Episode 402

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It’s that time of year again — we’re evaluating the 2023 Agency Edge Research study, where we polled people who hire agencies about what they expect from agencies and what gets them to open their wallets for us.

Despite a challenging year of having to find creative ways to get existing clients to spend more money with us, a lot of good news came out of this study. Overall, existing clients with larger budgets are much more willing to stick with an agency and spend more money if we present them with a compelling reason to do so.

What do we do with that information? We’ve been preparing you for months leading up to this study, covering many of the topics we’ll see today. So, if you missed any of those episodes, be sure to go back so you can be on top of your game going into 2024.

A big thank you to our podcast’s presenting sponsor, White Label IQ. They’re an amazing resource for agencies who want to outsource their design, dev, or PPC work at wholesale prices. Check out their special offer (10 free hours!) for podcast listeners here.

existing clients

What You Will Learn in This Episode:

  • The three main client archetypes
  • How the three archetypes spend their money
  • How clients use agencies to fill their different needs
  • The revenue and budget breakdowns of each existing client group
  • What makes a current client want to spend more money with us, and when
  • The biggest motivation existing clients have for increasing their spend
  • What clients believe makes the best agency
  • The increased importance of client love and getting to know their teams
  • Why we should be pitching new ideas to our clients and asking them to experiment with us

“53% of these clients are working with more than one agency. Even the ones who really want a long-lasting, very tight relationship with their agencies.” - Susan Baier Share on X “43% of our respondents plan to use their agencies more over the next two years. Virtually none of them plan to use them less.” - Susan Baier Share on X “For our relationship builders, the percentage that wants strong relationships, say collaboration leads to better outcomes, and are flexible and interested in new services is 70% to 100% strongly agreeing.” - Susan Baier Share on X “62% of our clients said they set a fixed dollar amount for their agency budgets. But 60% say they regularly evaluate the results and opportunities that come to them and adjust the budget throughout the year.” - Susan Baier Share on X “Many of them say that they're actually getting a better ROI working with an agency than they would just working with their in-house team.” - Susan Baier Share on X “There's a lot of clients in this study that want more from the agencies they're already working with. Our reward for doing that with them is that they have money and flexibility to spend it.” - Susan Baier Share on X

Ways to contact Susan:

Resources:

Speaker 1:

Running an agency can be a lonely proposition, but it doesn’t have to be. We can learn how to be better, faster if we learn together. Welcome to Agency Management Institute’s Build a Better Agency podcast presented by White Label IQ. Tune in every week for insights on how small to mid-size agencies are surviving and thriving in today’s market. With 25 plus years of experience as both an agency owner and agency consultant. Please welcome your host, Drew McLellan.

Drew McLellan:

Hey, everybody. Drew McLellan here from Agency Management Institute back with another episode of Build a Better Agency, and it’s a good one. As many of you know, for the last 10 years, AMI has partnered with Susan Baier at Audience Audit to do our Agency Edge Research Series. So every year we pick a different topic, pretty narrow in focus, and we go out in most cases, talking to people who hire agencies, so business owners, CMOs, directors of marketing, that sort of thing, and ask them some pretty pointed and specific questions around the topic. And that’s what we did this year. I’ll tell you more about this year, but in the past we’ve asked them what they want from an AE. We’ve asked them what makes them fire an agency. We’ve talked to them about what an agency can do to earn more trust, lots of different topics, but every year we get really specific about the topic based on what we see happening in the agency landscape. So I’ll tell you a little bit more about the 2023 study before we bring Susan on to talk about the results.

But before we do that, I just want to remind you, if you love last week’s episode with Carla Johnson, and I can’t imagine you didn’t because she’s brilliant. So Carla is the author of Rethink Innovation, and last week we talked about how we can all reinvigorate our ability to come up with the big idea on demand, be more innovative thinkers and how we can teach it to everyone on our staff. And Carla is teaching a live workshop on that topic, July 11th and 12th here in Denver. You can learn more about the workshop, you can register for it by going to the AMI website, agencymanagementinstitute.com. And under the how we help, you’re going to find navigation bar, you’re going to find the workshops button, and if you mouse over that, you’re going to see that particular workshop so you can register for it. It’s going to be awesome. We had folks raving about it last time we did it, about a year and a half ago, and so it was time to bring it back and we’re excited to host Carla here in Denver.

So when Susan and I were talking about in late 2022, we were talking about what we wanted to study in ’23. It was already very clear that ’23 was going to be a challenging year in terms of biz dev for agencies. The economy, other reasons, clients are slowing down, they are taking longer to hire an agency or to decide they need to hire an agency. And even after they hire an agency, they’re slower at doling out the work, which means we have to be able to grow more of our business with existing clients. And so that was the focus of the ’23 study. And so Susan and I, we were out in the field in January, so this data is very fresh. We just unveiled the research data and the findings at the Build a Better Agency Summit a couple weeks ago, probably by the time you listened to this about a month ago. So fresh out of the field, fresh data for you to use, and I think some really great insights. So let’s welcome Susan to the show and start digging into the data. Susan, welcome back to the podcast.

Susan Baier:

Thank you, Drew, always great to be here with you.

Drew McLellan:

So we’re here today to walk our folks through the 2023 Agency Edge Research piece that we just completed. Gosh, we just launched, we just unveiled the research data at the Build a Better Agency Summit in May, and we were just in the field, gosh, January, in February, so this is-

Susan Baier:

Yeah. Hot off the presses.

Drew McLellan:

… fresh data. So let me explain to everybody why we picked the topic that we did. So we had seen at the tail end of ’22, and we certainly are seeing it in ’23, that for most agencies this is really a challenging year to land new clients. That the economy or whatever’s going on, clients seem a little skittish about engaging in new relationships. They’re taking a much longer time to select an agency. And even after they select an agency, in many cases, they’re taking two or three months to actually start actually doing the work. And so what happens, the way Susan and I do this is every year we talk about sort of what’s going on in the agency landscape and what would be really helpful to understand or know more about.

And so in a conversation we had in 2022, tail end of 2022, we decided that we wanted to ask clients, businesses, business owners, CMOs, those sort of folks who are actively engaged in hiring and working with agencies, what, where and when they might give their current agency more money. So it was really about how do we get more wallet share out of our existing clients. If the new ones are going to take longer, how do we get more from the ones we already have?

Susan Baier:

And fascinating study, I mean, we have over 500 clients in the study. Statistical reliability is really, really strong on it. And I don’t know about you, Drew, this is one of my favorite surveys that we’ve ever done because the outcome is so powerful, I think, for agencies. There’s so much good news in it. It’s nice to be bringing good news instead of-

Drew McLellan:

And actionable news, like they told us what you should do to get more of their money.

Susan Baier:

Yes. And for the first time, I think since we’ve been doing this, this is our 10th study actually, and for the first time we have a segment that we’re really saying, “Eh, don’t, there’s not a lot of value in spending your time on these folks.” So as always, in case you’re not familiar with our research, all of our studies include this attitudinal segmentation perspective, which is really looking at our respondents, not just based on how big their organizations are or anything like that, but how they feel about something. And in this case, the question that you pose, when do you do this? Why do you do this? What keeps you from doing this? And how would you like to be approached with these kinds of opportunities from your agencies? So this year we found three segments. Not terribly unusual. This year we have one that’s sizeably bigger than the other two. So let’s talk about the first one.

Drew McLellan:

Well, hang on just a sec. So just a reminder everybody, these segments, if I said to you, where do the men over 50 show up or where do the startup show up? Or where do the international companies show up or where whatever, the demographics as we know from these studies are irrelevant. These people are bound together by a series of beliefs and attitudes and the actions that come from those beliefs and attitudes, not a demographic. And so our whole goal with this is to help you recognize what is unrecognizable to your eye, but to start listening for clues in conversations or behaviors that would begin to help you understand which of your clients fall into these segments.

Susan Baier:

Right. And when we were talking with agencies at Baba after presenting this research, certainly in my conversations, agencies were saying, “Oh, we have all of those.” And I know exactly who they are.

Drew McLellan:

And now I know who to pay more attention to and how to approach them-

Susan Baier:

And what to do.

Drew McLellan:

… about how to get more wallet share. So yeah.

Susan Baier:

More wallet share. Yeah. Okay.

Drew McLellan:

So now three segments.

Susan Baier:

Okay, so relationship builders, that’s our first group. That’s 30% of these respondents. And this is an agency, a client type that we have seen before, Drew. These are the folks who way back, years ago, we started seeing as really those clients who want a strong long relationship with an agency, they want to be married to their agency. This year what we see from them is that they’re really looking to learn from their agencies to level up their own in-house teams. They believe that agencies are saving them money, are leveling up their marketing activities. They trust their guidance, they credit agencies for their success. And this group from an attitudinal standpoint says A, we have flexibility to adjust agency spending more than any of the other groups. We’re going to talk about some more data with respect to this. And we are very interested in anything that our agencies offer us.

Drew McLellan:

Because we trust them, because we learn from them, because they sit at the C-Suite table with us. And so we are open to suggestion and have flexibility in our budget to act on those suggestions.

Susan Baier:

Right. And everything we do with them, A, educates our team on how to improve, and B, ends up generating a return on investment for them. So really strong group, very powerful, again 30%. The biggest group that we have, 43% of our respondents are in this next segment, which we call staff prioritizers.

Drew McLellan:

Yeah, very different attitudes.

Susan Baier:

Very different attitudes. So these folks have a strong internal team and they have a lot of confidence in their team. These people actually say that their marketing team has more expertise than any agency that they’ve worked with. Now, that doesn’t mean they don’t want agencies, they do. They want agencies that are efficient, that can work very, very well with their team and actually be integrated into their business operations. So agencies are very important for these folks. However, they also say that real experts in their space on the agency side of the house are hard to find.

Drew McLellan:

And I think there’s an age old struggle I think between agencies and in-house teams. And a lot of times agencies in fairness are a little arrogant about their abilities as opposed to the in-house team. And this segment of agency buyers won’t really tolerate that attitude. They expect us to come in to value what their internal team can do and to partner with them in getting to the results they want to get to more efficiently, more effectively and faster. But they’re not hiring an agency to augment a weakness on their team.

Susan Baier:

Right. Which is what we see on the first group. They have a team, but they really love that sort of education that’s happening in their agency relationship. This group wants the education to move the other direction. But they also want agencies that will really understand their needs and goals deeply. They want agencies that will spend more time getting to know their team. Not just in a work relationship, but really understand these folks because their trust lies in their people. And they’re also challenged with a belief that anytime their agencies and their in-house team are coordinating, it complicates everything. And it’s probably us as agencies that are making that more difficult than it should be. But it’s certainly a lost opportunity with these folks knowing how important that close partnership is to them, that we’re not making it as streamlined to work with their teams as they would like it to be. And that’s the biggest group we’ve got.

Drew McLellan:

And I think another thing to note that’s important is, they don’t have a lot of patience for when it doesn’t go well.

Susan Baier:

Nope.

Drew McLellan:

So if the agency can’t sort of toe to toe with their team, isn’t a good play in the sandbox partner, they’re ready to switch agencies. So what you’re not going to do is convince them that their staff is wanting and you can step in and they can get rid of their whole in-house department. You’re going to be the one that gets shown the door.

Susan Baier:

And they’re not saying we’re going to give you every little direction. They want partnership, they really do, but they value both sides, very comparably. So staff prioritizers, that’s 43% of our group. And then we’ve got this last segment, 26% saving seekers. So this is the segment where you and I looked at this and went, “Whoa, there’s not a lot of value here in terms of a right fit client.” So these folks say, and this is again data just from this year, very fresh, always looking for ways to spend less with their agencies. They feel they could handle their marketing in-house if necessary. They’re struggling to justify the cost of agencies in terms of the economic conditions they’re facing today. And the only thing they want to hear from their agencies is how are you going to save me money?

So in terms of our question, it doesn’t mean these are necessarily terrible clients to have for every single agency, but if you want to get more out of your clients, this is not a group you’re going to get any anymore out of. In fact, they’re just whittling away. They’re just going to carve out everything they can from you. So very difficult to justify really long-term nurturing or certainly prospecting among this type of client.

Drew McLellan:

So I think for the first time in 10 years, I think this is the first time where we have kind of said there is not a lot of redeeming value in this subset of people in terms of for the agency. So all of you probably have a couple clients like this. And what we’re saying is you have a finite amount of energy and time and brain power to invest in helping your clients grow their business and grow your business with them. And this is probably the folks that I would spend the least amount of time.

Susan Baier:

Yeah, diminishing returns from this folks, certainly. So here’s some other interesting stats across all of these segments. So as we have seen for the last, I don’t know how many years, more than one agency, 53% of these are working with more than one agency. Even the ones who really want that long lasting, very tight relationship with their agencies, they’ve still got more than one. So as usual, we’re saying you got to learn to play nice in the sandbox with the other agencies that they’re working with.

Drew McLellan:

Not just with the in-house staff, but also- [inaudible 00:14:52]

Susan Baier:

That’s right. To your point about demographics, there is no difference in the segment distribution here, whether they’re a B2B or B2C client, there’s no difference based on how long they have been in business. About two thirds of these have an in-house marketing team that they are working with. The staff prioritizers, that middle group have a larger team. So another signal that they’ve got more oomph on their in-house side. Now, those saving seekers, that third group, significantly more likely to have fewer than 10 employees and less than a million in revenue, so…

Drew McLellan:

That’s good news. They’re your smaller clients.

Susan Baier:

Yeah. I mean, a lot of them are, right? And that middle group, those staff prioritizers that was 43%, significantly more likely to have budgets over half a million dollars. And when you look at the data, what you see is that their piece of the pie, once you get over half a million dollars in budget is double what you see below that line. So if you’re targeting those kinds of budgets, 60% of the time you’re talking to someone who’s a staff prioritizer, just because the juice they’ve got behind it.

Drew McLellan:

Yeah. And in fact, we see much smaller segments of both the relationship folks and the savers once we get to half a million and above.

Susan Baier:

So once we get to half of that. Yeah. So understanding those prioritizers is really important if you want to be attracting that kind of budget. Now, one thing we didn’t know when we did this is whether the news would be good or bad with respect to getting more money out of these. But there is a lot of good news for agencies in this study. 43% of our respondents planning to use their agencies more over the next two years. Virtually none of them plan to use them less. So lots of opportunities, lots of different activities that they’re pursuing. And listen to the percentages, Drew, that are strongly agreeing with statements like these. I trust my agency recommendations, 72%. I want strong long agencies relationships, 81% strongly agreeing. 59% interested in new services from my agencies. Flexibility to adjust spending, 58% strongly agreeing. 44% strongly agreeing, I would spend more with an agency if they really understood our challenges and goals. And those are really good numbers.

Drew McLellan:

Yeah, those are great numbers.

Susan Baier:

But when you pull out the saving seekers, they’re even higher. For example, for our relationship builders, the number, the percentage that want strong relationships, say collaboration leads to better outcomes, are flexible and interested in new services is 70 to a hundred percent strongly agreeing with that. And the staff prioritizers aren’t far behind them. On the other hand, those saving seekers, that question about would we spend more if an agency understood our challenges and goals? Only 27% of that group strongly agreed with that. So again, to your point, there’s not much you’re going to be able to move these folks on, even if you are a terrific partner for them, they’re just, additional spending is not what they’re looking for. So there’s just a lot in here that does prioritize those relationship builders and staff prioritizers around this question in terms of spending more.

Drew McLellan:

Yeah, lots of good news. So one of the other things we talked to them about was sort of, okay, you love your agency, you say you want to spend more. What does that look like? How flexible is your budget? Can you spend more in the middle of the year? Do you have to wait till there’s a budget review? And some things like that. And that data was really fascinating too.

Susan Baier:

Really, really fascinating. And of course for an individual agency, if all of your work is government work, this is going to look a little different for you.

Drew McLellan:

Sure, right.

Susan Baier:

But 62% of our clients said they do set a fixed dollar amount for their agency budgets. But 60% of them say they are regularly evaluating the results they’re getting and opportunities that come to them and adjusting the budget throughout the year. 60% of them. And another 20% say absolutely we will increase the budget as needed based on opportunities that come our way. So I was surprised at the amount of flexibility these folks have. 59-

Drew McLellan:

I think this is one of the dirty little secrets clients keep from their agency. I think they try and convince us that budgets are much more fixed than they are, that they don’t have a lot of fluidity in the middle of the year. And what this data really shows is that when we present a compelling case, a compelling reason, and we’re going to show you some of the things they find most compelling in a little bit. They do have more money and the ability to spend it when they want to spend it.

Susan Baier:

Right? 59% have increased agency budgets mid-year. And for the relationship builders, that first group, it’s 71%. So there are budget allocations to be made and things moved around during mid-year. So we asked them why they have increased agency budgets recently.

Drew McLellan:

Yeah. What prompted that?

Susan Baier:

So 36% said it was, we wanted to throw more money at something that was working, right? We’ve tried this, it’s working well, we’re going to invest more in it.

Drew McLellan:

So this is critical. We talk about this a lot, the need to be able to pro