Myths of the learning curve.

This is a guest Blog from Steve Hacking Managing Director at Kardelen Partners.

It is so self explanatory there is no need for a waffly intro from me. Practice.

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How To Make Better Advertising and Advertising Better

sell sell bookI remember a tweet, or was it a linked-in comment, from Tom Godwin who works for  Havas, who wrote the often stolen meme –

“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”

You must have seen that by now, anyway, he said that he’d rather pay £20 for a short to the point book, than £10 for one that drags on repeating the same point – or something like that, you get the idea.

So here it is, a short, brilliant, no bullshit book by the ad agency Sell! Sell! called ‘How to make Better Advertising and Advertising Better‘.  Buy it here.

Admission declared, I do know Andy and Vic, they even thanked me in the book, I have to say “no thank-you ” because I only really-really-really got into being excited about advertising because of meeting Andy and Vic circa 2008/9, up to then I was somewhat faking it. And they also encouraged me to start a blog.

Their introduction gets straight to the point,  ‘The business is in a mess. Advertising and marketing people seem to have turned full circle to  point where they’re out of touch with the customer and reality. It’s almost as if the creative revolution of the 1960s never happened.

When you look at the advertising that’s out in the real world, it is largely vacuous, patronising wallpaper that takes people for idiots. campaigns are becoming more and more similar, when they should be more distinctive.

Agencies treat consumers like morons, with facile look at these cute kittens advertising that doesn’t have any relevance to what consumers wants or needs. Some harbour delusions that normal people ‘love’ brands or care about them as much as they do.

Steve Harrison  author of  ‘Changing The World is the only work fit for Men’ said  “Vic and Andy have come up with a foolproof way to help you discover if you are a good agency. Ask yourself: Dare I give this book to my clients?”

Bob Hoffman the ad contrarian said “The ad industry is in an unprecedented state of confusion. While the assertions and pomposity grow majestically, the advertising itself diminished rapidly.  Sadly there is no button we can push that will erase all the arrogance and self-delusion.  Fortunately we have this book. It might be just the reset button we all need.

The book takes on some very topical issues about how marketers (and other professions it has to be said) see  people today, or what they call consumers.  And the newest gig in town is  Behavioural Economics  (BE) or re-branded psychology.

Marketers realised if they talked about psychology they’d be derided by other professions but Behaviour Economic we’re all ears.  As Byron Sharp author of ‘How Brands Grow” says here ” Today, there is much interest in subconscious decision-making, as there should be, because buying rarely involves a great deal of conscious deliberation.

Unfortunately, along with this sensible interest in ‘fast buying’ and ‘low attention’ comes the silly notion of strong psychological effects. We all learned years ago that the claims of subliminal advertising were faked, and that such effects are trivial at best. Yet today I hear people making claims that sound an awful lot like the old myth of strong subliminal effects.

Neuroscience is fashionably dragged in as support: ‘Oh, look, this part of the brain lights up when people see a brand they know well and buy – this proves that brand preference is due to brands forging strong subconscious emotional bonds.

Sharp goes on to flush out their straw man argument of rational consumers “but did anyone ever believe that consumers were rational utility-maximisers with perfect information, zero search costs and limitless time? Economists moved on decades ago from this early model, and it’s a straw man argument to pretend they haven’t.”

I wrote about my fears of the rise in neuro bollocks for Marketing Magazine a while back, my point is really about the misanthropic view behind much of it but also that great creative work was being done with so little knowledge of our neurology or having read the never-ending theories on human psychology that fail any scientific scrutiny.

In fact, which is Sell! Sell!’s point, probably create better work. I remember an era when people looked forward to the TV ads – could you imagine?

It’s worth noting that up to 75% of psychological studies on human behaviour fail to get the same results when repeated, see here. The point is it all seems so bloody scientific but it’s not, it is the height of scientism.

And when marketeers do say they use neuroscience in their brand building like the KFC Marketing Director David Timm here in Marketing Magazine this is what we get,

Driving a more emotionally led style of advertising is a “different approach” to marketing for the brand that has been informed by neurostudies in consumer behaviour.

The assumptions that have traditionally informed brands about consumer choices have changed, Timm says, and marketers now know people “are not rational and do not make rational decisions” but make “emotional decisions that are “context dependent“. KFC is aiming to create that context. ”

He continues “It’s not that we have any more [analytical] rigour; it’s just a different lens,” he says. The studies helped KFC recognise it was creating a “very strong product message” but not complementing it with a strong brand message.

This is the problem of marketers today – it’s like the problem of dualism separating mind from body, marketers keep trying to separate brand from product. Forgetting that a brand is largely created by selling the product. People become familiar with it by buying it. People like what they are familiar with and so on.

And then Mister KFC goes on to this, wow, it looks like KFC knows how the human brain works, the most complex thing in the known universe. “Marketing as a whole is undergoing transformation. We now know through neuroscience how people’s brains work and what affects their decision-making. So what we’re trying to do is take the new knowledge and say- this is how we put it together, this is how a brain actually works – and this is how we should be marketing.”

The results in short were the following, updated state of the art stores that looked smarter and more modern with soft play areas in some locations and an updated menu that include burritos,muffins and  pulled chicken that’s not fried.  “Flashes of the brand’s trademark bold red are visible throughout the design of the store, but the colours are softer and more neutral. The walls are adorned with arty pictures of ingredients and flavours and a digital display shows order numbers, much like an Argos.”

Thanks goodness for neuroscience eh?

Anyone else reckon they might have been able to crack that one.  Anyone else figure out that KFC might be under huge competitive pressure from the growth in food chains.

Anyone else figure out that clean modernised stores might appeal to people without putting them into fMRI scanners?  I wonder if neuroscience recommend the shift of tag line from ‘finger licking good’ to ‘so good‘ – a marketing mistake if ever I saw one. Did the words ‘so good’ light up the amygdala more than ‘finger licking good‘?

Sell! Sell!’s book tips its hat rightly more than once to Byron Sharp and his point that it is key for a brand is to be distinctive and make consumers familiar with it via getting them to buy / use it.

The goal of a brand is to be both ‘physically and emotionally available‘ and to refresh people’s memories about the brand. Because consumer loyalty, despite what brand experts tell us is very weak. People don’t actually care as much about brands unlike the marketers who run them do.

However, what I really appreciated most about the book is actually very unfashionable today, that is it defends people and their ability to reason. It also defends people of character, the mavericks, the fun that should be in running an agency, creativity and the progressive idea that brands do and should go out of their way to be better in some way. It decries that advertising today refuses to mention those reasons or differences because they simply don’t have faith in people.

Which is all wrapped up in the misanthropic psychology of today that people make decisions solely emotionally.  That is a person can never reason why they did something they are simply post-rationalising and in fact humans are little more than zombies or genetic meat bags.  If advertising refers to the popular psychology of today then it is no surprise we have patronising and vacuous advertising fit for morons and we know what David Ogilvy said about that.

In fact advertising more often  today makes advertising for itself and for awards than for consumers. That’s at best.  Many people it seems don’t even want to be in advertising, seeing it as beneath them, they rather be in art, but as Martin Weigel from W&K rightly says Fuck Art Lets Advertise see here.

Even Sir Martin Sorrell CEO of WPP, said last week “we’re not in the advertising business anymore…” full story here, as they chase the big data and digital marketing dollar.

Andy and Vic are right the business is in a mess. Buy their challenging book here.

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An alternative lead thermometer – what are we dealing with?

bulletsWhat determines if a new business lead is great, average, or poor?

In my last post I talked about how poker is an interesting game to understand for business people because it deals with imperfect information.

And how in poker players talk about the equity or strength of their hand with a great hand being called a monster.

In that post I showed the various ranks of winning hands in poker, royal flush down to ace high.

So how would we rank leads?

Now before I dive in with both feet I need to load up some caveats.

  1. I am talking about selling creative services, not trying to get bums on seats for restaurants, or selling USB sticks or getting people to sign up to a newsletter, I am referring to ‘complex selling’ which covers creative services or other professional service too i.e. more than one decision maker, a considered purchase, an important decision that will affect future revenues / profits, possible jobs on the line if mistakes get made.
  2. I am not taking into account salesmanship – you ability to sell face to face.  This skill is important and I am missing it out. It is an important omission.
  3. Luck is not factored in because I don’t really know how to.
  4. I’m appealing to your intuition and using my experience to make this case.  True reliable stats don’t seem to exist. There are some stats and they do agree with me but they seem unreliable, biased and conflicted.

I am simply offering up a different way of thinking about qualifying leads, of course I’m leading you up the garden path but feel free to let go of my hand at any time.

So to know what a good lead is we should make an attempt at looking at how do buyers tend to buy creative services.  Many agency’s start with looking at how they sell and how they pitch. This is a mistake. It’s why I hear so often, we’d have won if our pitch was better – maybe you shouldn’t have pitched at all? Or our pitch was brilliant I don’t understand why we didn’t win. My general experience is that agencies on the whole have cracked pitching / presenting but not selling.

If we knew  first how buyers tend to buy then we could start to make some reasonable assumptions about them.  So let’s pretend to be one.

The marketing-team sit around a table and talk about their current agency.  The feed back is not good, it’s awful.  They have worked together for circa two years and the consensus is they have to go. If there was no consensus then however terrible things were there is a good chance they simply continue. This is important to know. You get fired when many people are upset not just a few.  Always have some support on the inside. And you get hired when lots of people are convinced you’re a fit not just a few.

What were their likely reasons?  Well, the marketing team felt the work was not inspiring, the agency team on the account had changed too often, some work was late and their was pressure from above to move the needle on sales and it was static at best and the creative director they liked had left a year or so ago and the replacement wasn’t right in their opinion.  Okay – it would not be all these things but I am suggesting these are the sorts of things that gets an agency fired. Fair?

So what happens next?

The Marketing Director takes responsibility for firing the agency and putting them on notice, the old, “It’s not you it’s me and the relationship isn’t quite working…”.  They may even invite them to re-pitch out of politeness and if the agency is a Fish they will.

Then the usual process is suggested. Send out RFIs, or get in the diary some first meetings to potential suitors and the end up with a pitch list of 4 and then decide? About right?

Who gets the RFI or the request for a first meeting?

Well perhaps the search for an agency with sector experience on an intermediary site or on a listing site. Perhaps they’ll find an agency on google i.e. SEO, type in integrated agency and bingo. Perhaps the have some e-mails that they have received from agencies that have prospected to them whilst cold calling.  Perhaps they have read about an agency in trade press that have just won awards or got campaign of the week.  Perhaps the marketing director has a favourite agency he’d like to work with again.  Or perhaps the marketing director has an agency in mind based on the work they did for someone he respects.

At some stage I have heard of an agency being selected from on of the leads.  But which works best?  What is the strongest lead there? What does your intuition say?  What lead would you like?

I wonder if we ranked these leads that come into agencies from hot to cold we’d get close to guessing the winning agency?

Hot 

marketing director has a favourite agency he’d like to work with again

marketing director has an agency in mind based on the work they did for someone he respects

marketing director read the book the agency published and agreed with their thinking

an agency in trade press that have just won awards or got campaign of the week

An agency where you say the CEO speak an event and liked their thoughts

an agency that have prospected to them via e-mail / dm / cold calling

an agency with sector experience found on an intermediary site or on a listing site

an agency found via SEO

Cold

All the above means really is blue leads close less often than red one.  Not that they don’t ever close you just need to have more of them to win a piece of business.

My experience is that agencies get 70%+ of their work from referrals and so clients must buy that way the same percentage of time, QED. So on the thermometer, red leads win 70%+ and blue zero to 8% and orange in-between.

The buyers typically want four on the pitch – suppose they pick from the above thermometer , one from the top and 3 from the bottom?  Who is going to win.  And how do you deduce that without seeing the work in the pitch, without knowing budget and without watching the chemistry or tissue meetings and without knowing budget or anything else?

The above intuition is what I call column thinking – you need to know when you are column fodder and as they say in poker – fold’em.

What is the intuition that is pumped?

So we don’t have as many ranks as in poker and there are certainly more in-between leads you could add.  For example I once won a piece of work from an agency seeing my recruitment ad, I once won a piece of work from am agency owner walking past my office and then researching us and then calling me and so there are other leads sources like networking, I wonder where you’d slot them in to the thermometer? Where would you put the incumbent on the thermometer in this scenario?

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Poker and new business – dealing with imperfect information

I think new business can be split up into stages like Texas Hold ’em poker.  However the main reason I like the analogy is because in business like poker you are dealing with imperfect information.  

You just don’t know what is actually going on behind the scenes at the buyer’s end. But you can in poker like in business work out a range of scenarios.  An advantage in business is that you can ask questions and get straight answers sometimes too.

In Texas Hold’em poker you are dealt two cards – called hole cards, that only you get to see. Then you and the other players get to see three more cards  ‘The Flop’ and then there is another card ‘The Turn” and then a final one ‘The River’ card.

So each player has two cards only they can see and five cards in total in the middle of the table that everyone can see.

In between the each stage is a round of betting.

The best five cards win – you could us your two and three from the five in the middle for example. Hands are ranked as below.

poker-hand-ranking

Then there is a result at the end someone wins and everyone else is a close 2nd.

In business we get a business lead – your hole cards, we have meetings the flop and the turn and then a pitch is the river.

Resulting in someone scooping the pot and everyone else is a close second.  If you want to know more about poker listen to Nicky Numbers here

So here is some poker terms that could equally apply to new business.

A Fish
Poker: a bad player who doesn’t know what they are doing.
New business:  a person who is gullible in new business.

Usage:  I was such a fish today. Or stop being such a fish.

A Shark
Poker: A good poker player that rips it up.
New business:  A pro new business player that wins a lot.

Usage: I was a shark today.

Going on Tilt or Tilted
Poker: Steaming or letting your emotions get the better of you especially after losing
a pot.
New business:  Getting emotionally involved with a business deal or taking not winning personally.

Usage: I’m on tilt now or don’t get tilted.

Pot
Poker: How much money can be won in a hand.
New business:  How much can be won in a deal.

Usage: How much is in the pot?

Pot odds
Poker: The chances of you winning a pot.
New business:  The chances of you winning a deal.

Usage: What’s the chances of us winning this pot?

Equity
Poker: The strength or value of your hand. You can have high or low equity.
New business:  The strength of your new business lead.

Usage: What is our equity like?

Hole cards or pocket cards
Poker: The two cards that you are dealt at the beginning of the game, that determine (partially) how you’ll play the hand.
New business:  Where your lead came from.  Your hole cards are mega important in new business. It often determines how you will proceed with a lead.

Usage: What do you make of our hole cards?

A Monster (Hand)
Poker: A great hand, be it a strong starting hand or hitting a big hand on the flop.
New business:  A strong lead, a quality referral from your best client.

Usage: I’ve just picked up a monster.

Fold or Folding
Poker: Throwing your cards away, deciding not to play a hand.
New business:  Deciding not to get involved with a prospect, maybe turning down a pitch, RFI, RFP or even a meeting.

Usage: I am going to fold this one.

Flop
Poker: The first 3 community cards that all the players can see.
New business:  The first face to face meeting.

Usage: How was the flop?

The Turn
Poker: The fourth community card.
New business:  Your 2nd meeting with the decision makers

Usage: How was the turn? What are we hoping for on the turn? Who will be there at the turn?

The River
Poker: The 5th community card.
New business:  The pitch. Or the decision.

Usage: We are off to The River.

Showdown
Poker: After The River the players have to show their hole cards to see who has the best hand and so so wins the pot.
New business:  The pitch reviews.

Usage:  I wonder what they thought of the show down. Can we win without going to a show down?

Implied Odds
Poker: Calling a bet even if the maths (pot odds) does not make sense to do so because ‘if’ you hit with the next card(s), the river and or turn then you’ll make a lot of money. Hooray. This is called gambling.

New business:  The chances are slim but the pot is big. A Fish mistake in general. Too many agencies work on implied odd rather than pot odds. They probably will not win it but imagine if we did! This is called gambling too.

Usage: Are we playing implied odds here?

All in
Poker: Sticking all your chips in the pot.
New business:  We are committed now to this lead.

Usage: We are all in.

Testing
Poker: Putting a big bet in to see if you opponent can handle the pressure.
New business:  A shark asking probing questions that cut to the heart of the matter to find out if they are column fodder or not.

Usage: I put him to the test.

A Shove
Poker: Pushing all your chips in the pot.
New business:  Pushing the prospect away, to see how they react.

Usage: Have you shoved?

Tells

Poker: Something that a player does physically that another player picks up on that gives the value or equity of their hand away.
New business:  Something that a Fish does that lets the prospect knows they are desperate for a sale or easy column fodder. Or something that a prospect does that gives the shark a clue how likely they are to win the business.

Usage: Do you think the way he said when we start, rather than if we start is a tell? Did you notice he kept looking past us and not at us? Is that a tell?

Poker Face
Poker: A poker player’s face that doesn’t give away the strength of their hand.
New business:  A hard to read face, be it the prospect’s, or the new business person’s.

Usage: Stick to your poker face. He had a poker face.

Reverse Tell or False Tell
Poker: Changing your face in the opposite direction to the strength of your hand. For example looking worried when you have a monster. Or looking pleased when you are playing a low value hand.
New business:  A shark looking concerned about issues that aren’t really that much of a concern to them really to get more value. Or a prospect looking overly worried about price or delivery times etc.

Usage: I think that was a false tell.

Range
Poker: The likely hands your opponents could have based on their betting patterns. It looks likely they have either a small pair or an ace and middle range card for example.
New business:  What are the likely starting hands of the other agencies asked to pitch. Where is your agency –  column A,B, C or D? You better know your range! Is it likely there is an agency involved that has a better starting hand than yours?  

Usage: What are we up against. Could someone else be holding a monster hand? 

Having Heart or having Moxie
Poker: Being brave.
New business:  Being brave.

Usage: She’s got moxie. He has got a big heart.

Heads up
Poker: Just two poker players in a game of poker. Or when a tournament gets down to just two players left.
New business:  When just two agencies are left in a pitch.

Usage: We are heads up.

Winning pre-flop
Poker: Attempting to bet big enough to win a hand before the community cards are seen.
New business:  Win without pitching. The best strategy in new business.

Usage: Could we win pre-flop? Are our hole cards stronger enough to win pre flop.

Tanking or In The Tank
Poker: Thinking. Delaying a decision. Deciding what to do next, fold, bet, raise, or shove.
New business:  A prospect thinking about what to do next?

Usage: They’ve gone in the tank. Let’s go in the tank on this one.

Calling Time
Poker: If a player spends too long in the tank then another player can call time.  They are then given a set amount of time to make a decision usually one minute.
New business:  Tell a prospect that they have a limited time to decide, else you’ll fold.

Usage: I think we should call time on this one.

Levelling
Poker: Complex thinking.  A bit like – I think, he thinks, that I think, that he thinks, that I think that he thinks, so maybe I should…arghhhh
New business:  Over thinking. Analysis paralysis. Procrastination.

Usage: Stop levelling or we levelled ourselves.

A Donkey
Poker: A bit like a fish, but anyone can be a donkey at times. It’s an insult. Stupid!
New business:  Being stupid.

Usage: I was a right donkey. The prospect was a donkey.

Close call or thin value

Poker: Being unsure if you are ahead or not.  So calling a bet being unsure if it is correct or not. Getting small amount of value.

New Business: Being unsure what column your agency is in. Perhaps you have a half decent referral or some reason that makes you believe you are in column A or B. But are aware that another agency maybe ahead.

Usage: It’s a very close call on whether we get involved or not.

Buying the pot
Poker: Putting in a big bet / a bluff. That makes a player with a better hand fold so you win the pot.

New Business: Pricing your services very low so you win the business.  Making it hard for the prospect to refuse really. Probably has more cons than pros. But the most obvious way to move from column C to A.

Usage – We could buy the business.  I think they bought the business.

Tight Aggressive (TAG)
Poker: A style of player who only plays premium hands and when they play them they bet big.

New Business:  Although the word aggressive has no place in new business this style of play is premium for agencies. Replace aggressive with assertive.

Usage: Let’s play tight.

Loose Aggressive (LAG)
Poker: A player who plays loads of hands. And so bluffs a lot.  Can be very hard to read this player.  Poker is now a very aggressive game.  They are ’agro” in poker terms.

New Business:  Loose is not a good method for creative agencies.  You’re probably getting involved with too many leads – you should probably considering folding some.

Usage: Why are we so loose? We need to tighten up.

The Grind or Grinding
Poker: The way you make money.  You have to grind out some wins. It takes patience and perseverance. Poker is  a grind. Don’t be fooled into thinking it is an easy way to make money.  

New Business:  Let’s keep grinding!

Usage – Back to the grind!

 

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A scientific approach to new business for agencies

NBD graphAbove is typically how  an agency’s clients are distributed.  It is a negative binomial distribution (NBD), sloping down from left to right.

It is what Byron Sharp in his award-winning book How Brands Grow found to be the distribution of buyers of consumer products and I think it is likewise for agencies.

I want to explain here how this simple model applies to agencies  and how to increase agency revenues from understanding this model.

Just to avoid the so what conclusion, lets look at what is to be done, and why is it of use.

In short Sharp says that a brand has very few high spenders, for example in 2016 there will be a few people who drink 3 cans of Pepsi a day so consuming 3 x 365 = (1095 p/a).

At the other end of the scale there will be lots and lots of lots of people who don’t drink any cans at all in 2016, zero cans (0 p/a ), but may drink a can next year, they are still customers they just didn’t buy in 2016.

And then there are those people who just drink one can per year (1 p/a) and in the middle the consumers who buy say buy one can every six weeks or so, (9 ish p/a) .

So the curve slopes down from left to right (NBD). Part of it maybe flatish special as it tails of towards the high users.

The conclusion is double jeopardy that states  – ‘brands with more market share have more buyers, and those buyers are slightly more loyalty.

And retention double jeopardy – brands lose buyers in proportion to market share (big brands lose more in absolute and less in percentage terms).’

Agencies

Agencies tend to have a similar distribution (NBD) many low spenders and few big spenders and of course some in the middle.

Low spenders are in the green section of the above graph.  The agency has a low point of entry for a new client and the goal of the agency is to develop the business into a medium spender.

Low spenders will come from referrals into the agency from other low spenders and some medium spenders and from new business channels, where a low point of entry is sold to get the client on-board.

Medium spenders are in the orange section of the graph.  The agency will have less of these than the low spenders and they will come from business development moving a client from a low spender to a medium spender and referrals from other medium and high spending clients of the agency.

High spenders are in the red section of the graph.  The agency will have very few of these. This is the prized destination for all the agency’s clients.  Of course not all of them will make it there. Some will stay stuck at low of medium spend and some will die (leave the agency) before their time, sad but true.

More high spenders may arrive from referrals from their current high spending clients. The two easiest ways to get a high spending client is to move from orange to red or get a red to come straight into the agency.

Low v High

The interesting point that Sharp makes when talking about consumer products is that the difference in the curve of a leading brand and a challenger brand is the difference in the quantity of low users more so than the difference in  high users.

The leading brand will have significantly more low users than it’s competitors. The curve will move slightly to the right, in other words outwards.

There maybe a difference in high too (i.e. slightly more high users) but the vast and significant difference is the occasional users who can then move down the graph to the medium and high zones.

Is it the same for agencies?   Well, yes I think so .

The quantity of new prospects that an agency can get on board with a low entry price point is key.  Then to move them along the graph, low, to medium, to high.

Then to get referrals from current clients as and when they are in the medium and high spending zones. So some new business comes straight into the medium and high spend zones without having to go via the green zones.

Double jeopardy in agencies –  in short a smaller agency is effected far more from a loss of a current client than a large agency, no shit Sherlock and the difference between a large agency and a small one is the quantity of low-level users.

The other interesting finding of Sharp’s when dealing with brands which is of use to agencies is that of ‘Usage drives attitude – not the other way round. We grow to like what we use. Call it the “I love my mum” syndrome, which explains why all brands get good ratings in satisfaction surveys.’

So the goal of an agencies new business programme is to get marketers to love (rate highly) their agency by using them, even if at the low-level green entry point, rather than marketing their agency as the one they’ll love so they should use it.

In short – low entry point for prospects – do good work – get referrals – have a low entry point – do good work – get referrals… and move the client from green to orange to red where possible and keep prospects coming into as higher spend zone as possible via referrals.

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ROI in new business – don’t be fooled by randomness.

gold fish bowlI’m trying to show agency owners the problem with being proactive with new business via telemarketing and direct marketing that can end up with them being fooled by their own numbers..

This is not an article about how you should improve the creative output of your agency to increase your chance of winning more new business, although you should. In fact it should be top priority.  Doing a piece of work that makes an agency famous is the best new business tool ever. How often do you see that on a new business strategy document? Answer – not enough.

This piece makes quite a few assumptions about the talents of new business people, it assumes they are like for like which simply isn’t true, far, far from it. I’m sure you can find other assumptions too. Just try and not miss the point.

I hope it helps agencies see the new business problem from another angle and helps them change course or amend their new business programme.

It doesn’t mean you should never do these cold campaigns but you should be aware of your averages and expectations of outcomes over time. ANd when you get lucky understand that.

It appears to me many agency owners who want to win new clients get frustrated with the old practices and yet in a way seem trapped in them & then end up doing them just one more time. And the trap is chasing KPIs that are arbitrary and based on small sample sizes that makes them unpredictable and forecasting unmanageable in the real world.

Lucky Jim’s Story.

bars

When I was about 12 maybe 13, I used to go on summer holidays with my parents to a caravan park in the New Forest.  I loved it because it had a club house and in there where arcade games and fruit machines.  Evening time my parents would sit in the main bar where there would be some entertainment on and I’d play on the machines, the days when 50 pence went quite a way.

However, in the club house was the daddy of fruit machines, which was for over 18s only, that had a £50 pay out. I decided to sneak in and put my 50p in the daddy. I sidled over casually, hoping nobody spotted me and snuck my 50p coin in which gave me 5 spins.

First spin, nothing, second spin, nothing, third spin I hit four ‘double bars’ in a row, that won me £25, then they held, giving me another £25 – I’d won £50 (a lot 1983) as the money started to clunk out in 50 pence pieces (the £1 coins was very new) my Mum lucky looked over and came over to help me collect the winnings from the over 18 machine.

Question – Was I lucky?  What would you need to know to find out if I was or not or what does your social intuition tells you? How do we decide if I was lucky?

Of course I was, we know that about fruit machines don’t we. A determinist might say no I wasn’t.  I just didn’t know what had happened before hand, i.e. people had loaded the machine up for a win, lots of people need to lose before the machine pays out. It was fate? Anyway – would you advise me to play that machine again? Why not?  Look at my return on investment (ROI) it is 100 to 1.

New business wins are rare events.

It is easy to confuse your current results and ROI with luck which makes planning or forecasting results frustrating.  And I think most new programmes are very hard to forecast because the deviation between the potential outcome / variables is large i.e. what might happen or not happen is large and still be viewed as typical or normal. So zero business wins to 1 business win is a small variation but £0 to a win worth £200K is large. And any month could be zero or £200K.

Winning a piece of new business is a rare event in agencies in my opinion.  But how rare, how often does it happen?  And if you use a small sample size then you can get fooled by the stats easily.

Example –  an agency could easily have zero pounds worth of new business wins for 11 months in a row and then a new business win of £200K.  Each month has a likely new business variation of £zero to £200k  or put another way zero wins to 1 win and a zero month is perfectly normal, right?

Example: Let’s say I speak to agency A and agency B.  Both fairly similar in many ways.

Agency A has just won a piece of new business, great, hooray.  They look at what happened between this win and their last, to get some statistical feed back to use for forecasting.  It took them 1 year or 24 intro / credentials meetings, 8 second follow-up meetings, 3 pitches and 1 win worth £200k and a gross profit (gp) of 15% – which is normal (ish) for today.

Is it now fair to say that if they do the same again they get another win?  With that sample size what has been proved?  If you put x into the fruit machine x comes out –  always? ROIs aren’t fixed are they? Should I have played the fruit machine again? Will they get one business win per 24 intros? Why not?

Agency B, did the same as agency A, for no wins. Same amount of first and seconds and pitches but no dollars. Not that unusual in my experience.  In fact I would say this is most common – probably in my experience what I hear 70-80% of the time.

What if we added the two sample sizes together and averaged it.  Now we have 48 first meetings, 16 second meetings. 6 pitches for 1 win worth £200k at 15% GP (£30k) between them – is that even worth doing?

If you paid a lead generation agency or an in-house person £30K p/a (to make maths easier, could easily be £36k-£40k) you broke-even as long as you don’t include Employers NI at 13% = £3,900 for your in-house person and you put no cost against the time to prep for the 48 credential meetings and the 16 seconds and the 6 pitches. Are they all cost-free – do we even want to go there – I did a while back see here.

The piece of business will be with you for just under 3 years on average according to the IPA, so is really worth £600k at 15% = £90K which mean your new business person has a free-roll for 2 more years, right?

You can run with this thinking for 3 wins a year at say £80k each doesn’t matter really.Just get the thinking of ROI not being fixed.

Top Down Problem.

good quarter

Typically a new business programme is a top down initiative the CEO / MD decides that the agency should be pro-active about approaching prospects.  They’re right too.

The standard lead generation model whether it is in-house or outsourced is this – here is a ‘wish list’ of between 200 and 400 prospects – phone them, e-mail them, direct mail them (they love receiving it too by the way, really love it) telling them either a) we have or had experience in their sector b) we have an insight for them / their sector c) we have a way of working that will help you get better work – look here are our awards!

Fair – about right – give or take? What else is there to say?

So what do many agencies do after say a period of the similar results for a year or 18 months, like Agency Bs?  Well they fire the lead generator in-house or new business agency and do the exact same thing again but with a different lead generator/ new business agency.

Before they know it they have done the same process two or three times (often with higher meeting targets to make up for short-falls, we need 3 meeting per month, nope 4 ,nope 6 and so on)  and then all of a sudden they get the ‘double bars’ they get the business win. The outsourced agency or new business person is hailed a hero and carried aloft around the agency for all to see.

Was it the person or just the numbers that lead to the win? Is it just a numbers game?

Do the numbers even stack up?  Say a £200K win again at 15% but it took two years to get, that is the same as adding agency A and B together right? Except agency B now thinks it takes two years to win £200K and agency A thinks it takes one year?

Thought experiment.

What if we took a bigger sample of new business meetings that were attended by agencies in London let’s say 50 agencies doing like agency A and B combined over 1 year.

So 50 agencies, 25 like A and 25 like B would be 25 x 48  first meetings, plus 25 x 16 second meetings plus 25 x 6 pitches for 25 wins.

That makes a grand total of 1200 first meetings that end up generating 25 business wins of £200K at 15% gross profit.

If we represented each meeting as a marble and put 1200 in a gold-fish bowl, with 25 red  ones(winners) and the rest white (losers) and asked each new business manager to pick out 24 marbles (meetings per year) blindfolded (very important) what chance do they have of picking out a winning one?

Answer just over 2% (2.08%) a pick right, and with 24 picks –  50% chance of having a win this year.  But some will get zero and some will get three right? That’s the rub.  Someone will get better than that and so will get zero.

The MD is not happy with the first year of the new business manager’s work if he picked out 24 white balls – arghh – what an idiot, fire him. Some new business managers will look like heroes for picking out two or three reds and some will be in line for the elbow.

Changing the rules.

red bead IILet’s get back to normality, well a little bit.

What if we changed the scenario slightly and differentiated between leads.  Let’s say leads can be classified in just two main ways as a) cold leads  and b) referred leads.

Cold leads get to us via our cold channel marketing, DM, E-mail campaign and telemarketing to wish list of people we don’t know but brands we’d like to work for.

Referred leads that come to us by our client marketer referring us to another or moving job for example or from speaking at an event. And let’s say (because it’s true) that 70% of referred leads we close. We already know the rate for cold ones.  But a) and b)  leads come in different quantities, let’s say every agency gets three referrals a year and as before 24 colds.

Let’s increase our sample size again so we don’t get fooled by small sample size randomness.

Now in one gold-fish bowl you have as before 1200 marbles and a 2 % (ish) or 25 red winners to choose from.

In our new gold-fish bowl we have only 150 marbles and 70% or 105 red winners winners.

Rule – You get 24 blind folded picks from the cold bowl and three blind folded picks from the referral bowl.

Which bowl are you most hopefully from when your blind folded new business manager picks? Will they turn out to be lucky Jim?

If they could add 50 marbles at their current red / white ratio to any tank which one would you add marbles to?  Would you add cold leads to your pipe line or referred leads? Why?

What would happen if you mixed the tanks up in some fit of madness and then you didn’t know the difference between a referred lead and a cold one?  Like an agency would ever make that mistake and put as much effort and time into a cold lead as a referred one just because the payout was big.

Isn’t it worth learning how to get more referral leads, what I call column thinking?

94% of all problems in business are system driven and only  6% are people driven.
W Edward Deming

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Why don’t good ideas get done?

This is a guest blog, well two info-graphics from Steve Hacking who is the CEO
of Kardelen.

Logic trees or critical thinking is a method to make sure what seems like a good idea is torture tested and then there is a plan so the idea is implemented or ditched.

The first logic tree show how you get beyond “I’d like to get fit”.  The 2nd is a logic tree for our good friend “I will grow sales via referrals’.Infographic logic jpeg

Infographic logic second page 2

 

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Do you even know how to answer a prospect truthfully?

hl meckenI had one of those moments last week, what you may call an ‘a-ha’ moment.

And I am still not sure if I am 100% right to be frank.

I think some people in agencies literally can’t see the God’s honest truth.  They’re so biased and clouded, they literally can’t see it, let alone or say it. They don’t know the words. Let me explain a little further my thinking –  maybe I’m wrong.

Maybe they can see it yet feel it’s inappropriate.  The truth can hurt after all. Maybe somethings are best left un-said? Maybe they just have a habit of giving the same old answers to the same old questions.

The truth – is not as obvious as it first looks.

I think that today somehow telling the simple truth has become like a revolutionary act.  It appears that it is very hard to tell.  And part of that I think is that people are unsure what it looks  or sounds like.

The importance of the truth in new business is that it will set you apart from your competitors, make them at ease with you and of course and help get more new business into your agency and stop you spending time with tyre kickers  – column C and D prospects

And do you know what? It feels good, in fact it feels great, honesty is the best policy, it is so liberating that you don’t have to go around badgering prospects with how great you are, how many awards you won… To be frank that boast laiden creds document could have been sent to them on a Powerpoint before the meeting couldn’t it, if that is your bag?

So I thought I’d give you some idea of what the truth looks like and I’m well aware it may shock a few of you.  Truth does that.

And some of that is because you can’t hear the tone or see the body language which adds to the context. Remember the golden rule – you are there to diagnose not to get an ego boost or patronise a prospect.  They were clever enough to invite you in so they can’t be half bad, can they?

Below are some typical things a prospect may ask an agency very early on.  And here is the truthful answer that will a) differentiate you b) help you qualify the prospect by getting them off the solution and them qualify you too and c) help you become consultative and not a reluctant consultant.

Q: So how do you think your agency can help us?

A: Maybe we can’t. (truth)   What is it you were hoping we could do for you? (moving off solution).  Is there a specific issues you currently face? (qualifying and beginning diagnosis)

Easy enough wasn’t it?

Q: What makes you different from the other agencies?

A: Maybe nothing. (truth) How were you hoping we’d be different? (moving off solution)  Is there something your current agency doesn’t do that you’d wish they did? (qualifying and beginning diagnosis)

Easy right.  That’s what the truth looks like give or take, you can learn that can’t you?

Most agency people would have a presentation out by now, which will prevent them from being consultative in their selling or they’re  into a five-minute discussion about their proprietary tools or way of thinking and actually making themselves sound exactly like all the others, desperate – and even just like the one they are considering firing.

The truth is you aren’t that different most of the time. Except you can differentiate your agency in the way you sell to them. Non pushy, easily understood, credible (truthful no less) and reasonable.

respect

In fact prospects feel comfortable around people who are disarmingly truthful and so will tell you more than they will other competing agencies about their business issues, which may help you when finding a solution. Or perhaps it might lead to a project being bigger than they first anticipated because you diagnosed more issues than they considered.

The concept behind consultative selling is to get to the truth of the situation. Your first meeting with a prospect is a test drive, it shows how thorough, truthful and credible you are.  Saying you are the best undiscovered agency in London is not credible, the times I have heard that one.

You are with a prospect to find out exactly what is going on in the prospect’s business world and you should be asking yourself a few questions – Why would they change agencies?  Would I change agencies in their shoes?  What’s so bad with what they have right now?  Is it costing them too much time and money to work with their current one?  If so how much do they think – could they ball park it? Where is the evidence for a need to change?

Then once you have the prospect diagnosed as needing to change then you need to make sure the rest of their colleagues agree for the need to change to – this is all before you present the solution to them.

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New Business – Question Everything.

questionBeing persuasive is a pretty handy skill to have.

Useful in business for obvious reasons but in life in general.

How do you persuade someone?  

How do you get people to make a decision in your favour? Is it even possible?

Today we are often told by the latest in modern neuroscience that all decisions are made emotionally.

Some of them even contend we have no free will at all, so decisions are already made, really we are simply witnessing them. The universe is deterministic and free will is an illusion. How helpful is that?

The same goes for much of the latest in cognitive science and psychology, or as it is now called Behavioural Economics.  People don’t make rational decisions they say and simply post rationalise their emotional / intuitive thinking. Their point is that people make decisions subconsciously and that is devoid of any rationale.  What like zombies?

We see ‘their’ lists of biases that humans have, that alter the way people make  decisions.  People make more favourable decisions when they smell something lovely, fresh bread, summer roses or fish and chips for example.  

They make less favourable decision when they smell something disgusting, I’ll leave that list to you.  Who knew eh? Don’t hold meetings in the company loos. Do you offer fresh bread to your prospects or a bag of chips maybe? Can you imagine – “Before you talk me through your case study could you pass
the ketchup?”

Other biases include making bad or rash decisions when we need the loo or are hungry.  We make more favourable decisions when we are  physically hydrated, or emotionally happy –  like if we have  just won some money or recently spoken to a loved one? Who knew eh?  

Can we get the prospect to speak to a loved one  just before we meet or can we meet them just after they have been offered a visit to the loo or  have finished a fresh glass of water? Give them some scratch cards maybe? Please win, please win.

What happened to rational man and his ability to reason?  The Behavioural Economist would say that died with Classical Economics but I feel we are throwing the baby out with the bath-water. Just because utility maximising as advocated by Classical Economics has died and good riddance, doesn’t mean man doesn’t act without reason does it?

I am sure there is some evidence regarding some of the psychologist’s biases, although it bothers me that much evidence is drawn from experiments carried out in sterile conditions of the psychology department in a university. Rather than from real life. Eight five percent of all psychological experiments can’t be replicated. So lets tread with caution shall we.

Or maybe ‘they’ are suffering their own confirmation biases – maybe they could not help but discover what they set out to? We look for patterns and we find them don’t we?

The only time I really want to be persuaded by the smell of fresh bread is when I’m in a bakery.  I really don’t want it in an estate agents or when I’m with my financial adviser.

I can just see a Derren Brown like character jumping out in front of me and claiming “You just sold your house for £10 and signed up to life assurance that never pays out because we piped in the smell of fresh bread.” Arghhhhhh, it’s a nightmare!

Consultative Selling

What happened to having a reasonable dialogue with people based on their needs? Understanding another’s view, situation and vision of the world, or their business at least? Where the seller asks the prospect a series of question to uncover their business issues, their current situation and where they’d like to be.  

The thought being that if we understand our prospect and their issues well, they are more likely to be persuaded to buy from us.  And our attention to detail and understanding gives the buyer a view of what we will be like to work with.  Meeting one with a prospect is a test drive.

That is the idea behind consultative selling.  A simple concept that a business prospect (a sentient living being) tends to either move away from painful situations  or toward pleasurable ones.  

Some (experts) say people are way more likely to move away from pain than toward pleasure.  But we do both in different social contexts. Ice cream is sought for pleasure on a hot day or is it to take away the pain? Or ice cream can be consumed on the sofa straight from the tub to get over a bad day at the office, to give pleasure or take away the pain?

In fact our psychiatrist friends would rightly tell us that there is an interesting relationship between pain and pleasure but we are not going there.

Business people I contend  will do much more to avoid loss (pain) than gain (pleasure). Loss aversion ‘they’ call it, it is one of the many biases our psychologist friends talk about that seems to have some evidence but it is not a panacea.  Just because someone has a problem doesn’t mean they are in a situation to solve it.

Businesses are very typical of moving away from problems, they tend to come to creative agencies when they have multiple problems, more so when they want to move towards excellence. How often have you heard a prospect say our current agency is 9 out of 10 we just want to find a 10 out of 10 agency ? Never I expect.  

Prospects come to us with because they have issues, right?  Things aren’t how they want them to be. Their current agency lacks results, collaboration, miss budgets, lack creativity and strategy and so on.

So if they have worked that out already, why do we need to question them to find out about their issues?

Well, some might say that if we talk with the prospect about the issues it shows we understand them. True, walk in another man’s shoes and all that.

Also it demonstrates the attention to details we offer. Meeting number 1 is where they get to sample your agency’s service. It’s like a test drive or a free sample of what you’d be like to work with. E.g. Are you diligent, thorough, challenging, interested and understanding or are you simply friendly, prescriptive, cheap and non descript and yes, yes, yes.

The issue I see today with consultative selling especially for creative services is this –   buyers today have so much information to take to their internal meetings that we are not privy to, what is a new business person’s role now?

The buying of creative services are complex. They have more than one decision maker, often three to four, sometimes the investment is a large sum and yet potential big returns too. And when the people client side start their hunt for a new agency they have access to your website, maybe your case studies, blogs, articles from trade press, your philosophy or manifesto, Facebook pages, twitter account and so on maybe even your price list.

Could they decide without even meeting you?

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The Reluctant Consultant

honestyI love the phrase ‘The Reluctant Consultant.’

Let me explain what it means to me.

To begin with we need to look at the word ‘Consultant’ – what’s one of them?

It seems like everyone is a Consultant of some sort today, fighting it out with the digital gurus and social media experts in the latest job title challenge over on linked-in.

A consultant diagnoses a client’s problem and then prescribes a solution but only once they are sure of their diagnoses.  In our world they charge for this solution. And quite often (it should be) that charge is based in some way according to the potential value of the solution and not based on hourly charges.  It’s a highly valued solution and charged accordingly.

I won’t define reluctant you can do that just fine.

So what is a Reluctant Consultant?  When a Reluctant Consultant is with a prospect and they are struggling to remain in the diagnosis phase, the first phase (where you ask question about their business problems) and instead skip ahead to be prescriptive phase the final phase.  Because that is easier. Often they actually prescribe /  sell  a box standard solution, the thing they always sell (strange that) in the same way everyone else sells it  – then they are being a Reluctant Consultant.

The are being reluctant to advise wisely and are bailing out on their role of being consultative and instead are prescribing before diagnosis which is malpractice. Will this result in repeat business?

The Reluctant Consultant agrees to do whatever the prospective client asks of them.  He would rather not challenge the prospects thinking.  I’m not advising you to be  being abrasive in fact many consultants could do with working on their bed side manner.  Humiliate a prospect at your own peril. You’re supposed to be smart that’s why they invited you in, which actually makes them quite smart, right? You don’t need to arrive with ego too.

However, to challenge the thinking of a prospect in their own interest is another thing entirely.  “I can sit here and agree with you Mr Prospect but my worry is two-fold,  one I see things slightly differently and if I do simply agree with you won’t you make the same mistakes as last time, can’t we discuss it a little further?” “I can see you are keen to get a proposal or a price but I think you’re rushing ahead.”

Consultants need to overcome their reluctance to consult.

That’s why I love the phrase ‘Reluctant Consultant’, it reminds me that there is huge value in the prospect seeing the truth and that is found by being thorough in the diagnostic phase at the beginning of a meeting.

To be truly consultative you can’t be reluctant to say what you really believe about a business situation and often there simply isn’t enough  information to make a good diagnosis.  If  you don’t know say that – “I don’t know.” Add “Yet”  onto that sentence if it makes your ego feel batter.

Maybe (it happens rarely) the prospect has done the perfect self diagnosis on their business. And if they have they don’t need you, do they? Now you are just an executor of their plan and you’ll be paid hourly (after some heavy negotiations, you’re not exactly in short supply are you, ring any bells agency owners) and not based on your true value in relation to the solution in the bigger picture.

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