Client retention and getting new business are two of the biggest challenges most agencies face. How many clients have you lost this year? What was the main reason?
As someone who owned an agency for 15 years, I have a pretty good idea of what works and doesn't work when it comes to meeting with clients, pricing and writing proposals, closing deals, executing the strategy, and (most importantly) keeping clients long term.
Building relationships and great customer service drive agency success, but there are three common mistakes made when pitching a proposal to a client and one major mistake which cause clients to cancel.
This post will highlight four of the biggest mistakes agencies make, from the initial introduction call, to presenting the proposal, to servicing the client, delivering results, and keeping them happy. By minimizing these mistakes, you will win more business and keep your clients longer.
Mistake 1: Not Understanding the Client's Business or Economics
The first thing you should do when speaking with a potential client is to:
- Identify their goals and metrics to measure success.
- Who are they selling to, target market? Industry?
- What is their ideal or most profitable customer?
- What makes them different, their Unique Selling Proposition (USP)?
- Who are the main competitors?
- Discuss important keywords and marketing channels they want to test.
Once you understand the industry and target market, you can begin to suggest campaigns that effectively target the correct audience. This will help you price the proposal correctly when you know how competitive or niche their business is. But just as important as market research, you also need to learn the client's economics.
Image Credit: BRIM Agency
What does this mean? Basically, finding out exactly what drives their business, where they make money, top selling products currently being sold and the most profitable products or services plus any new initiatives, products or services they will be offering.
During the needs analysis, you want to calculate the average order value AOV (a dollar amount), average gross profit (a dollar amount or percentage), and the lifetime value (a dollar amount) LTV of a customer.
Use this data to calculate a break-even analysis to make sure you and the client align measurable cost per acquisition (CPA) goals.
In other words, how much can we spend to acquire a customer without losing money? Break-even analysis gets you into the client's financials, which is good for both parties.
Knowing what you can spend to acquire a customer allows you to build and optimize campaigns around specific CPA goals. Now you can eliminate losing campaigns using bottom line, no fluff, numbers that the client's management team will appreciate.
For example, if the client's average sale is $500 with a 50 percent gross profit, then the profit per sale is $250. This means the marketing you deliver has to acquire customers at a CPA of $250 or less in order to at least break-even. If the CPA is greater than $250, the client will be losing money and most likely will terminate your agreement before they run out of money.
Not conducting a cost per acquisition (CPA) break-even analysis early in the conversation is a very big problem. It means you don't understand the economics of your client so how can you be successful.
How does this help win more business or improve proposal writing?
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Simply put, it allows you to clearly define and document goals for the project in your proposal. If the client requests a cost per acquisition goal of $100, then you can put that in the agreement as a way to document how you'll measure success and incorporate into the monthly reporting. (See Mistake 4.) This shows the client that you know what success looks like for them and can help separate you from other agencies.
Mistake 2: Not Enough Keyword and Competitive Analysis
A thorough competitive analysis is critical for two types of competitors: direct business competitor (those with similar products or services) and SEO competitors (websites who rank for important keywords but aren't necessarily a direct competitor).
Keyword and competitive analysis helps you quickly understand which keywords and competitors dominate the market and how competitive is the market. Most importantly, competitive analysis helps show the client that you've done your homework and can make your proposal stand out.
Having keyword and competitive data helps you price your proposal accurately because it gives you an idea about how competitive the industry is.
You have a much better idea how many hours to estimate and what it will take to rank for the desired keywords, or how many hours to manage the PPC, social, and display budget. In competitive markets like debt, mortgage, real estate, or education, you'll know to add more hours because of the work required to succeed in those industries is much more challenging.
Keywords and competitive research can be time consuming. You can use competitive intelligence software to save time like www.similarweb.com, www.iSpionage.com, or www.theSearchMonitor.com. These tools help you "spy" on the competition and learn more about their PPC and SEO strengths and weaknesses. You can see the PPC strategy of competitors including keywords, ad copy, landing pages, clicks, and budget.
In this example, the keyword "hire agency" (which we should all be bidding on) has a monthly search volume of 33,100 and you can see the nine advertisers buying this keyword.
You can see the SEO keyword rankings, number of links and PageRank in a matter of minutes, not hours. Show screenshots of the data to let the client know who they are up against and how you will outperform the competition.
Clients love data on their competition. It stirs the blood in their veins and makes them want to take action against them quickly.
Mistake 3: Using a Generic Proposal Template
One of the most common mistakes is to use a generic proposal template. Copying and pasting generic information in a proposal template is a great way to not stand out and to not win clients.
Yes, it's unrealistic and inefficient to write each proposal from scratch, but some data should be added specific to the client's goals, website, and competition. A cookie-cutter proposal template doesn't appeal to all client needs and will kill you if you are up against a few other agencies.
From the client's perspective, it's really easy to see which agency has done thorough market research and put effort into the proposal writing process versus those who just hit "find and replace." Often, management will be looking at two or three agency proposals on their desk and will make a decision based on price and value. The proposal look, feel, and the amount of work you put into it ends up being a very important piece of the puzzle.
Your proposal can have some automated components, but you need to customize it with screenshots of what's wrong with the site, what's working on their site, competitor's sites, keywords you have researched, budget estimates and deliverables, etc.
If you're willing to work that hard on the proposal, before any money has exchanged, you're probably willing to work even harder to get results for a client, and this will help you to stand out.
Yes, this approach ends up taking more time, but in my experience, when we started customizing proposals, the close rate nearly doubled. It's somewhat of a pain because you won't close all of the deals, but when you're close rate increases, it ends up being totally worth it.
Mistake 4: Client Communication and Reporting the Wrong Metrics
Lack of communication or not reporting the right metrics in your deliverables is the most common mistake. The key to client retention is frequent communication, especially in the first 60-90 days.
Once trust has been built, deliverables have been met and results are trending up, you can back down to bi-weekly or monthly communication. The worst mistake you can make after closing a new client, is to go dark, or quiet for 4-6 weeks before updating the client.
People are always scared and nervous about making a bad decision. Fear drives many decisions and the more communication you have in the beginning of the relationship, the more trust you build for a long term relationship.
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This includes not knowing exactly what you should be reporting. Typically, paid search and display reporting includes these 10 KPI metrics:
- Total spend on campaigns
- Revenue generated
- Return on advertising spend (ROAS)
- Cost per acquisition (CPA)
- Click through rate (CTR)
- Number of visitors
- Cost per click (CPC)
- Number of conversions (sale or lead)
- Conversion rate
Once you win the business, knowing the economics (Mistake 1) helps you retain clients because you'll know what to report monthly or weekly. When you have clearly defined success up front, you can report the right metric that will keep your client happy over the long run. If possible, focus on how profitable (ROAS, ROI) the campaigns are to prove the value of your service and keep clients longer.
In terms of reporting, most agencies have two main reporting templates: one template for lead generation and another for ecommerce. The main difference between the two is that with ecommerce you can report revenue in real time but with lead generation you don't always have that information because it can be in the CRM and there is a sales cycle.
Often times, you may not be able to measure revenue from leads and will have to focus on lead volume and cost per lead (CPL). I love ecommerce Clients because you can measure revenue in real time to calculate return on advertising spend (ROAS), revenue per visit, and average order value (AOV).
The most common metric to optimize campaigns is CPA (cost per acquisition) but If possible, use ROI or return on advertising spend (ROAS) as the key performance indicator (KPI) you include on your reports.
The potential downside (although it really shouldn't be a downside if you are result oriented) is that this puts pressure on you to make sure you perform and eliminates the possibility of sugar coating results. The upside is that your client retention will go way, way up if you can deliver value and ROI through easy to read reports and metrics.
Avoid these 4 mistakes to help your Agency or Consulting business be more successful. Prioritize your tasks and deliverables on shared value projects. Shared value means you both gain value by doing the task. Improve any mistakes you are making, especially the ones, when fixed, will impact your customers in a positive way.
Image Credit: atLarge Inc.
Most importantly, clients and agencies want to build long-term success, but the expectations and measurements of results must be agreed in advance or the relationship will likely fail. Here's a good post on "6 Ways to Get the Most Out of Your Agency" by Andrew Delamarter.
Are you an agency? Have you worked with agencies that have made any of these mistakes? Feel free to add mistakes you feel are made often in the agency world or share your opinion in the comments below.