Under the old model, agencies knew they'd lose money at the start of a relationship. Spec creative, huge pitches, new personnel, campaign development -- all the stuff one does with a new client -- were bound to lose money. Once the campaign got rolling and went on autopilot, media profits would offset the initial costs, and all would be well. It made sense to lose money at first. You made it back over the life of the contract.
This doesn't work in the new world of short-term projects. Blowing $50,000 on a pitch to win business worth $100,000 means you won't make a dime. Going overboard with creative concepts and client service at the beginning of a project means you lose money from the start. You may make it up if a project leads to another, but not if you repitch the business.
In the future, relationships will be replaced by a series of linked projects. No more keeping a client for years (unless we really screw up). Instead, we must be ready to jump to the next client and the next project on short notice.
The Number One Asset: Time
Fortunately, there are models for operating in this kind of environment. Business service industries, such as legal, financial, and consulting have operated like this for a long time. Although they have different ways of doing things, they know there's one asset more precious than any other: their time.
In a project world, you must track time, bill time, and sell time. Don't work for free and hope to make it up later. Don't give away work in new business pitches. Don't do a little extra for a relationship that isn't guaranteed to be there next month. Give good service, but get paid for the time you put into a job.
November 03, 2003
Goodbye martinis and expensive dinners? Goodbye big client pitches and high up-front risk? Sean argues the new agency business model will change or is changing. Agencies will need to adopt to specialized project work and good client service but not deep client relationships:
Posted by about me at 4:48 PM