Customer churn is a major concern for advertising agencies

Tips for minimizing customer churn

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Our last blog was about the new business development and the agency pitch process which are constant thorns for advertising agencies. This week we look at the retaining existing client or minimizing client churn. This is an issue in all industries but the advertising market is ultra competitive. With a client churn rate is as high as 40% per year, no wonder new business development is such major focus for the agencies. BUT so should minimizing client churn be!

We also spoke about the topic of client retention earlier this year so please check out the blog if you have not already done so. In it we explained that it costs between 5 and 25 more to get a new client as it does to maintain an existing one. So it makes a lot of sense to keep your existing clients happy.

So what is your agency doing to minimize client churn? Below are some things that your agency can do.

Include minimizing client churn in your KPI’s

There is a saying that has become so common that its difficult to attribute “you can’t fix what you can’t measure.” This is obviously because its 100% accurate. For example, what is the first thing you do if you want to lose weight? Exactly! So the first thing that you do if you want to reduce your agency’s client churn is to measure it. This is not a one off exercise but needs to be done regularly. Of course that does mean that you need to have the right systems in place to be able to measure client churn.

Once you have the actual churn then you can establish a target for the year and work towards meeting it. And its worth it as research from Bain & Co shows that increasing customer retention by 5% can increase profits as much as 95%.

Have a client retention strategy

The word “strategy: is overused in business but client retention is such an important part of any business that it merits the use of the word. Once you have established where you are and where you want to go then you need a plan to get you there. This plan needs to be documented and tracked. This strategy should include the following:
a client retention strategy will be useful to reduce customer churn

1. Client Project Reviews

This ensures that your agency delivered what it promised or if not why not. This article form HubSpot states that the 3 reasons that clients leave their incumbent agency are:

  1. Agencies charge for time not value. (a topic which Carlos Pezzani talks about extensively in his book.)
  2. Agencies don’t offer the right services. If they do, they don’t package them properly.
  3. Agencies aren’t accountable enough to results.

Having a project closing review addresses all the above complaints or at least highlights them and allows the agency to proactively address them. Incidentally this is standard practice for projects in other industries.

2. Communicate Openly and Frequently

The ad industry has an unfortunate reputation of being too opaque with its clients. God forbid that the client actually sees that time and effort spent on a fee! Imagine if they could see work done in delivering the project!

This lack of transparency is counterproductive. It’s one of the reasons that larger clients are insisting on more transparency and adding the right to audit the agency as part of the contract terms. It also features as 3 of the 6 reasons sited in this article from Whatagraph.com.

The irony is that sharing project data with the client benefits the agency, as we have said on many occasions in the past. It highlights out of scope requests, it shows the level of overwork and over-servicing and it makes future negotiations simpler, if not easier.

It does mean that the agency needs to have proper tools and processes in place to be able to communicate accurate information on a real time basis. But that is not a bad thing.

3. Survey them

Client surveys are common in many professional services businesses. This is especially the case when it comes to businesses that have long term relationships with their clients. Isn’t that what ad agencies want? Long term relationships with clients? This is particularly important for agencies that have a lot of retainers as it means that you find out that there is a problem BEFORE the renewal. That gives you time to address it before you find yourself pitching for the business or worse…

Most business use an NPS (Net Performance Score) to gauge client satisfaction. This not only shows which clients are unhappy, but also those that are and can be used as references or case studies.

Summary

The above is by no means exhaustive but the key is to minimizing client churn is measure the the current situation so that you can plan a route to the desired outcome. Once you have a plan, you need to have procedures in place to make sure that its executed and is applied to all clients. None of this is new. It’s based on a simple principle. Clients are people and doing these things build a trusting relationship with them.

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