30 Years Loyal Service, Then What?
3 Comments - Posted By Rob Millard In Strategy 101 , , - Permalink -
So you've had this important client (this VERY important client) for more than 30 years. You've been doing good work for them and your firm has grown steadily on the steady flow of fees. How secure is your position?
This is exactly what Bob Bernstein and Skip Rein, founders of Missouri-based ad agency Bernstein-Rein must be thinking right now. According to an article in Fast Company, Wal-Mart are putting their $578 million advertising account up for review for the first time in 30 years. Bernstein-Rein and Omnicom GSD&M have been sharing that revenue river for three decades, the former growing to 300 staff in the process.
Continue ReadingWhat Do "Bad" Clients Cost Your Firm?
1 Comments - Posted By Rob Millard In , Tools for Strategists , , , , - Permalink -
If you were able to ask just one question of a client, with the assurance that the answer would give you a good indication of their level of satisfaction with your firm's services, what would that question be? Fred Reichheld's article The Microeconomics of Customer Relationships (subscription or purchase for $6.50 required,) in the Winter 2006 edition of the MIT Sloan Management Review, has the answer. It is:
"One a scale of 1 to 10 where 1 is 'not at all likely' and 10 is 'extremely likely,' how likely is it that you would recommend us to a friend or colleague?"
Depending on the answer, clients would be categorized as promoters (scores of 9 and 10,) passive (7 or 8) and detractors (6 or less.) Note that passives do not straddle the 50% or even the 60% mark. Anything less than 70% is viewed negatively.
General Electric, already the 9th largest company in the world by revenue, is using this model to try to drive its organic growth rate from 5% to 8% pa. According to Reichheld's data, a promoter has a net present value (NPV) to the firm of 1.5 and 2.5 times that of an "average" client (i.e. a passive.) On the other hand, a detractor frequently has a negative NPV. Sometimes, a surprisingly high negative NPV. The article explains how a firm can calculate these figures for themselves and also how to use them. A summary follows:
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