COMM2333: CLIENT MANAGEMENT

Week 2

Managing clients: Retention and Acquistion & Financial Considerations.

Class program –week by week content.• Week 1: Course introduction, Industry overview, Teams & Case study method

• Week 2: Managing Clients: Retention and Acquisition. The role of the client manager and client collaboration.

• Week 3: Organisational Culture and Climate & Case study discussion

• Week 4: Leadership and Management, Wilson Matrix and Case.

• Week 5: High Performance teams and Case. Assessable Case brief

• EASTER BREAK – 2nd April to 8th April 2015.

• Week 6: Negotiation Principles and negotiation exercise. Hand in Assessable case

• Week 7: Negotiation Part 2 and exercise. Team 1.

• Week 8 Guest Speaker and Assessable Case. Team 2

• Week 9: Legal considerations in advertising and Case. Team 3

• Week 10: Ethical considerations in advertising and DVD. Teams 4&5

• Week 11 Managing your career & yourself and Case. Teams 6&7

• Week 12 Individual Presentations

Session Outline

• What is a consumer?

• What is a Client or Customer?

• Client Retention

• Client Acquisition – definition and process

• Client Portfolio Concept

• Financial considerations .

What is a Consumer?

• A consumer is someone who buys goods and services.

• Penguin English Dictionary 3rd edition 1979

• A consumer is a person or group of people that are the final users of products and or services generated within a social system. A consumer may be a person or group, such as a household.

• Source: Wikipedia.

What is a Client (also a customer?)

• A client is one who employs another professionally as an advisor or agent

(Penguin English Dictionary)

• Customer – one who buys at a shop.

(Penguin English Dictionary)

• A client or customer is a recipient of goods or services in return for monetary or other valuable considerations. Source: Wikipedia.

Client/Customer Retention.

• Client/Customer Retention is the activity that a selling organisation undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organisation has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace.

• Customer retention is more than giving the customers what they expect, its about exceeding their expectations so that they become loyal advocates for your brand. Creating customer loyalty puts customer value rather than maximising profits and shareholder value at the centre of business strategy. (1) The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service.

• Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees returns a revenue gain of 3.4 times the norm.

Client/Customer Acquisition

• Client Acquisition Management is a term used to describe the methodologies and systems to manage customer prospects and inquiries, generally generated by a variety of marketing techniques. It can be considered the connectivity between advertising and customer relationship management. This critical connectivity facilitates the acquisition of targeted customers in an effective fashion. (1)

• Source: http://www.destinationcrm.com/articles/web-exclusives/viewpoints/the missing-linl-in-CRM-customer-acquisition-management-44024.aspx

Client (Customer) relationship Ladder – Andrew SobelRank from the weakest to the strongest relationship.

• Vendor of Steady supplier

• Trusted Partner

• Contact

• Expert

• Trusted Advisor

• Acquaintance

The six levels of professional relationships: SobelLevel How a client would describe the relationship

Contact We’ve met. I think she works for ……

Acquaintance I’ve known him for a while. We have some things in common and know some of the same people.

Expert She’s very knowledgeable in that area and did excellent work for us on a project.

Steady Supplier We’ve had a relationship for a while now. He and his fiorm consistently deliver and I’ve recommended him to a few colleagues. For this type of work, we will continue to use them.

Trusted Advisor I’ve know her for a long time. She’s superb at what she does and has great business sense. I really trust her judgment and I will definitely use her as a sounding board for important issues.

Trusted Partner I view them as a long term partner in growing our business. They’ve built many strong relationships with our people and they consistently add value. I feel we get the best that their firm can offer.

Acquiring new clients: Know your Market

•Winning business not easy

•Well serviced local market

•14+ major agencies and lots of specialists

•Category exclusivity

•Identifying potential clients

•Global alignments

•Mergers

•Like-minded brands

•Networking & relationships

•Unhappy advertisers?

•Deciding When To Pitch

•Is it for real?

•Is it profitable?

•Can the time and energy be spared?

Challenges of Acquistion (or Pitching)

• Time & resources - average pitch typically requires 600-800 internal head hours

•• Disruption to marketing process and also incumbent agency if shortlisted

•• Exposure of brand/business information to the market

•• Time and resources to induct and orientate new agency

•• Knowledge loss with change of agency

• Managing the process in a timely & professional manner for corporate reputation

* Adapted from Trinity P3

What makes a good contact or prospect for an advertising/communication agency?

A client that:

•• Provides a sound brief that engages with other elements of the marketing mix

• Allows enough time. Innovative, customised solutions take longer.

• Is open minded and prepared to listen to new ideas

• Is not driven solely by cost per thousands and price. The wrong environment is never the right price.

• Rewards a media agency for the quality of their thinking

* Adapted from Trinity P3 ‘Top 10 tips to ensure you get the best media strategy’

Top 10 Tips – for acquiring new clients

1. Avoid The Pitch!

2. Why a pitch... Is there a hidden agenda?

3. Know your prospect

4. Read the brief

5. Win the pitch before the presentation

6. No standard formula – tailor to each clients needs

7. Be real and relevant, live your brand personality

8. Short and sweet

9. Show real passion and commitment

10. Prepare early and rehearse, rehearse, rehearse

1. Avoid The Pitch!

•A ‘review’ is a pitch

•A pitch means you are a chance to lose

•Pitches cost money

•Retaining clients can be as good as winning new ones

2. Why a pitch?

• Is there a hidden agenda?

• What are the real reasons for pitching?

• Make sure these reasons are addressed in the response

3. Know your prospect

• Cast smart, likeable, talented people

• What is the client’s background?

• What are their personal interests?

4. Read the brief

• Check your response against the brief along the way and prior to presenting

• Address what the client wants – a million apples is no good to a client that wants oranges

5. Win the pitch before the presentation

• Everything should be prepared and in order

• All questions answered and likely questions anticipated

• Great delivery should be enough by the time you deliver the pitch

6. No standard formula

• Tailor to each clients needs

• If you are cut and pasting, make sure its relevant

• Show what you can do for them, not just what you can do

• Demonstrating a point of difference is critical in a service based industry

• This is the falldown of many agencies, particularly media agencies

• Must be seen as a communication solution provider and not a commodity

7. Be Real and Relevant. Live your brand personality.

8. Short and sweet

• No one ever asked for a presentation to go for longer!

• Get your key points across quickly

• Say it the shortest way possible

9. Show real passion and commitment

• Need to be an expert in whatever you are selling

• Advertising is the business of knowing other people’s business

• Demonstrate your enthusiasm

• Ask questions

10. Prepare early and rehearse, rehearse, rehearse

• Make your work count

• Don’t fall at the last hurdle

• Very hard to fail when you are prepared

Becoming a Trusted Partner (or Trusted Advisor).

• Trust leads to higher retention rates and increased profitability

• Trust is achieved through Credibility, Reliability and Intimacy vs. Self Orientation

• Credibility: expertise and presence

• Reliability: dependable and consistent. Achieved through action.

• Intimacy: emotional closeness, building rapport

• Self Orientation: defensive behaviour, focus on self instead of client

• (C+R+I) / SO = Trust Factor

• Example 1 (existing client): 9 + 9 + 8 / 5 = 4.2

• Example 2 (new client): 7 + 6 + 2 / 8 = 2

• The development of trust:

• Engage, listen, frame, envision, commit

COMM2333: CLIENT MANAGEMENT

Week 2

Financial Considerations in Client Management

Outline

• Why do we need financial analysis?

• How to use Financial Analysis?

• Key Terms

• Break Even Analysis

• Foundations of Budgeting

• Setting the campaign budget

• Advertising Budgeting Methods

Why do we need Financial analysis?

• To assess the current financial health of our agency (and our clients)

–Are revenue, costs, and therefore profits, increasing or decreasing?

• To assess the future financial health of our agency (and our clients)

–I.e.: Is there a concern with future revenue and/or the cost structure of the agency, which indicates future financial difficulties?

How to Use Financial Information

To answer specific questions NOT just to show that you calculate a few financial ratios!

Therefore you MUST draw conclusions from your analysis

i.e. How profitable is the Agency?

How much revenue is required to reach B/E given the current cost structure of the agency?

What is the overall financial health of the agency?

Purpose and Key terms

• Purpose of the firm: to make a return (ie Profit) to cover all costs and provide a return on investment – sometimes in the form of dividends to be shared by shareholders and other stakeholders

• Income statement (Profit and Loss) – usually prepared quarterly and provides an easy to understand picture of profitability

• Balance Sheet - shows at a point of time (usually end of FY) the assets, liabilities and equity of the firm

• Assets – the resources available to the firm to make a profit

• Liabilities – the creditor financing of the assets of a firm

• Equity – shows how the assets of a firm are financed (ownership)

• Cash Flow – shows the liquidity of the firm which is a function of how quickly a firm collects the money owed to it and how slowly it pays out money.

Collections of 26 days and not paying its own bills for 42 days means??

Break Even Analysis

• Break-even analysis is a tool to calculate what revenue is required to cover all costs (variable and fixed costs).

• VARIABLE COSTS – COST THAT VARY WITH REVENUE

• FIXED COSTS – GENERALLY DON’T VARY WITH REVENUE

• You can also use break even analysis to:–  set price levels – target optimal variable/ fixed cost combination– determine the financial attractiveness of

different strategic options ie increase advertising

Agency Revenue - FEES PAID BY CLIENTS

Different methods of rewarding an agency for its work.

1.Percentage of the Advertising budget

2.Fixed Fee per annum

3.Hourly Payment

4.Project payment

5.Based on Performance

6.Hybrid - Combination of the above

AAA Ad Agency - Illustration

• Revenue – total ad spend/fees paid by the client

• Client A – TOTAL AD SPEND$200M; FEE TO AGENCY $5.0M

• Client B - $10.5/$2.1M

• Client C - $4M/$1.0M

• Client D - $1.0M/$0.5M

• Client E - $0.250M/$0

• Costs – both fixed and variable costs – senior management (2 persons) salaries $1.5; staff salaries (12 persons) $0.895M, staff on costs $0.479, rent $1.5M, printing $0.5M, computer costs $0.5M, entertaining $2.5M, miscellaneous $3.5M.

Is this Agency profitable?

What else have you noticed about the financial performance of the agency?

AAA AD AGENCY ILLUSTRATION

• REVENUE = $8.6M minus COSTS = $11.374M

• PROFIT(LOSS) = $2.774M

• Heavy reliance on one client (Client A) – 58% of the revenue

• Only 5 clients

• Fee structure for clients – highly variable (based on fees as a % of budget):

• A 2.5%

• B 20%

• C 25%

• D 50%

• E N/A- maybe start up or pro bono

• High senior management salary (av. $750k) vs. staff (av. $74.6k)

• Rent appears high in relation to revenue and no of clients (17.4% of rev)

• Big entertainment ($2.5M) and miscellaneous costs ($3.5M)

BCG – Portfolio Analysis – Balance of Clients.

BCG – Portfolio Analysis – Balanced folio of clients

B/E for a client advertising budget - B=F/(P-V)

• B= break even volume

• F = fixed promo costs (ie advertising)

• V= unit variable costs

• P=price per unit

Think Hyundai and its latest Genesis luxury car

• Ad budget $10,000,000

• Price = $60,000

• VC = $50,000

• Profit per car = $10,000

• B/E = ? units

Foundations of Budgeting – Jugenheimer/Kelley (2009)

1. There is some relationship between advertising and sales

2. There is always ‘some return’ for an additional advertising investment BUT consider the concept of ‘diminishing returns’

3. There are threshold levels of advertising and below the threshold advertising will have no impact on sales

4. The sales returns are spread over a substantial time period after the advertising runs – ie the lag effect

5. Some sales will be made even with no investment

6. No amount of advertising can push sales beyond a maximum ceiling

Advertising considerations (Rossiter – Chapter 13)

• Adspend in an industry recession – should you decrease/increase?

• Adspend set and a competitor attacks – should you change your adspend?

• Advertising Budget setting – (Schroder’s Method)

–Budgets should not be set nationally but locally

–Examine largest competitors SOV/SOM and our own SOV Vs SOM

–If your largest competitor’s SOV is below SOM, then attack with a larger comms budget and be prepared to sustain 13+ months

–If SOV matches SOM then defend – which requires matching LC’s expenditure

–Important to track impact of ad expenditure (sales, m/s, and TA awareness, preference, intention to purchase etc)

SOV = share of Voice

SOM = Share of Market

LC = Largest competitor

Advertising Budgeting - Methods

1. Percentage of sales (past years sales/anticipated sales)

2. Percentage of profit (past years profits/anticipated profits)

3. Match the competition/share of voice (SOV)

4. All you can afford

5. Allocation per unit sold (similar to % of sales)

6. Objective and Task

7. Zero based (clean sheet – similar to objective/task)

8. Industry norm

9. Minimum effective level

10. Investment spend

11. Remainder or what’s left over (similar to all you can afford)

12. Top Down/Arbitrary

Resources• Sobel A (2009) All for One 10 strategies for building trusted client partnerships. Wiley

•Sebastian T (2008) Tell your clients where to Go!

•Gibson P (2012) The world of customer service

•Solomon R (2008) The art of client service

•Po-Chedley (2001) Client Relationship Management

Ogilvy, D. 1968 Confessions of an Advertising Man Mayflower Dell, Great Britain.

• Maister, D, Green, C. & Galford, R. 2000 The Trusted Advisor, Free Press, New York.

•Axelrod, A. 2002 Everything I Know About Business I Learned From Monopoly, Running Press Book Publishers, Philadelphia.

•Trinity P3 - Marketing Management Consultants. http://www.trinityp3.com/downloads.php

•Penguin English Dictionary 3rd ed 1979 and Wikipedia accessed July 2013

HOW TO ANALYSE A CASE STUDY.

FORMAT – BUSINESS REPORT

• Write your report as if you were writing to senior management.

• Business report format

– Exec Summary

– Introduction

– Page numbers

– Headings and sub headings

– Reference list

1. Statement of Problem

• Identify the Core or underlying problem (just ONE problem)

• Separate problem from symptoms

• Be Succinct and paint a clear picture – usually one sentence

2. Background /Situational AnalysisThis section provides context

•2.1 External to Agency

– Business and Competition

– Environment

– Consumer trends and attitudes

– Communication strategy of brand and competition

•2.2 Internal (including Clients & Personnel Issues)

– Clients/client portfolio

– Hiring/Structure of the agency

– Personnel appraisals/salary

– Manpower application

2.3 SWOT – SUMMARY of your situation analysis

Note:

State any assumptions you have made

State the timeframe

Draw on material from the case first

3. Discussion of Alternatives (list)

• Develop three or more alternatives

• One alternative could be to maintain status quo

4. Recommendations/ Rationale

• Choose one of your alternatives and support your recommendation with a strong persuasive argument

• Recommendation is a straightforward statement followed with bullet points to support your preferred option

5. Action Plan or Next Steps

• implementation

– Specific task, timeline and who’s responsible

– Use a table foramt

– Budget - optional

– evaluation or measurement and methodologies used - optional

6. Contingency Plan

• Identify the biggest Risks with your recomendation

• What if it goes wrong?

• Statement saying : “If this happens this is what we will do”

Three things to do before week 3

1. Work on your team proposal – also familiarise yourself with the library cross search facility (refer slides at the end of this slide pack on WARC/GOOGLE)

2. Check content on Blackboard – lecture and tutorial resources AND find your blog on Blackboard (let me know if you can’t find it).

3. Read and Prepare Boswell Agency (posted to week 3 Blackboard – course content tab) using the case study method

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