Why Referrals Are a Bad Business Development Strategy

Why Referrals Are a Bad Business Development Strategy

Out of curiosity, what’s your agency’s business development strategy? If you said, “I don’t know,” “We don’t have one,” or “Referrals,” then this blog is for you.

We hear it all the time: “Our agency doesn’t need to prospect for new business, because we’re already swamped with Super Big and Lucrative Client.” But ask yourself, what happens if Super Lucrative Client takes their business elsewhere? What was once a rosy picture turns bleak, and fast.

Should worse come to worse and you do lose an important client, it’s vital that your agency has a strategy underway to find and finesse new relationships. Moreover, we at Winmo firmly believe that the natural influx of working relationships shouldn’t dictate the rise and fall of your small agency empire. To help you consider your agency’s business development strategy, we’re sharing some vital contextual info about agency business development and detailing why referrals are no longer a viable business strategy. Plus, we’ve got some top tips on how to jumpstart your agency’s business development quickly and effectively.

Reality Check: The State of Agency Business Development

We’re not really ones for fear-mongering, but we believe that it’s fair to say that changes in the agency and media landscape are some cause for concern in terms of business development. Here’s what’s up:

  1. Agencies are underestimating what marketers really want: According to Hubspot and the 2017 RWS/US report, less than half of agencies anticipated an increase in marketing budget, while almost 70% of marketers expected to spend more money. This could reflect tentative optimism on the part of agencies, but it also represents opportunity — agencies that don’t expect more spend might not push for more business. The takeaway: Proactive agencies have more chance to be rewarded in a high-spend market, so be sure to have a finger firmly on the pulse of your marketing department targets.
  2. Agencies are spending less on people, marketing, and sales: As brands and marketers shift towards project-based work (more on that in a second), more agencies are looking to scale back business operations. We see this all the time at Winmo; agencies drop line items and cut costs to shore up profits. The only problem: getting rid of or scaling back your business development and marketing teams in the hopes of becoming a more profitable company is a logical fallacy. To grow a business and financially unchain an agency from the whims of a few big clients requires investment in key people and tools.
  3. Project-based work is on the rise: Your agency may already be feeling the pinch of the project-based contract. The days of the AOR are on the decline as marketers continue to look for fluidity with creative partners. Last year, RWS/US reported that 35% of agencies had ~60% of project work, up a massive 15% from the previous year. Today, projects are more than a quick payday for agencies; more and more, this parsed out work will be the seeds of a lasting and lucrative relationship with a client. When considering a project, think beyond the current moment and consider, “Is there a possibility for future work with this client?” A forward-thinking approach will be vital in developing robust relationships over time.
  4. Say hello to the in-house agency: According to Hubspot, “Nearly 80% of agencies predict their clients will move some marketing services in-house in 2017 — that’s a 23% increase over 2016’s prediction.” While it’s likely that the work that’s moving in-house will be smaller projects, it’s important to be conscious of that trend.

The agency as an institution isn’t going anywhere; the incredible work produced by agencies of all sizes represents far too much value to disappear overnight. But the landscape is changing! It’s important that your agency move, and more importantly grow, with it.

What NOT To Do: Why You Shouldn’t Rely on Referrals Alone

So, full disclosure: we’re a sales intelligence company, so we have a stake in the idea that referrals are a bad growth strategy.

But, actually, referrals ARE a bad growth strategy!why referrals are bad business development strategy

In 2007, 94% of agencies chose “referrals” as one of their three primary sources of new business for the firm. In 2011, that number dipped to 71%. This year’s RWS/US report revealed that referrals are at an all-time low, with only 64% reporting the channel as a top-three source of business.

We all know that the Don-Draper-drinking-at-the-office days of the agency world are out of date. Just as antiquated, though, is the idea that business should come to you. The fact is, proactivity is rewarded, and projects or accounts are earned. “Grow” is an active verb, not a passive noun.

Really, it’s simple math: the more chances you have to win business, the more likely you are to win business. Referrals are great (when they happen), and we’re not suggesting that you abandon the networking ship altogether. Instead, we’re arguing for the maximalist strategy; increase your development channels, actively prospect potential clients, and create a robust business pipeline to see your agency flourish.

The Solution: 4 Business Development Tips

If you’re looking to expand your business development capacities and aren’t sure where to start, consider these four tips:

  1. Invest in the right tools: What’s a painter without a brush? It’s critical to arm your business development team with the right tools to find and contact your prospects. Better yet, invest in WinmoEdge (the crystal ball of agency shifts, with a 74% accuracy record) and discover what the power of predictive sales intelligence can do for your business.
  2. Be persistent: But polite! Follow up is basic, but as Don Rheem (an employee engagement expert) shared with us, common sense is not necessarily common practice. While you never want to come across as pushy, it’s important to continue reaching out, even if you hear nothing back. We have some great resources for prospecting email subject lines and templates, and we recommend you take advantage!
  3. Stay on-message: Another interesting takeaway from the RWS/US survey revealed that marketers feel agencies talk too much about themselves, and not enough about the brand or business. Always remember to keep your client and their business central to your prospecting and pitches. Your value-add is important, but your knowledge and expertise about a potential client will set your agency apart.
  4. If you’re lost, ask for help: If you’re at a loss for where to begin with business development and are ready to invest some resources into developing a robust pipeline, consider outsourcing your business development needs. Catapult New Business will work for your business like any in-house employee, using industry expertise and the right tools to reach your next Super Big and Lucrative Client.

Ready to jumpstart your business development strategy today? Request a Winmo trial and flood your pipeline with valuable prospects.

 

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