For agencies, losing is the best way to win

Psychologically, losing makes a much larger impact than winning. You’ll understand this firsthand if you spend a few minutes at a casino. You win $100 in blackjack, and you feel good, but not euphoric; a few minutes later, you lose it all, and you are devastated.

My thoughts in such a situation always turn to thinking about what I could have spent that money on instead of gambling. Economists call this “loss aversion,” although the 1980s hair band Cinderella probably summed it better by noting, “Don’t know what you got, ‘til it’s gone.”

Agencies deal with loss all the time. Team members leave for another company, another agency is awarded an RFP, or an existing client switches agencies.

Essentially, every week, someone is telling you you’ve lost — and the concurrent wins don’t make the losing feel any better. You’ve got to have thick skin to survive the agency world (and perhaps some would say a bit of masochism isn’t so bad, either).

Equally important, agencies need to turn losses into wins. In other words, agencies need to conduct post-mortems to identify why they lost and what they can do to win in a similar circumstance in the future. If handled correctly, losses can be the single most important way for an agency to win in the long term.

The happy client who left

All of this is top of mind to me because my agency recently lost a great client. The client had been with us for more than three years, and we had helped them out through ups and downs (We were pretty sure that they were on the verge of closing at least once, but they roared back to life), and through a few different internal marketing teams. We felt like we had a great rapport with the current team, and the feedback our team received was positive.

Then, out of the blue, we got an email requesting a “quick chat” (which is client-speak for “We are going to fire you”). The client had decided to consolidate all digital spend with their offline agency. This was a huge shock to us — the offline agency used to use us to white-label digital marketing for clients, so how could the client possibly conclude that this was a good decision?

I wrote an immediate and frank email to the VP of marketing at the client:

I understand the theory behind what you are trying to do. But again — unless you really just don’t care about digital (and maybe that is what you are saying, given that most of your budget is offline now) — handing off digital to a company that is not expert at it is a bad decision.

If your doctor told you that he was now offering dental services and your health would improve because he could serve you “holistically,” would you accept his offer? Of course not — because doctors are good at one thing, and dentists are good at another.

We lose clients all the time — some take things in-house, some move to another agency. This is part of the agency world and most of the time I just let them move on. I only reach out when I feel like the client is going to be really negatively impacted by the decision. Such as now.

(For the record, I was being honest when I noted that I don’t generally write clients to try to get them to change their minds once they’ve decided to move on.)

The email I got back from the client was eye-opening. There were two primary messages: First, in an apples-to-apples comparison of the strategy documents presented by us and the offline agency, the offline agency outflanked us with significantly better top-of-funnel ideas.

And second, the client didn’t care that we were better at “bottom of funnel” digital marketing (SEM, SEO, paid social) than the offline agency, because they viewed that as “a commodity,” for which their internal team could “supplement for any shortcomings.”

I’m sure that any SEM professional reading this article is fuming about the notion that lower-funnel marketing is a commodity. That’s a topic that’s deserving of its own post, so I won’t argue it here except to say this: A service offering that is perceived as a commodity in the eyes of the buyer is going to be treated like a commodity.

And any rate, there are thousands of clients out there that get the value that a direct response agency brings, so any time spent trying to dissuade one client is time not spent selling to a client that already accepts the point.

Evaluate your losses

Faced with this situation, what would you do? I saw a few options:

1. Do nothing. Assume that the client is an anomaly, or just made a bad decision, and take no action. Sometimes this is the right choice. If, however, this is always your choice, you are dooming yourself to suffer similar client loses in the future.
2. Look for internal failures. Did the account team managing the client do something wrong? In this case, was the strategy document below our standards? If so, the next step would be to either evaluate whether the team in place is up to our agency standards, or provide training to the team so that they performed better in the future.
3. Make a fundamental change in the agency. Is this loss part of a greater trend? If so, it may require adding new services or people to the agency, or significantly retooling the strategy and positioning.

In my experience, most losses will result in either inaction (#1) or an internal investigation (#2). In the case of this client, however, I concluded that the loss merited a fundamental change to my agency.

In fact, this client was one of several in a string of clients that we had taken from start-up to industry leader, only to then lose the client to a “traditional” agency that pitched the notion that only top-of-funnel awareness could catapult the client to a new level of growth.

Once a client buys this argument (whether it is true or not), an agency that prides itself on awesome SEM but lacks awareness expertise is finished.

Life is a bowl of inflection points

How my agency plans to counter-attack this argument (and how other SEM agencies can do the same) is a topic for another time. The global message of this post, however, is that losses can often be the biggest driver of agency improvement.

In this case, as noted, I was able to categorize this one loss as part of an overall trend that was hurting my agency. Clients were “voting with their pocketbooks” for agency candidates other than 3Q Digital!

I believe that an agency’s growth is driven by the ability of its leadership to recognize and act on inflection points. It is rare for an agency to find the perfect mix of talent, servicing offerings and positioning and see linear year-over-year growth.

Instead, growth is choppy and often stalls, only to be reignited by a significant (and sometimes painful) course correction. You can read a brief (and now outdated) summary of some of the inflection points 3Q Digital confronted over the years here.

When things are going well, it’s very hard to identify inflection points. Going back to the gambling analogy, a poker player who consistently wins every time he sits down at the table has little incentive to change his strategy. Losses – for card sharks and agencies – have a way of putting things in perspective.

As painful as it is to lose a client, it can truly be one of the best things to happen to your agency, if you look at it as an opportunity to get better.