The seven most expensive research agency 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.