Agencies are regularly dragged into overservicing clients, some of them in the extreme needy category, adding a mound of unbillable hours and more strain on staff.
A survey of 22 agency leaders by professional services platform Ignition found over-servicing of clients was happening “all the time” and that this was costing as much as $20,000-30,000 each month. (14% indicated that it was costing $20K and $30K, a third say that unbilled out-of-scope work is between $1K and $5K, and another 14% indicated $5K and $10K.)
“It’s easy to see how scope creep can eat away at an agency’s margins and profitability, but it can also have negative consequences on the people and culture within an agency,” Ignition’s global vice president of marketing, Bronwyn Karaoglu, told AdNews.
“When over-servicing clients and shifting goal posts is the norm, it can lead to unreasonable workloads and deadline pressures on employees. This can result in a snowball effect of missed deadlines, lower quality of work and low morale among employees.
“In extreme cases, it can lead to higher levels of burnout and people even quitting their jobs. With many advertising and marketing agencies facing persistent talent shortages, a culture of overserving can make it extremely difficult to retain and attract top talent needed to service and grow client accounts.”
She says scope creep, overservicing and late payments are evergreen challenges that advertising and marketing agencies have been talking about for years, if not decades.
“In a high inflation and high interest rate environment, scope creep and late payments can be a recipe for disaster if left unchecked,” Karaoglu (right) says.
“It can make cash flow management really challenging, especially for smaller agencies. It can also have negative effects on people within the agency, including increased workloads and higher levels of burnout.
“While the results from the survey are perhaps not surprising, it highlights a big opportunity for agencies to change the way they do business with clients, to improve cash flow and maximise profitability.”
She says it’s important for agencies to set clear expectations and boundaries right from the start so that if overservicing happens, they can re-negotiate the scope of work and charge for the value they deliver.
“While this may seem obvious, Ignition’s survey suggests many agency leaders may not be setting expectations early, with 52% of agency leaders admitting to over-servicing clients ‘all the time’,” she says.
Another 38% say they deal with out-of-scope requests multiple times a week.
“There are some small incremental steps agencies can take to ensure they are on the same page as their clients,” she says..
“For example, when sending a client proposal that outlines the scope of work and deliverables, they could consider making a provision for any additional work or scope changes upfront. By including a provisional line item in their proposal that clearly outlines how you’ll charge clients for additional scope, you’ll be indicating to new clients that ad hoc requests may entail an additional cost.
“Once the agreement has been signed, agencies should refer to this as their single source of truth, allowing them to have open and honest conversations about out of scope requests or renegotiating the deliverables. Proposal, billing and payment automation software can create a digital paper trail for agencies, allowing them to make adjustments to active services after a proposal has been accepted.
“That way, when things change, you can simply adjust the scope and pricing for agreed services to make sure you bill clients for any out of scope work and don't lose out on potential revenue."
Culture
When agency leaders were asked how many hours they spend overservicing clients each month on average, 43% of agencies said that they are over-servicing clients by up to ten hours per month, 14% indicated that they were over-servicing clients between 21 to 30 hours a month and another 14% estimated over-servicing by 31 to 40 hours a month.
“One of the key factors could be that many agencies are under-valuing their services,” she says.
“Some agencies may fall guilty of thinking about what their clients can pay, rather than the price that will allow them to do their best work, particularly in the current climate.
“While the latter may feel counterintuitive to winning the business, it’s proven to be more successful in the long run.
“Just because scope creep is somewhat of an industry norm, doesn’t mean it needs to be.”
Of the top challenges faced by agency leaders, 57% said they are operating on leaner budgets in the next 12 months.
“Amidst pricing pressures and leaner budgets in this economic uncertainty, it’s even more important than ever for agencies to charge and get paid for all of their work,” she says.
“Every item of unbilled work; every late client invoice; every hour of over-servicing adds additional pressure on your bottom line - and people.
“If you work in an agency, you’re going to deal with a high maintenance client at some point in time.
“Often, they’re difficult because they’re unhappy with part of the service, product or customer experience. Sometimes, there is a personality clash. Other times, their expectations are unrealistic.
And a high maintenance client could have hidden, unmet needs.
"Asking a lot of questions, specifically open-ended questions, will help you get to the root of the problem. Demonstrate that you’ve heard and will make it a priority to get the problem solved. When a client feels their questions or concerns aren’t being dealt with appropriately, they often fall into the ‘everything’s wrong’ or ‘nothing’s working’ trap.
“However challenging, dealing with needy or high maintenance clients can provide valuable learning experiences. They can provide an opportunity to revamp workflow processes, re-word your contracts or have honest conversations with clients that lead to stronger relationships and organic growth. The key is ensuring you’re armed with the right tools you need to effectively set and maintain client expectations.”
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.