Agency leaders must take responsibility for owning their commercial challenge, rather than relying on procurement teams to be more flexible during negotiations, according to new findings from the IPA’s Commercial Behaviours Survey; helping agencies improve their financial performance.
The report has brought to light the practices of the agencies with the greatest revenue per head; and reveals that 80% of top-performing agencies acknowledge their own responsibility for commercial performance compared with only 30% of the weakest performers.
Other key findings from the IPA Commercial Behaviours survey are that the top-performing agencies:
- Manage their costs against revenues and consider the complexity of the client relationship when setting fee levels
- Regularly map out their portfolio of clients and assess both the attractiveness of each client and the agency’s relative commercial bargaining strength
- Understand the range of potential pricing models from inputs-based cost-plus to outputs-based / outcomes-based pricing and consider pricing to be a core agency discipline
- Take into account broader market place factors, such as level of agency differentiation, competitor conflicts and the client’s buying power
- Walk away from business that does not make commercial sense
In addition, the top performers ensure that they have the right employee making pricing decisions; push back on pricing challenges and defend their pricing with justifications; and look to charge a premium for new products and services, high-end staff or guarantees of delivery and output.
The IPA’s Finance Director, Tom Lewis, said; “For the first time we are able to compare agency commercial performance to beliefs and behaviours, allowing us to identify how the top-performing agencies think, believe and act differently.
“The best-performing agencies start by owning their commercial destiny; once they have accepted this responsibility, the rest is down to hard work – how much effort they are prepared to put into good commercial performance.”
Agency leaders can take the Commercial Behaviours survey to find out how their business ranks compared with industry front-runners by contacting IPA Finance Director Tom Lewis on toml@ipa.co.uk.
A report of the full findings from the Commercial Behaviours survey will be handed out to attendees at the IPA Business Growth Conference on July 5th at The British Library Knowledge Centre. For more information about the event and to book your place visit http://www.ipa.co.uk/events/business-growth-conference.
Last updated 10 March 2021