An agency client of mine - who had 40% of their revenue with one client - received an RFP (request for pitch) out of the blue from the client's Procurement team. They were being asked to re-pitch for an account they'd had for four years.
No pre-warning from any of their marketing clients, no advanced notice, no unhappy client or 'dissatisfaction' with their work, nothing.
How devastating is that?
What would be the impact of losing this client?
If they lost the client, 40% of their revenue would disappear - and they'd have to make 40% of their staff redundant (this is typically - currently - how many agency business models work).
Why did this happen?
When we look more closely, the reason the agency was in this predicament was because there had been a change of CEO. Often when a new CEO takes up their new position they look for 'cost savings' (to make their shareholders happy - and make themselves look good quickly) and this can start with a 'consolidation of suppliers' exercise.In this instance, the new CEO decided to instruct his Procurement team to review their supplier list and reduce the number of suppliers - and thus save some costs.
As my agency client was on this list as a long-standing supplier, they were forced to re-pitch for the business and renegotiate their fees.
What was the upside?
The agency had established a very strong relationship with their client (the marketing team) who were very happy with their work (and who incidentally were equally as baffled and as 'out of the loop' on this supplier consolidation exercise).So they were advocating for the agency internally as much as possible because they wanted to continue working with them.
How did the agency respond?
The agency had to spend an inordinate amount of time working on winning back the business - assembling a re-pitch team, filling out Procurement's extensive 'sausage machine' type Excel document that allowed them to compare agency rates with competitors, developing the pitch deck, liaising with Procurement etc.The agency also had to renegotiate their contract - and while rates were kept the same they were forced to agree to a bulk discount i.e. if the client spent X, they'd have to give back Y% on the spend.
What happened?
Thankfully the agency re-pitched and kept the business - but not only did it leave a bad taste in their mouth, it cost them in lower fees, a lower bulk discount threshold, a tired and disillusioned team - and not to mention the negative impact it had on the other clients in the agency as everyone had been drawn in to this re-pitch scenario.
What lessons can we draw?
One could argue that in this instance the agency weren't staying close to their client's procurement team (who work closely with the C-Suite) and would have at least possibly had some kind of 'heads up' on what was about to happen. So first lesson is to ensure you try to stay close to Procurement. Here's an interview I had with the global procurement team of a pharmaceutical company on the Creative Agency Account Manager podcast where they talk about how to establish relationships with them that you might find useful: Listen to the interview here. The next lesson is to ensure you can spot the types of potential risks that can come up and address them quickly. I'm referring to the 'Red Flag Checklist' :
You only have one point of client contact
Client contact goes on mat leave / resigns
Client company merges or acquires (potential job losses and/or consolidation of marketing depts and roles)
New incoming member of the senior team / C-Suite
Annual relationship review feedback is negative (or isn't carried out)
Client’s business isn’t doing well / client's competitors are aggressive
Client announces redundancies
Read this article to find out how to respond to some of these scenarios as an account manager: 5 red flag moments when your account is at risk
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