Changes in the Agency Client Landscape

David and Blair try to predict the future about what principals of creative firms can expect in their relationships with clients as the COVID-19 pandemic continues to impact business.

Transcript

Blair Enns: David, we're recording this on April 20th. Happy 4/20.

David C. Baker: [laughs] Happy 4/20. I could use some of that right now. Have you got one of those brownies sitting right in front of you?

Blair Enns: How much to divulge here? I'm not a big fan of edibles.

David C. Baker: Yes, but? There's a but coming.

Blair Enns: [laughs] But I happen to have a tray of brownies and a jar of gummy bears.

David C. Baker: If the world ever needs more of that right now, we should just loosen the gates, I think.

Blair Enns: I know, yes.

David C. Baker: I'm in Tennessee, though, so we'll be one of the last states to do it.

Blair Enns: Yes. You and I can't talk openly about things that we may have done together.

David C. Baker: Right. [laughs]

Blair Enns: Okay, we're doing a podcast. Let's stay focused. The reason I bring up the date is just because we usually try to do timeless podcasts, but it's still right smack dab in the middle of COVID-19, so we want to have some context for this. We're going to try to predict the future about what changes our listeners can expect in their client-agency landscape moving forward. Before we get to the specifics of what listeners can expect in their new relationships with their clients, do you want to make a prediction of how long until we see normal again? Or will we even ever see normal by our old definitions again?

David C. Baker: The easy one, right, would be not easy to predict, but easy to think that we need to predict, when do people go back to work away from home? When do they start traveling again? I don't know if you notice that about a week ago, Microsoft canceled all of their in-person events through June 2021.

Blair Enns: Saw that.

David C. Baker: Yes, so it wouldn't surprise me if they have to actually bump it a little bit later. I would think that that would be a little bit optimistic at the moment, looking at flying schedules, and seeing that there are not even one flight a day from major destinations at this point. Who knows? It just feels like as soon as we feel like maybe the clouds will lift a little bit, then we get hit with some news. We already told people it was April 20th. Today, oil dropped below zero per barrel.

Blair Enns: What?

David C. Baker: Yes. Just for May contracts, what that means is that all of these folks, the brokers who have all this oil they're sitting on, they are paying people to take the oil because nobody will buy it, and they need to clean out the tankers and the storage tanks. Now, that's never happened in the history of the world where the price of a barrel of oil is less than zero. I would say this is a weird world.

Blair Enns: I'm going to buy me some oil.

David C. Baker: Yes, you're right. Even just one barrel. [laughs]

Blair Enns: Bury it in the backyard with my Bitcoin and maple syrup. The reason I asked you that question, I went on Twitter this morning, and I said I'm making operational decisions about the running of my business under the assumption now that we will not be traveling or gathering the way we have historically, until September 1st, 2021. That's about a year and a half away. I actually lied. I said to my team earlier until January 2022. I just dialed it back a little bit, trying not to be such a pessimist.

I can see people getting on planes, to go to meetings and wearing masks, et cetera, but I don't see gathering in large numbers comfortably, until we're at a vaccine. Let's say it's a year to get a vaccine, that's optimistic, and then another year to roll that out across the world. I think we're in this for a while, and I think we need to start adjusting how we're thinking about running our businesses, not just over the short term, but over the midterm.

You sent me a really interesting list of how you see the client-agency relationship or landscape changing. I want you to pick apart, you've got nine things on this list, and probably by the time we get to the bottom, there might be some more. Let's just go over this.

David C. Baker: Sure.

Blair Enns: At the top of your list, you had a lot of new contacts who will be decision-makers on the client-side. Are you talking about turnover on the client-side?

David C. Baker: Right. A CMO, or maybe somebody with a different title, maybe even a CEO, if it's a smaller company, because historically, isn't it true that most of the boundaries from one agency to the next occur at the same time that that person moves into that role, and so then they bring my agency with them. It hasn't happened yet, there's not been a lot of change there, but I think there's going to be a lot of change. There'll be some early retirements, there'll be some downsizing, there'll be some promotions of people who make less money.

From a new business front, this is really good news if you are looking to make inroads into one of these firms. It could be bad news if you're the incumbent. I haven't tried to list good news or bad news, I've just tried to list things that I think will change. This is opportunistic, this is good, because when a new person takes over the firm, you now have an opportunity to work with them, particularly if you have been working with that person somewhere else already. You keep the client that they're leaving, and you pick up the new client where their new job is.

Blair Enns: I hadn't thought about this, and it didn't even strike me when I saw your bullet point here. But it's a really profound insight. As you're talking, I'm imagining, say, an agency principal in his or her early 60s. Somebody who's got an eye on the exit, and whose clients are about the same age. Because that tends to happen, doesn't it? We age with our clients, or am I imagining that?

David C. Baker: No, it does. It's not as direct as the relationship between aging with your employees, that delta, that age gap tends to stay the same as you age, your employees age. It's not quite as direct with your clients, but there is a connection there for sure.

Blair Enns: So if your clients are of a certain age, and they're thinking, "Okay, it's a couple of years of working at home," or whatever the new world is, and the clients are close to retiring, they might just say, "You know what? Now's a pretty good time." Some of those companies, maybe there are packages. If that's you, if you have a dozen clients, and three or four of those clients are deciding, "Okay, I'm moving on," that's going to have an impact on your business. Whereas if you're a younger principal, and you're maybe connected with people, just a rank below in the organization, maybe this is your opportunity.

David C. Baker: Right. We're so used to hearing pretty much all bad news these days. I thought this was interesting because new business is still happening. Anecdotally, not just hearing from people who are hearing, but I'm actually hearing directly from people who are saying that they are still in the mix for picking up new clients, and that's really great news. And I think that this might actually pick up. It's going to be coupled with some other things like the next one, but I think this is good news. There's going to be more churn. This is good opportunity.

Blair Enns: Yes. If you're the type of person who thinks change is good, this is a good time for you. The second point that you just alluded to is this idea of shorter contracts.

David C. Baker: Right. In a way, this won't make all that much difference because even when you had longer contracts, you discovered when this hit that they were not waterproof in any sense, you started to see the leaks right away. If your client is bigger than you and they've got more attorneys on retainer than you do, you're pretty much going to lose that battle anyway. But I think we're going to start recognizing out of the gate that this idea of a one-year, or much less a two-year contract, is just a little bit crazy. Our world is changing way too quick. If we're looking for an inroad from a new business standpoint, this is really good news. I guess the flip side of that is that we are going to have to get used to quicker churn with our clients.

I hear this from principals all the time. Like, "Yes, the average age of the clients on our roster, we've had the average one for 13 years." I always shake my head and I don't say much, because I don't think that's something to necessarily be proud of. But there aren't going to be as many firms claiming that anymore, because there's just going to be a lot more mixing and matching as people move around in this. The ground is moving underneath us, it's like a constant low rumble earthquake.

Blair Enns: Even those long-term contracts that were signed, maybe the clients are looking at them and thinking, "Well, yes, I signed with them, but I'm not necessarily going to live by them."

David C. Baker: Right, exactly.

Blair Enns: The third point on your list is another interesting one I hadn't thought of, deferred account reviews, which goes against the trend of what you just talked about, shorter term engagements changing quickly. The idea that the client was thinking of putting its account into review and now is thinking otherwise, is that what you mean?

David C. Baker: Right. This would only apply to the agency-client relationship where the agency is deeply embedded in the client. They have been there for a while. Maybe it's two or three years, could even be longer. But those big relationships tend to turn over every two, three, four years. In that setting, somebody has either moved into a new position of making decisions over it, but more likely, it's just they've gotten tired of the work or the relationship in some way. They've had these internal discussions. "You know what? I think it's time that we put this account up for review." Then all of this change hit, and they had another meeting, and said, "You know what? We need to limit the disruption around here. Let's live with this for a little bit." I'm not saying that it will stay the way it is forever. I'm just saying that if you were in trouble with a client, it's likely that you have several more months of reprieve, so maybe it's two, or four, or six months. I don't think you have longer than that. But when you would have lost it, you probably are going to be in a position where you won't at this point, just for a brief period of time.

I'm hearing that directly from my clients' clients, and also from some of those clients directly who've just told me this that they're just deferring some of the account reviews that they would have launched at this point.

Blair Enns: That makes sense, and it's interesting- I think we may have talked about this before, but in the podcasts and webinars that I've been doing over the last few weeks for these agency associations and trade organizations, the question almost comes up around, "Well, how do you pitch virtually?" I was like banging my head against the table thinking--

David C. Baker: Like, "How do I kill my neighbor and not get caught?"

Blair Enns: [laughs] I think you must have me confused with somebody else.

David C. Baker: Right. The question is, why are you killing your neighbor? It's not how do you not get caught. Why are you pitching this [unintelligible 00:11:32] anyway? [laughs] 

Blair Enns: So there is- the landscape is changing quickly. People and the client side are changing quickly. But if you're in this account where you're on the verge of review, if things aren't changing on the client side a lot, they don't want to introduce any unnecessary change. So the idea is the review of the account will likely be deferred.

David C. Baker: What I would do in that case is if you have the spidey sense that this is happening to you, then I would pull all the stops out, and I would take a lot of risks to try to turn this around. Maybe that's changing the account person. Maybe it's pretending like you're just getting this from scratch and suggesting all kinds of new, more innovative things you should be doing for them. You have very little to lose at this point, and I would try to pretend like you just landed it, and you're really trying to impress them.

Blair Enns: That's interesting. There's an idea in change management known as environmental control that essentially says change the environment to change the outcome, or the decision. I interpret that a number of different ways like, yes, you imagine that the client is sitting there in his office making the same old, what we might consider to be bad decisions over and over again. If you want the client to make a different decision, change the environment. Get them to your office, get together with them in a new location off-site. Change the physical setting, so that people are outside of their comfort zone and they're open to making different decisions.

There's something about the environment that is changing. It might not necessarily be the physical environment, but it actually is. Everybody's working from home now, so you get this new changes introduced. It almost becomes this catalyst or this invitation for you to introduce other types of change. It's an entirely new environment. Everything about the experience of going to work has changed, so you have this opportunity. I don't know if that made sense to you at all, but it made sense in my mind.

David C. Baker: I hadn't thought about it quite like that, but yes, great point.

Blair Enns: All right. We're talking about changes in the agency-client landscape over the next little while. First, we've talked about a lot of new context on the client side front, shorter contracts, the deferral of account reviews. Next on your list, this is an interesting one. More referrals to your firm from previous employees who will be doing contract work for clients. Do you want to explain that one?

David C. Baker: About four, five years ago, I started to notice something really interesting. For one thing, it got started because people no longer were working on one side of the fence or the other. They were either on the client side or the independent private firm side. Now they're switching back and forth. You had somebody who used to work for you, and now they are either working for one of the clients and the in-house team, or they're doing contract work for them.

What happened is that many of these clients when they had an overflow issue, you could picture them-- It wasn't happening exactly like this, but they would step out on the floor and say, "Hey, any of you know of a firm that would be great at doing this?" If that employee who still like you and left on good terms thought you were a good fit for it, they would introduce you. It was a really interesting thing that started happening a few years ago, and I still hear a lot of this happening. It reinforces the point that your culture is important and that the terms on which somebody leaves you, whether you are initiating it or they are, are important.

You want to be able to see this person at a coffee shop, when those open again. You want to see them at a coffee shop and be glad to see them, hug them, ask them how they're doing. They're still a supporter of your firm. When you think about the people that you're having to downsize around, if that's true for you, then these are the same people who will be kind of your unpaid ambassadors as they go find work on the client side. That's how it works.

Blair Enns: So it's an advantage to you if you have a large network, and you've had a good culture and those people have really enjoyed working with you. Otherwise, it's just another example of more flux in the system.

David C. Baker: Right.

Blair Enns: Not everybody's going to benefit from it, but those who have treated people properly and have built a good culture should. Is that what you're saying?

David C. Baker: Right. Now you know there's somebody listening right now who's thinking, "Oh, right. I'm going to get 50 people, and I'm going to have a fantastic culture, and then I'm going to let them all go every four months."

[laughter]

Blair Enns: I like that model.

David C. Baker: Yes. We're not saying that, but we're saying that it's a natural pathway for you to be introduced via your former employees who are working for your clients as employees, or as contractors. So that's good news as well.

Blair Enns: Okay. Next on our list of changes that we're projecting in the agency-client landscape is this idea of bad client behavior in general, expressed in a few different ways, increasing. Is that right?

David C. Baker: Yes, definitely worse than it was. At the moment, you have bad client behavior that's just slowly starting to seep up from within your existing client relationship. These clients already like you and respect you, and a few of them are introducing some slight bad client behavior. But now imagine what will happen when those same people are not held back by the fact that they have an existing relationship with you. So they're going to be introduced to new firms as they move on, and they won't have any natural limiter or break on those bad client behaviors.

I'm already seeing this happen, and I think it's going to get worse. So we're going to have to slap down some bad clients. We'll have to be pickier. What's so difficult right now is that this is the most inopportune time to be picky, but it's when you have to be pickiest. It's that really tough place that principals find themselves in now where they cannot afford to lose their mind and take everything that comes their way. I don't know if that makes sense.

Blair Enns: It makes sense, and you've listed excessive demands, scope creep, and payment terms. As I'm reading this, I'm thinking when you talk about scope creep, we don't use that word creep in other places like terms creep or demand creep, but that's exactly what happens.

David C. Baker: Right.

Blair Enns: Managing this part of the relationship with clients, it's a lot like parenting. You start it with these ideals, and you lay out the laws of the land.

David C. Baker: Then you have one kid.

Blair Enns: Yes. Early you explain the laws, and the children don't have the wherewithal to push back on those laws. And at some point, they're just fighting you on everything, so you start to give up. You start to give up. I remember saying, "In our house, we're not going to have toy guns, and we're not going to let the kids in the internet." I remember walking past my youngest. I have four kids. He was about 12 and he's, as I say, killing people in the internet. He's playing the shooter game on the internet with somebody. And obviously, the guy he's playing with has asked him, "Where are you?" and he says, "I'm in Canada. Where are you?" I think, "Oh, God. Here's my 12-year-old talking to strangers on the internet, shooting," and it's like, "Whatever. I give up."

[laughter]

Blair Enns: I did a really good job on the first couple. The third one, eh. Fourth one, I'm just taking the F, and moving on.

David C. Baker: Yes, right.

Blair Enns: The same thing happens with your clients. That's my point.

David C. Baker: Yes, and at some point, you will get tired of beating this back, and as a team, you'll have to stick together and decide, "All right. How are we going to relax rules? Are we going to relax in this temporarily? Where are we going to take a stand?" This is something that you and I have talked about before how helpful it is to have a policy on everything and to have it on your website so you can point to it.

Blair Enns: Yes. Next on the list, an opportunity to buy some accounts from firms that don't make it. I like this one. There's going to be a lot of accounts changing hands. There's going to be mergers of firms, right?

David C. Baker: Yes. In some cases, let's say you have a firm that's struggling, and for some reason, they're just not going to make it, and they realize this. Nobody in their right mind just walks away from a firm. What I do when I'm involved is I help them sell those accounts on a non-risk basis. You're not going to have somebody who will pay you a lot of money for those because they never know what will happen with each individual account. But you can set up some sort of- it's almost like a trailing salesman's commission where you pay based on how much work that new firm retains from the account that you introduced to them.

There are really good ways to manage that and also to find agencies that are willing to pay you for them. If you're on the buying side, this is really every firm that goes out of business that has some decent work, they obviously don't have enough or they would still be in business. They have some decent work, you have the opportunity to pick this up fairly inexpensively and definitely with no risk because you don't pay unless the work comes with you. This is also good news at least for the firm that's buying these accounts. I'd say buy and quote, because you're not really buying them in the traditional merger acquisition sense. It does you cost a little money but there's no risk involved.

Blair Enns: Yes. The uncertainties removed from the price.

David C. Baker: Right.

Blair Enns: I know you're doing a bunch of work with a bunch of firms right now, including some dissolution work. I'm just imagining David C. Baker is this clearing host of all of these accounts, so you want to wind down your firm or you want to buy some accounts, it's davidcbaker.com. Next on your list of changes in the agency-client landscape, higher bar for flexibility on your part.

David C. Baker: Yes. I think particularly this is around your service offerings. If you wrote this article about two and a half weeks ago around constraints and using them to rethink how you would do business. I think this relates to not just how you staff accounts, but the things that you're doing for clients. I don't even know what that means yet, but you're already starting to discover this. You're getting panic calls from your clients, asking how you might be able to solve a particular issue, and you're calling in favors from the 20 years you've been doing this, and trying to learn from your other clients as well. It's a great opportunity to not charge more money, but to get your tentacles into a client deeper with a slightly more respectful relationship along the way.

I'm seeing this is also really great news. I should have counted here to see how many were good and how many were bad news. This is great news. I'm not talking about somebody who texts you at 11:00 o'clock at night and need you to make one last change in something that shouldn't have had any changes made. I'm not talking about that. I'm talking about genuine need from a client, and it's clear that they respect the work that you're doing for the firm. So that's good news.

Blair Enns: Yes. It's a, "Hey, can you do this for us?" If they go, "That's interesting. Yes. We can do that, but never thought this day would come." Next on the list, even greater rush towards digital as it becomes easier to target specific segments and turn it on-off as needed. I think I understand that, but can you help me?

David C. Baker: A lot of firms are already on this path, so it's not a new path. It's just a faster pace along this path. Agencies' clients are desperate to target their messages more specifically and be able to turn them on or off based on what's happening on the ground or what's happening with particular demographics. Contrast this with something on the other end of the scale, that would be out of home or billboards.

Blair Enns: I was just thinking out of home posters. Change all the billboards.

David C. Baker: Right.[laughs]

Blair Enns: Give us two weeks.

David C. Baker: If they're digital billboards, you can do that, but most of them still aren't. I'm doing the grocery shopping these days, so I'm out seeing these billboards, and I'm just laughing at myself. I was like, "What a waste of money the message that's still on there." All the way to the other side, you have digital ad buys on Amazon or Bing or Google or whatever, how quickly you can turn those off and on, and how much more targeted they can be. This is not news to anybody. All I'm saying is that the pace towards moving things toward digital is so much faster than it was before. And if you're behind the curve on that one, there's no better time to solve that for yourself.

Blair Enns: The world is changing, messages have to change quickly. Whatever medium you're working in, it has to accommodate the ability to change messaging quickly.

David C. Baker: Right.

Blair Enns: Last on the list. I really like this one. More leadership opportunity for your firm as you save clients from their tone-deaf selves. This has got David C. Baker written all over it. What do you mean?

David C. Baker: What do I mean by tone-deaf? I'm not seeing as much tone-deaf stuff now as I was in the early days, but it's still happening. I cannot believe some of the email blasts that your clients are sending out.

Blair Enns: What do you mean my clients? Oh, our listeners' clients, yes. [laughs]

David C. Baker: I don't mean your client. I mean our clients. Haven't we always said that one of the primary advantages you have is that you're an outsider to your clients, and you can speak courageously? It's like, "Oh my God, there's never been a better time to speak courageously and to save them from their tone-deaf selves, and this is fantastic." Even for the meek and the faint of heart, you can bring yourself to raise your little hand halfway and say, "Hey, excuse me. Maybe that's not a good idea." Then the rest of you can just smack him in the head and say, "That's a bad idea." This is a fantastic time to be a leader in your category.

Blair Enns: Some clients, depending on the organization and who you're dealing with in the organization, you get the senior person on the client's side. It might be the CMO, it might be the CEO, where you realize this person's people they're not giving her honest feedback. I remember in my agency career, the first time it happened, I was just so blown away by it. I remember being in a meeting and the CEO comes into the meeting. All of the marketing underlings that I was dealing, they were all young like me and I was under 30 at that time. There's a bunch of people under 30, and the CEO was relatively young, but he's rich and famous. He walked in and everybody else just turned into this yes man. I just thought, "Oh my God, this person is getting no valuable feedback because these people won't say anything to him." It's just in my nature and my personality to relish being in that role.

David C. Baker: Relish being in the role of a yes man, is that what you mean?[laughs]

Blair Enns: No. Being, "Okay, I'm going to be the adult in the room. I'm going to push back on the CEO when his people won't."

David C. Baker: Yes. You got excited for that opportunity, right? It's like you can stand out.

Blair Enns: Yes. I mean, I live for this shit, right? Yes.

[laughter]

Blair Enns: If you're at all wired that- or even if you're not wired that way and you see the opportunity, what you're saying is there's a real opportunity to provide value and stand up and say, "This is not the right message at the right time."

David C. Baker: Right. It's pretty easy to do too because you can easily put yourself in the shoes of a consumer because you are a consumer and you're getting these messages from other companies, whether it's from your clients or not, and you immediately have this visceral reaction, plus you're trapped in your home with all these other people, and you can ask them what they think too. Yes, it's pretty easy. We don't lack for opinions here. Now, finally, let's not lack for courage.

Blair Enns: Yes, that's a great way to say it. We open this episode by talking about our predictions for when things are going to get back to normal. We don't think it's going to be for quite some time. It sounds like 18 months or so before travel normalizes, maybe more like two years. I know we're adapting our workshop. We're moving it to an online format. We've been experimenting with it. I'm really thrilled with the results. Are you going to be doing your core product, the Total Business Review? Are you going to be doing that remotely?

David C. Baker: I am adapting a lot of what I do. Most of what I did was done remotely anyway. The only program that I usually did in person was the Total Business Review, but I think I've done about five or six of those remotely, so I'm just retooling that. I'm actually excited because it allows me to concentrate in some new areas. Instead of trying to cram it into two days on-site, it can be a little bit more relaxed. I'm excited about the constraints that are forcing me to reinvent some things.

Blair Enns: All right. Excellent. This is a good one, David, I think people will appreciate it. Again, it's a timely one. We've been talking about what changes in the agency-client landscape that we see. We talked about nine different ones. I won't list them all here. I'll talk to you soon. Thanks.