If you make an effort to keep up-to-date with useful research in the area of business theory, there’s a good chance you’ve come across “Blue Ocean Strategy”. In their 2005 book Blue Ocean Strategy, researchers W. Chan Kim and Renée Mauborgne argued that markets can be split into two distinct categories: blue oceans and red oceans.
Simply put, a blue ocean is a market that is emerging, profitable, and not yet packed with competitors that turn survival into an all-out dogfight. In contrast, a red ocean is an existing market where established competitors struggle to eke out a reasonable market share, and new entrants have a slim chance of succeeding. The red colour of the ocean alludes to the kind of waters sharks feed in – a grim analogy for business competition, but fairly accurate!
In this article, we’re not going to focus on discussing the differences between blue oceans and red oceans, and how you can apply this knowledge in your business (that’s a topic for another day). Instead, we’re going to look at one particular factor that will influence your ability to survive in a tough, crowded market.
The reality is that business is getting more and more competitive with every passing year. Waves of globalisation have spurred on increasing interconnectivity between countries around the world. This creates a situation where you’re not just competing with a handful of companies in your local area – or even in your country – anymore. Instead, you’re trying to keep up with competitors on a global scale.
And this reality of increased competition from all sides is prevalent in the agency space. Depending on the kind of service you provide, you might be insulated from this to a certain extent (e.g. local recruitment agencies have little to fear from foreign competitors – although they have their own challenges, such as competing with online agencies like Monster). However, there’s other sectors that are very prone to disruption from the wider environment: think design, marketing, or business consultancy services. The kind of work these agencies focus on is easy to do in a “remote” (i.e. online) capacity, leaving the door wide open to potential competitors.
Sometimes these competing agencies are located in lower-cost regions of the world, where they can afford to charge much lower prices than you can. Maybe they offer a novel approach to delivering the same results to your clients. Maybe they can even deliver better ones with their methods. The water is getting redder by the day. Without a proper strategy in place, you could be in for a nasty surprise in the near future.
When you’re operating in this kind of environment, how do you compete? How do you stand out among this competition, and create a business that’s sustainable in the long-term?
You need to focus on building great customer relationships. And by this, I mean that you should focus on increasing customer retention rates, and growing the service you provide to your existing clients.
Of course, customer relationships are just one half of the equation. The other half is knowing exactly what niche of the market your services are perfect for. But we’ll leave that topic for another day, and instead zone in on the value of effective client management.
Being able to retain & grow your existing clients is a powerful skillset, one that you must develop if you hope to build your agency. It can make the difference between swimming alone in shark-infested waters, and having an ally pull you onto their boat, stopping the beasts from sinking their teeth into you.
But developing this skillset isn’t easy. If you’re the head of a large agency, the leader of a client-facing team (or even if you’re a one-man band), it’s quite possible that you haven’t taken the time to really work on client management best practices for your staff or yourself. With everything else you have on your plate, giving your staff training you feel might be a bit redundant seems like a huge waste of time.
And if it was the case that your staff already possessed these skills, I’d agree with you – it would be a waste to give them specific training in this area. But the skills of effective client management aren’t exactly common knowledge. Maybe you’ve seen this first-hand in your own business. Maybe you’ve experienced this first-hand (e.g. that time when you weren’t sure how to handle a client that asked for too much while giving too little in return).
In my coaching practice, I’ve seen the same issues playing out time and again in agencies around the world. The fundamental approach many of them take to client management is flawed, setting them up to do unprofitable work, work too long for too little pay, and to stress constantly over keeping their clients happy.
To bring things back around to our idea of a “red ocean”… these kinds of agencies are floundering in blood-red waters, hoping that their indifferent allies (clients) will paddle over and rescue them – but they can’t be certain what’s going to happen.
It’s the same in your business. If you’re not confident that you can retain a client, you’ll do one of two things:
Both of these scenarios lead to the same conclusion – your clients move onto another agency if your output doesn’t quite meet their standards. That’s not to say that your work is bad in this scenario. It’s a case of their expectations being too unrealistic, or that you’re stretched too thin trying to over-service countless clients to deliver truly great work.
We both know that retaining and growing your best clients is the path to business success. Even think of something as fundamental as your customer acquisition cost. That’s a sunk cost you have to incur every time you go out and hunt for new business. Based on that alone, getting more money from your existing customers will be more profitable than finding new ones.
You can’t afford to paddle around unprotected in the red ocean of a fiercely competitive market. It’s better to have a stable, safe location to survey that waters from, allowing you to dive in when you need to (but protecting you when you don’t).
Rather than having a large pool of potential rescuers (who may or may or not pull through for you when you need them), wouldn’t you rather know you could rely on help from a handful of bigger boats – and be sure they’d be there for you?
That’s what it means to retain clients and grow your existing accounts.
You don’t worry about constantly acquiring new business to replace those customers that walk out the door and never come back.
You don’t have to worry about satisfying those demanding clients that barely move the needle when it comes to your bottom line.
And you won’t have to worry about losing your best clients – because you possess the skills required to keep them truly happy with your work.
We’ve already talked about how over-servicing is a fools game, one that we all get caught up in at some stage. However, there’s a difference between knowing something and being able to put that knowledge into practice.
That’s why I created the FREE Client Management Masterclass. Based on my experience in the agency space (first as the owner of a 7-figure agency, then later as a coach and mentor to 200+ agencies across multiple sectors), I’ve produced a free 30-minute video training session that can be used to take your client management skills (and those of your employees) to the next level.
The Client Management Masterclass went live on Monday 18th March, and streams directly to your computer, tablet or phone. In the Masterclass, I reveal my Three Pillar Approach to effective client management, teaching you how to get paid what you’re worth, manage client expectations up front (to avoid conflict and negative situations), and boost retention rates to supercharge your profitability.
I’ve accumulated these client management best practices over the past 25 years, based on my observations of what creates the most impact for my coaching clients. Anything you learn here is proven to work across a variety of industries, and will likely be of benefit to your business too.
Additionally, all attendees of this Masterclass will be given the chance to sign up for my brand new Client & Account Management Mastery Course, featuring exclusive video training, in-depth tricks of the trade, and access to a private mastermind group, where you’ll get the chance to ask me your questions on a weekly live Q & A. This is like hiring me to coach you in-person (which typically costs £2000+, depending on your needs). Further details of that will follow at the end of the Masterclass.
The Client Management Masterclass is available for viewing now. If you’re interested in learning more about it, please go here. If you register in the next week, you’ll be eligible an additional FREE bonus (more details at the end of the Masterclass).
Last week I had to renew my car insurance so I phoned my current provider (after checking out the best deals) and they showed little interest in trying to keep me as a customer. They didn’t even attempt to match any other quotes that I received so I said goodbye and moved to a new suppler.
It has always amazed me that utilities companies such as car insurance make little effort to retain their clients and instead, focus all their marketing money on winning new clients. This is not a good business model for any agency or service based business. Yet what efforts do we make for keeping our clients? Of course we want to continually do a great job for them and we know that if we do, we will give ourselves a good chance of retaining them but what else should we be doing?
So let me ask you a question – “How often do you stop, take stock of your top clients and take a high level strategic view of them to work out any risks and opportunities for growth?” If you are like a lot of my clients, the answer is probably ‘not often enough”!
Yet it costs 5 times as much to win a new client as it does to keep an existing one. I think we have all read a stat like this somewhere, so why don’t we focus more on developing existing clients?
There are a number of reasons that I hear:
Here is another interesting and thought provoking stat: If you can increase your client retention by 5% you can increase your profits by 25-95%! Surely that is worth investing the time to train your accounts team to do some Account Development Planning?
I know when I ran my agency, CIT, we didn’t have this in place and just believed we could keep our clients by going the extra mile (there is SO much wrong with that statement!) but every now and again we would feel really cheated because we had worked extra hard (read that as over serviced) for a client and suddenly we had the rug pulled from our feet and they went else where. Could we have prevented this? Maybe, if we had done some proper strategic Account Development Planning.
To successfully do some Account Planning, we need a formalised structure for reviewing existing accounts, identifying threats and opportunities, and creating an action plan to go after those opportunities (or mitigate the threats). I appreciate many agencies don’t have this structure in place or don’t even know where to start so it’s one of the topics I cover in my new Client & Account Management Mastery Course. its a big topic so it gets a whole section to itself.
So back to my car insurance – it’s just going to take one of them to buck the trend and ‘swim in the other direction’ and put their focus on customer retention rather than (or as well as) customer acquisition to make them really stand out from the crowd – and no doubt customers will flock to them! As an agency, we need to ensure we are also doing the same.
Until next week, enjoy the rest of your week.
I wrote on this topic a while back and since it was really popular, I thought I would add some further thoughts.
In the 21st century, a crucial part of attracting and retaining the best staff is to ensure you have a strong, clear and up to date online presence. The Z Generation (those born after the millennium) sees social media at the centre of their communities. A report by Sparks & Honey, a US advertising agency describes this generation as the “first tribe of true digital natives” or “screenagers”. But unlike the older Gen Y, they are smarter, safer, more mature and want to change the world. This is also why CSR (Corporate Social Responsibility) policies are more than just good for positive PR but crucial for attracting and retaining the younger, Z generation who want to “make a difference in the world”.
Glassdoor Research shows that when candidates have access to information about a job and company—before deciding whether to apply or accept a job offer—employers have seen an average of 22 percent reduction in turnover. The tide is already shifting with employees having more voice with the social channels. Review portals like Glassdoor and independent surveys that rank companies in terms of employee satisfaction have become important tools for potential employees checking out employers.
Of course your social media presence isn’t just about staff, it has to engage with all your stakeholders, including current and potential customers. The importance of social media is not just because of the Z-Gens but also due to the prominence of mobile devices and the X gens/baby boomers also using social media more frequently.
The success gap is widening between businesses that are using social media in an informal, ad hoc manner and those taking a more planned, strategic approach.
This has significant implications:
So how does your social media strategy fit in with your marketing plan – and how strategic v adhoc is it? And how are you measuring and adapting your online presence? Want to find out more then get in touch.