It's a Small World After All

David finds Blair's thoughts fascinating on how far agencies should service or pursue clients geographically, and whether or not the location of a firm should be a factor.

Transcript

BLAIR ENNS: David, [singing] "it's a small world after all it's a small world after all."

DAVID C. BAKER: I swear to God, if you keep singing, you are an even worse vocalist than I imagined, and I didn't have high expectations in the first place.

BLAIR: That's probably the best I've ever sung anything ever. All right, well, we're talking about geography, right? Is that the subject? It's basically the question of how big or small should your geographic trading area be.

DAVID: Trading area?

BLAIR: Trading area.

DAVID: Trading area, that's a very interesting phrase. What is this? Are you the SEC? Trading area? What does trading area mean? You mean where you do business, right?

BLAIR: Yeah.

DAVID: Why don't you just say that? Okay.

BLAIR: That's a more universal globally accepted term.

DAVID: We're talking about global acceptance because this is space related. So you put all kinds of really interesting thoughts together. Well, we'll leave it up to the listeners to decide if this is really interesting. I found it fascinating. I was looking this over and I was thinking, "Oh man, this is going to be a really fun podcast because we can make fun of each other." We can make fun of our clients. We can be a little bit irreverent, but this should be a fun one.

BLAIR: Which is usually a sign that it's going to bomb, but let's begin. Essentially the question is what should your geographic trading area be? How far afield can you serve as clients or should you pursue clients? The first question as always is one of positioning. Let's talk a little bit about how positioning affects geography or specifically how far field you do business. Over to you, Mr. Baker, hot potato.

DAVID: This is an area that's changed so drastically over the last maybe 20 years because you would put a pin on a map of a firm's clients, and they would all be within, I don't know, an hour's drive or something. Then as the world became google-ized, all of a sudden, we could reach out to anybody at least in our country and maybe internationally. Then all of our former unknown competitors could come in and snag the clients that we thought we had locked up. I remember when I owned a firm, there was one firm that was better than me in the town, and I hated the guy. His name was Tim Kennedy. I felt like, "Oh man, it's either him or me when people are going..."

DAVID: I never thought about who was in LA at that time, but the world has changed dramatically. When I look at a firm and I do that exercise of the pin in the map, if all of their clients are right around them, I immediately have a particular assumption about how good the firm is.

BLAIR: About how narrowly or broadly positioned right they are, so if all the pins in the map are in their same geographic area, you assume that they're not much of a specialist, because people will travel for a specialized expertise that they can't get on the other side of town. Hey, I have to ask you a question. Do you have or have you ever had a map with pins in it that shows your client's geographical location?

DAVID: I did, yes. I don't know where it is, but I did. I was so proud of myself. I love travel, and I would like, "Oh, one of the best parts about getting a new client was, yes, I get to put the pin in the map." I remember having that for sure.

BLAIR: I laughing because just outside of this door of my studio that separates the studio from the office is a map. It's a map of the world, and it's got a bunch of pins in it. The funny thing is I had somebody buy the map and put all the pins in based on where our clients were at the time, and so at any given time, we have between 50 and 100 firms in our training program. I had her put all the pins in the map and then about a year later, I realized, "Oh, you know, our clients changed. We need to update this."

BLAIR: I realized we had no way of knowing who is who, so it's not feasibly possible to actually make the adjustment. I have a map with pins that represents our client base about four or five years ago.

DAVID: It doesn't help you. You've never had a client in Kaslo?

BLAIR: No, there aren't. I had a client in Kimberley, British Columbia, which I could hike to Kimberley in eight days from here.

DAVID: What a strange statement. It's like pulling up Google maps and accidentally having that pedestrian icon instead of the Uber thing, and you 're like, "Whoa, that's a long ways away," and you realize you've got...

BLAIR: I could drive there in five or six hours, probably five hours, but that's the closest I've ever had a client. Back to this positioning and geography, if you have a firm, you're working with the firm and they have say 10 clients, distribute those clients for me in an ideal way, if you could design how many of them would be right there? How many would be across the country? Would there be any foreign ones? How would you design that client base?

DAVID: That's a good question. I've never really thought of it that way before because I'm not sure that I would design it per se. I would just be open to a broad geographic trading area. I think we're limited more by time zones than we are by physical location, although there is some correlation. I am reminded of the fact that many years ago, early in my consulting practice days, I had a client in Atlanta and they said to me...on the East side of Atlanta and we won't get hired by firms on the other side of town. That's just a function of just not being specialized at all.

DAVID: People won't travel across town for something that they can get across the street, but I think back to your question, if I were trying to make something up, the answers are different depending on where you're based and we'll get to being based in a place like Kaslo where there are agencies where it just would make sense for you to have any clients close to you, but assuming that you're in a first or second or third tier market, and third tier would go down to say cities of 750,000 to a million, then I would expect that 25% of your client base would be locally.

DAVID: I would expect that 75% to 80% of your client base would be national, and the remaining 20% would be international. I'm generalizing there. I suspect like in your business, your numbers wouldn't look anything like that, would they?

BLAIR: No, and I'm going to gloss over the fact that when we add up all those percentages you put together, it's more than a 100%. I'm not going to say that on this recording.

DAVID: That's the opening that leads to my only joke, which I was told many times before. There are three types of people in the world, those who can count and those who can't.

BLAIR: I would probably mirror closely what you said. It depends a lot. If your firm is in New York City, it's very possible that half of your clients will be there, and then 40% would be in other parts of the country, and 10% might be overseas, but if your firm is in, say, I don't know, Lincoln, Nebraska, then you probably don't have any local clients, and you might have 30% international clients and 70% around the rest of the country, I would think. This is different too in terms of country to country, because a lot of firms in your country in Canada, 60%, 70%, 80% of their business is the US. They're reaching south.

DAVID: When I look at our market, we're in Canada. I don't have the current numbers at my fingertips here, but it's generally 70%. I'm going to add up something more, over 100%. Generally, 70% of our business is always in the US, followed by the UK, followed by Australia, and our home country of Canada has been fourth historically. It's probably third, maybe even second now, but it's never been anywhere near close to the other market. If you're a Canadian firm, especially these days with the US dollar currency advantage, it makes sense to sell into the US.

DAVID: Honestly, that's probably the biggest reason why most of my business is in the US. Other than that, it's a massive market and you go where the market is. When I started the business, the currency advantage was so huge. It would have been silly to try to sell into my own country. David Ogilvy built Ogilvy and Mather. He built it into a global firm by following his global client Shell around the world. How important do you think it is to clients for the agency to be in their geographic market?

DAVID: It's very important if you're doing things like PA, political affairs, or PR or if you are buying local media or doing anything that would be heavily impacted by local consumer tastes, but if you are in the US and you're working for a UK firm that sells all over the world, especially in a B2B environment, I don't think it would be that important. But most of the firms that you and I work with are not international do everything ARR kinds of firms. For those large multinational, the 100 largest companies in the world, it'd be absolutely critical if you are the ARR, but if you're doing something else for them, it's not that important.

BLAIR: But do you run into situations where you're working with an independent firm, say a one-office firm, and let's say they hit a certain size, 5000 people, or maybe sizes and really all that important and they are asking your opinion on the idea of opening an office in another location because a client is there. Generally, is that a good idea do you think, or do you find yourself agreeing with their decision or questioning it more often than not?

DAVID: I question it more often than not. I think it's generally a mistake. There are some exceptions to that. If you think about the outsize influence that say Nike has in Portland or Walmart has in Bentonville or P&G in Cincinnati, those would be the general exceptions, but it's not usually a good idea to open an office in another city because of one client. Now, if opening that office means it's a part of a larger strategy, and this one client you have is very tightly within the declared expertise that you have and there are lots of other firms in that area that you could address.

DAVID: Let's say you're in Chicago and you're with lots of tech stuff and your first client in San Francisco, so you're opening an office in Silicon Valley because you don't want to just serve that one client, but a lot of other clients in the space, that could make sense. I haven't really measured this, but I would guess that 80% of the time when I hear my client opening an office because of a client, I shake my head and say, "Ah, that's a mistake."

BLAIR: I would concur with that. Let's come back to... You touched on a firm in Lincoln, Nebraska. I'm thinking there's so much perception wrapped around location. Sometimes, that's true and sometimes it's just not true at all. I'm thinking of a firm in Lincoln, Nebraska. If you found yourself in Lincoln and you were starting a firm from scratch, what would your removed location say to you? What kind of decisions would fall out of that around the positioning of your firm and anything else?

DAVID: That'd be so tough. I just can't imagine in this day for that firm to not be really well positioned to overcome the reluctance that a big fortune 1000 would have to work with a firm in Lincoln, Nebraska. I have a fantastic, huge, very well positioned in Lincoln, Nebraska. It's why that one came to my mind. There are firms all over the world that are overcoming this, but they're not overcoming it without positioning. Then there are a half a dozen or so specific foci or focuses. They just simply won't overcome it. If you think about energy or packaging or really great food, green stuff, you can't get over some of that geographic.

DAVID: I remember when I started this from 25 years ago, it was a huge disadvantage to be in Nashville, Tennessee. I had a 615 area code. Now, Nashville is on the radar and it's a cool city, but back then, I had to get a toll free number, and I had a 888-476-5884. I still remember it even though it's not mine anymore, because a firm in New York City, they had no interest in talking with somebody from the south. They thought that they couldn't help them. I think we're over that stigma a little bit, but without a strong positioning, there's no way you can overcome being in what they might consider a backwater.

BLAIR: I went through the same thing when I started without pitching. I got a toll free number, so you couldn't tell where you were calling. People would ask where I was, and I would say, "I'm just outside of Vancouver." I'm nine hours outside of Vancouver. I don't know. At some point, you become confident of what you do. You realize the location doesn't really matter, but I think if you're specialized, your location is irrelevant. If you're not specialized, the more generalists you are, the more important location becomes. Would you agree with that?

DAVID: Right. The other thing that's interesting to notice is how frequently your clients expect to see you face to face in person. It used to be every month or two, and when I interface with my clients, it'd be interesting to hear what you hear, that expectation isn't quite there. For one thing, you're doing more video conferences and so on, and you may see a client during the new business process and then you may see the client in person that is every four or five, six months and their expectations are fine with that. In fact, they will sometimes want to come to you as well. I don't see geography is nearly the barrier that it used to be.

BLAIR: I remember the first time you and I were still doing the new business summit, so this is at least 10 years ago. We were talking about this subject and somebody said, "I've delivered over $1 million in services and fees to a company or a brand name company, I won't name them, over the last year and a half, and I've still never met the client." That really aligned with my thinking because when I launched Win Without Pitching as a consulting practice from the middle of nowhere, I think I probably went the first year without ever meeting any of my clients. I did all of my work remotely.

DAVID: I've got a question for you, but you promise not to be super snarky when you answer this.

BLAIR: Of course, I don't.

DAVID: Of course, you don't. What about the firm that has on their website three offices?

BLAIR: New York.

DAVID: New York, one of them is always New York. Of course, it's WeWork or it's a UPS store that has a mailbox in it. Is that a good idea to put New York when you've got one person working from their home there? Is that a good idea?

BLAIR: I'll just tell you a quick story on this before I answer the question. I was in London not too long ago when somebody buys a copy of my book, Pricing Creativity. We sell it directly from our website, so I get an email. Every once in a while, I look at who's buying it, where they are, and I look at it, and I think, "Oh wow, this is in the same neighborhood I'm staying. Oh my God, this is right across the street from my hotel. This address is right across the street." I look across the street and it's mailboxes, et cetera.

DAVID: A London office though, they had a "London office."

BLAIR: "London office" at the Mail Boxes Etc, whatever street it is in Shoreditch right across from the Courthouse Hotel. Whoever's there, if you're listening. I've thought, "Oh, I'm going to walk over and say hi to this person," and it's Mail Boxes Etc.

BLAIR: I think your question is about: does it make sense? Are there times when it makes sense to have that kind of fake New York office? It used to be so common. New York ran out of 212 area code phone numbers so long ago because so many people, not just in the creative professions but in the business world, everybody wanted that 212 area code. I remember clients in Texas and other parts of the country who just really valued that 212 area code. I think there's certain specialisms where it makes sense to be seen to have a New York presence, but honestly, like you David, I think we're past this.

BLAIR: Again, if you're a generalist trying to spin some story, and I really mean that, like, you're really trying to tell a story that stretches credibility, then you start looking at things like fake phone numbers in New York, but if you're a specialist of any kind, I think you just own the fact that you are where you are and it doesn't really matter where somebody is. I think we're almost 10 years, certainly five years, past that point of having to fake having a presence somewhere else.

DAVID: What if there isn't a central presence? What if everybody's distributed?

BLAIR: Oh yeah. You see that a lot these days, right?

DAVID: For sure. You do too. In a new business setting, how does a prospective client get their arms around the fact that there isn't a central place? Is that an impediment still? Will we ever get over that? This is something where the fog is still here, not just from a positioning standpoint but from a management and a culture and innovation standpoint.

BLAIR: I agree. Talk about a timely topic because I think the trend is upward for these types of distributed organizations. I think your question about how does the client get their head around it, in my experience, most of these firms are fairly tech heavy, so they have a development or a software engineering component, and therefore their clients are fairly tech heavy and there seems to be just some understanding in the tech world that this is the way we're working now. I suspect it's largely driven by how the San Francisco Bay area is, Silicon Valley, and it just does not make sense for everybody to be going into the office. I think in the tech world, distribution seems more logical.

BLAIR: If you're tech heavy or your clients are tech heavy, people are more likely to embrace it, but I agree with you. I think we're in the fog of this right now. I think of the firms that we work with that are distributed like this, and they're all tech heavy, but they all come with challenges. I think one of the challenges is I remember doing a workshop last year, and there's a couple of people from one of these distributed tech heavy companies. They were always working. When you distributed globally, then the line that separates your personal life from your business life gets really blurry.

DAVID: Because of the time zones?

BLAIR: Yeah, because of the time zones, because you've got... In North America, you're up early to deal with the UK and Europe, and then you're staying up late to deal with those folks in Australia and perhaps in Asia. I remember at the end of the workshop, we're all winding down. I think, it's Friday afternoon. People are catching planes, but everybody's in the lounge having a drink together and the folks working for distributed firms, they're not. They're sitting there, but they're on their laptops. They're working because their day never ends.

BLAIR: You brought up the subject I think of that you don't think open offices work all that well, and I think we'll probably come back to that topic and explore it in more detail, but I suspect we're going to see the trend to keep going up on globally distributed offices where there is no central location. People are just working out of WeWork or working out of their homes, and then I think we're going to see a backlash to it, but that's just my predicting the future.

DAVID: I agree with that. We need to do a separate podcast on how this works because I've seen some really clear patterns about how to make this work and where the failures are. We need to remind ourselves to have another one of those. Let me switch gears here. Does it make sense for an independent firm to join one of those networks from the perspective of expanding their geographic footprint? There are a lot of other reasons for them to join, but does it help them do business better because they're joining a global network of independent firms?

BLAIR: Let's just name some names here. If people don't know where we're talking about, so there's Tan. There's ICOM. There's magnet. There's Worldwide Partners. There's Amon. Those are all in the ad agency space. Then there's some other ones that are more digital. There's some that are more PR, et cetera. The origin of those networks is you're an independent generalist in a market and you have a client who has some needs in another market, so you join this network and you're able to make a claim we have worldwide reach. I think it still makes sense.

BLAIR: I wrote an article a few years ago about how that model was less relevant, how the networks are still relevant more as a peer group in my experience. I speak to a lot of them. I'm speaking to a couple more coming up in the next couple months. I know you do too. We speak to the same ones, and I really see the value of those organizations as the peer groups, as people coming together, because back in the day, it was all these generalists. Everybody was a generalist and everybody had a geographic trading area, but that's changed.

DAVID: They're competing with each other more and more, and the clients are not buying the argument that, "Oh, you could hire this firm." It's just the same as hiring a multinational firm because you have this connection with... You've got a PR firm that is in Singapore, so they're not buying that argument. There are really powerful arguments to join those networks, but the fact that it expands your geographic trading area seldom happens. I do hear of it happening, but that's not the primary reason. Do it for other reasons.

BLAIR: I would agree with that. I think clients are less likely to buy the argument, but I think there's still value there. I think if you forget about the outward signaling or messaging, if you just dropped the idea, if you're thinking of joining one of these networks and you weren't allowed to say publicly, "We're part of this network," and make this claims, the reality is it's still true that it does expand your network because you are meeting with these people around the world and you do have these people you can pick up the phone and you can call. There is real benefit there.

BLAIR: I don't know that the spinning of the message, I don't know the clients kind of buy it so much. I think it's a little bit of a tricky spot because there's clearly some value there, but like you, I think the client looks at those claims and they see them a lot, "Oh okay, you're part of a network," and they understand that these are really different firms and you're buying services from each other at the kind of rack rates. In fairness to these independents who belong to this network, if you look at the global agencies, so I can't name names here, but a CEO of a national division of a global ad agency was in a global pitch.

BLAIR: He told me, Okay, we're making this pitch," and there's 16 different business units and we're presenting this cohesive front. What the client really should have asked us is, "Do those 16 different business units have 16 different PNLs?" Because the answer is yes, and if that's the answer, then there's really not much difference between that global network and the global independent network. I think most of those stories that agencies spin of being able to leverage global resources are at least a bit of a fib, and there's not much difference between the fib being told by the global network versus the independent who belongs to a global network of independence.

DAVID: When you look at it that way, it's kind of humorous, so everybody's lying. It's not just the network people are. There's something we haven't talked about yet, but I think it may be one of the most important aspects of geography. That's not positioning. We've talked a lot about how it doesn't have a huge impact as long as you have your act together, but employee recruitment has a whole lot to do with geography. I see my clients toying with the idea of starting a firm in another location more because they think it will make it easier to recruit people than because they think it will be easier to serve a client in that market.

DAVID: Austin comes up a lot. We can't get people to move here, so let's create an office in Austin because that's a cooler place. That's interesting, and I don't have all the answers for that one. I don't have all the answers for anything, but I think that's an interesting thought. It's something that probably deserves a whole lot more exploration, but that's the bigger challenge. I don't know if I can measure this specifically, but it seems to me like recruiting really good people is on par with snagging really good clients, and geography has a lot to do with that more so than it does clients.

BLAIR: I agree. I think it's probably the biggest driver. I've been in Austin a lot over the last year or so. What I was told recently is there's 110 people a day moving to Austin, and my question was where are they coming from? They're almost all coming from California. What's happening is the Bay Area's full, right? It is full, and people are starting to cash out if they own property and look for places to move, and Austin has the cache factor that's similar to San Francisco. It's a lot more affordable.

BLAIR: I was just in Reno, Nevada for the first time in my life.

DAVID: My condolences to you.

BLAIR: That's what I would imagine going in. I was struck by, a, how physically beautiful it is. You take the casinos aside, and I was staying in a Casino Hotel. I'm not a big fan of casinos or hotels, but if you just put the casinos aside, Reno is a beautiful city. It's physically beautiful. It's surrounded by mountains. You're just a few minutes outside of the Sierra Nevada's. You're like 20 minutes from Tahoe, and you're a 40 minute flight from San Francisco. I'm flying from San Francisco over the Sierra Nevada's into Reno. I'm thinking, "Man," and so all the tech companies are buying massive swaths of land outside of Reno.

BLAIR: I think if I ran an agency and it was looking at the tech space, I would be thinking about Reno, Nevada. You can drive to San Francisco in four hours. You can fly there in 40 minutes. It's beautiful. The cost of living is low. It's super affordable, and I think as the exodus out of the Bay Area continues, I think that's just a logical location. Sorry Reno, I'm sorry if I've ruined it for you, but I'm rarely struck by a place when I visit thinking, "Oh wow, this is really cool." I was really struck by that in Reno.

DAVID: Boise 10 years ago was the same sort of story. You have a absolutely beautiful place. People want to live. Housing is more affordable, and so when people think about where they're going to plant a firm, I do think they think more about employees than they do about clients nowadays. That's pretty interesting.

BLAIR: Crispin Porter years ago moved from Miami to Boulder, Colorado. I think this quality of life, where can you hire good people or where can you lure good people to, because the quality of life is there? I think that's becoming just more and more vital. I think 10 years from now, Kaslo is going to quit being 876 people, and it's going to be 10,000.

DAVID: Oh wow. Well, time to buy some property it sounds like.

BLAIR: No, I'm just kidding.

DAVID: If we look far into the future, what I see is a movement towards distributed firms and then a movement back away, not backing away entirely, but more to a reasonable level. I think we're going to settle into this place where people do want to work face to face for part of the week on a consistent basis, but where the firm is is going to be driven more by where the employees want to live rather than where the clients want them to be. That's kind of where I see this headed.

BLAIR: I agree with you too, and I think I'm seeing more clients on other continents for agencies, especially for the specialist agencies. I know you just put a nice bow around this because we're at time, but can we sneak one more topic in here?

DAVID: Absolutely.

BLAIR: What about travel? I remember years ago talking to an agency principal. I was trying to convince him to focus, to narrow his focus and broaden his geographic reach, and he said, "Yeah, I just don't want to go to Minneapolis in January." That line always stuck with me. Some people, if you've got young kids, you're probably at that point in your career where it doesn't make sense to do a lot of travel. I know when I started my business, I didn't want to travel because I had all these young kids running around. Now, my youngest just turned 17. I'm basically living on an airplane.

BLAIR: I've adjusted the business based on what was important to me personally, but I think we have to recognize that some people are scared off of the idea of doing business on the other side of the world because they just imagine it leads to being on planes all the time. Do you think that's a necessary requirement as you broaden your geography? Do you become a slave to the airplane?

DAVID: I do think it's necessary, but I think it could be managed. I'm at the edge of trying to be really innovative in that area in terms of how I deliver services, but if you are unwilling to travel or if you don't have a few really key people who own a part of the firm who are willing to travel, it is going to limit the amount of success that you will experience. I do believe that.

BLAIR: If you've got like eight people in your firm, you get somebody in there who's dying to travel.

DAVID: Yeah, who has a bad marriage and just wants to get away all the time.

BLAIR: Hey, that leads us to our next topic. Are we going to do this topic next, because you and I were talking about subjects we should talk about, and one is being in business with your spouse.

DAVID: This is a terrifying one. Should we really do that one?

BLAIR: That's what I'm wondering too. I think we should do it. I mean, it might not be relevant to the whole audience.

DAVID: What's the worst that could happen? We both get divorced, and we lose all of our listeners.

BLAIR: We move in together, two old bachelors and a dog. That's never going to happen.

DAVID: We'll do it. Let's do that one next. That should be fun.

BLAIR: Okay.

DAVID: Good discussion, Blair.

BLAIR: Thanks David. We'll talk to you next time.