecessary expenditure as possible (and it is possible).
A rotten apple quickly infiltrates the good ones and destroys the whole sack. The same is true of clients.
Funny that, we started off thinking about breakfast and now we’re into dessert.
Bob Willott is editor of “Marketing Services Financial Intelligence” at www.fintellect.com