OPINION23 October 2014

The seven most expensive research agency mistakes


In my work helping research agencies be more successful and profitable, I often see classic negotiation and terrible sales mistakes.

I’ve worked with around 10 research agencies as well as over 90 other agencies (advertising, media, design, digital, PR, sponsorship and experiential) and see the same mistakes being made. While it’s okay to make a mistake once, making the same one over and over again is inexcusable.

The seven most expensive mistakes made by research agencies are inter-connected:

1 ) The first is being too focused on the topline revenue rather than on the right balance between revenue and bottom line profitability. As a research agency I believe making a fair profit is a fundamental business goal and a commercial business profit is vital. It gives senior management options and confidence to make brave decisions. Revenue growth must be profitable.

2 ) Not understanding your value is the next mistake. It is easy to become focused on the ‘doing’ rather than the result or impact of our work. Clients don’t want to buy research. They want to buy the result of the research. Clients want the insight or the knowledge resulting from the research to help them make smarter decisions and gain a competitive advantage. This is a research agency’s real value. The better we understand this, the more money we will make and we will be able to avoid the next mistake.

3 ) Under-pricing is a costly mistake. Mark Ritson once said: “most businesses strategy for pricing is a mixture of voodoo and bingo.” By under-pricing we set a precedent with that client going forward and it will be hard to increase our price for subsequent work. Price is the number one factor to influence profitability. If you don’t get your price right, you will be on the back foot.

4 ) What’s special about your agency? Too often research agencies look the same. If you look the same don’t be surprised if you are commoditised and bought predominantly on price. You can only charge a premium price if there is a real or perceived difference between you and competitors. Price is a factor, it is rarely the factor.

5 ) Over-dependence can be costly. If a client represents more than around 15 per cent of your business there is a danger that you might avoid increasing your prices, challenging the client and presenting standout work. Instead we play safe avoiding ‘rocking the boat’. When I asked research agencies about this point they often say: “we’ve had client x for 10 years.” The past is not a guarantee of the future. I have seen too many agencies destroyed or decimated by the loss of one or two major clients. Hope is not a strategy.

6 ) Poor briefs are also costly to research agencies. What makes a poor brief? A verbal or poorly thought through brief is dangerous. A verbal brief isn’t worth the paper it’s not written on.

7 ) Scope creep and over service cost research agencies a fortune. Clients will ask: “could you just….” and expect that extra work to be covered by the original budget or fee. Scope creep is like a disease: it won’t get better unless it is treated. Your ability to tackle scope creep is linked to your confidence, your differentiation, your pricing, understanding your value and the brief.

Chris Merrington is the founder of 80:20, which specialises in consulting research agencies in their profitable growth and success.

1 Comment

8 years ago

Heartily agree, Chris! I believe that No.4 on your list is the most egregious error - if you are not differentiated, there is no chance of you being able to charge a premium, build your bottom line or grow. Saying "we do good research" is not good enough. A few other errors to consider: 1) Excessive loyalty to tenured staff who are getting in the way of progress - this can be a killer, especially if they are in charge of areas such as IT or Finance. 2) Blind denial of change in the industry or in the needs of clients - the research industry has left itself wide open to new competition through its denial of the forces of change 3) Not listening to your clients - this is the biggest complaint of the client community 4) Not understanding the business implications of your research - research is not an end unto itself (as you point out) 5) Thinking that the delivery of a 150-page deck to your client is both smart and the end of the project. If you cannot communicate your findings with impact in 10 slides, you are doing your client a disservice 6) Catering to the needs of a mid-level research manager rather than to the business needs of the client 7) Thinking that your survey is the be and end all of the assignment - it isn't. What other data sources and experiences can you bring that will add value? 8) Treating your client relationship as a series of projects. Agencies need to move to a continuous learning model rather than focusing on the project. 9) Believing that your tracker will last forever and not seeking to add value to it at every opportunity. 10) Believing that your competition is other research agencies. It isn't - it could be an analytics company, internal data, a DIY solution or...nothing at all.

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