The account manager’s job is to keep and grow client relationships.
Given they’re speaking to the client the most, they are in prime position to grow the account by:
- Uncovering additional client needs
- Spotting opportunities to suggest additional agency services
- Proposing new solutions and ideas to solve client problems
They are an agency’s untapped superpower for growing existing business.
And it’s not like this hasn’t been talked about a million times with stats like these:
“New biz is 5 to 25 times more expensive” – HBR
“Increasing client retention by 5% increases profit by 25% to 95%” – Bain & Co
Clients are willing to invest more money for additional ideas
According to Drew McLellan‘s 2023 study by Agency Edge, 59% of clients increased their budget allocation mid-year with their agency.
Of that 59%, 53% cited the reason as “a compelling opportunity” or “the agency proposed new initiatives”.
So clients will spend more money with you if the idea is relevant and it’ll help them reach their goals.
What holds account managers back from growing accounts?
So given the obvious commercial opportunity, what holds them back?
Well, Gartner says “if the AM is either unwilling or unable, the growth engine stalls”.
Having taught account growth since 2016, I don’t generally see a lack of willingness among agency account managers.
BUT I do see the AM isn’t able.
Not necessarily because of a lack of business acumen or selling skill (which is the case sometimes) but mostly because they’re not able to be proactive because a big contributing factor is the agency doesn’t have the right pricing model.
Growing an account does require proactivity to spot, develop and proactively bring additional ideas to help solve clients problems.
And takes additional time outside of their current ‘delivery focussed’ workload.
What does that look like in practice?…..
- the AM conducting a regular quarterly strategy session where the client shares their business goals and priorities and then the AM rallies the agency team to develop additional ideas outside of the current scope of work to help the client achieve their objectives
- the AM researching their clients’ competitors and identifying what they’re doing differently/better and proactively consolidating their thoughts and proposing ways the client could capitalise on the insight
- the AM spotting a client’s customer behaviour trend through their campaign analytics and data and putting together a business case for increasing the client’s efforts in that area
Challenging the industry’s sacred cow – billing by the hour
One of the key things that holds account managers back is many agencies don’t have the right pricing model to give them the time to be proactive.
Pricing based on number of hours spent has been the mainstay for agencies for decades but this is coming to an end – with procurement now looking closely at how agencies are adopting time saving AI tools to make the job quicker!
Tim Williams has been talking about this for years and frequently writes hard hitting articles about how agencies are rewarded for time and effort rather than value such as this insightful piece “For the agency business to live, the billable hour must die” .
Billing by the hour also creates the wrong dynamic with each party having different incentives i.e. the agency is incentivised to spend more hours (to increase their income) and the client just wants the agency to solve their problem efficiently (and for a price that doesn’t spiral out of control).
But things are changing because many agencies who traditionally only sold hours (pricing projects on number of hours to be spent) are now transitioning to pricing deliverables (outputs) – and even value (outcomes).
Pricing by the hour isn’t very profitable (according to Campaign, advertising agency average profit margins went from 30% in the 1960s to 9% in 2018).
And why not add into the flawed business model mix the following:
- Many agencies give away their most valuable asset (thinking/strategy/creative) for free in pitches
- We only stand a one in four chance of winning a pitch in the first place – so that additional effort puts a strain on the team and existing client business (not to mention opportunity cost to existing client growth)
- Many don’t systematically increase their hourly rates
- Many aren’t great at reconciling number of hours spent and then taking the learnings to price more accurately next time for similar projects
- The AM’s billable target is often too high – or worse, they’re penalised for going over the target – and hence don’t have the time to spend on executing an account growth plan
All of which adds up to an ineffective way of operating for the agency and severely limits the account manager’s proactivity.
We should also pay attention to stats from creative industry charity NABS showing a 15% increase in agency staff reporting issues with burnoutin 2022.
Re-thinking the agency business model
If you’ve read the brilliant book “Madison Avenue Makeover” by Michael Farmer you’ll see that it is possible to change the agency business model to sell products and programmes with healthy profit margins built in.
The book documents the transformation of IPG agency Huge with Caroline Johnson at The Business Model Company completely overturning the agency’s business model.
If you want to be inspired by what the future looks like for the agency business model, read the book and follow Caroline.
I’ll be talking more about pricing with Alfie Wenegieme FCCA, Managing Partner at Cactus on the next podcast episode “Creative Agency Account Manager”.
