Marketing and advertising agencies face the challenge of meeting client expectations while not deviating too far from initial service forecasts. Out-of-scope work, anything not agreed upon at the beginning of a project, is a reality for many businesses. Once over-servicing begins it can be difficult to stop.
In this difficult economic climate, every business needs to be cautious not to bleed money.
Marketing spoke to Bronwyn Karaoglu, global vice president of marketing at Ignition, about recent research the company has undertaken as it tries to highlight the extent of the scope creep.
Ninety-two percent of agency leaders said that clients had requested they work on a task that is out of scope, while most agencies reported over-servicing clients “all the time”. According to Karaoglu, it’s often their own fault.
Over-servicing is an industry-wide problem
Karaoglu says the 22 marketing and advertising agencies involved in the Ignition survey were aware of out-of-scope work-related losses and described over-servicing as a major challenge. “It’s costing them a lot,” she says, but does not believe this represents a new trend.
“If you’re not getting paid for your work there are implications on cost, on cash flow and on everything else.”
A third of agency leaders say that unbilled out-of-scope work is costing them up to $5000 per month, while over a quarter say that it is costing them more than $20,000 each month.
An agency issue Karaoglu identifies is that many clients have become “conditioned” to expect that a lot of related yet unspecified work will be required, and don’t want to pay for it. Over-servicing has been entirely normalised. Thirty-eight percent of agency leaders say clients request out-of-scope work multiple times per week.
Be mindful of over-servicing immediately
Ignition garnered from its research that the leading catalyst for unbilled out-of-scope work is a misalignment of expectations, with troubling differences between the perspectives of a client and an agency often created at the initial stage of the relationship.
It’s important to have a clear agreement in place from day one that defines all aspects of potential servicing so that both agency and client can remain on the same page, as once issues arise they become harder to address.
“If you’ve started to over-service a client and suddenly stop, it can have a negative effect on the relationship with that client,” says Karaoglu, warning agencies to be careful about how they manage the issue.
She believes the signed agreement should be regarded by both parties as “the single source of truth”. It is the nature of a business relationship to be dynamic, but if a client demands constant changes it creates a vicious cycle of over-delivering and underperforming.
The agency-client relationship as the critical asset
Karaoglu thinks agencies prioritise preserving relationships with clients, which creates a hesitancy to push back against unexpected requests. Twenty-four percent of agency leaders told Ignition that demonstrating the value of their work to clients is difficult, while 38 percent think retaining clients will be a challenge agencies face in their next 12 months.
But provided compensation is assured, out-of-scope work can be a valuable opening.
“It really signals an opportunity for organic growth, for agency leaders and owners to negotiate that additional revenue with their clients and build on that relationship. However the challenge is that many of them simply absorb the cost, and just take on the extra time,” Karaoglu says.
Often the fallout of avoiding awkward conversations with clients falls back on employees of an agency, with Karaoglu saying that it can lead to burnout, increased absenteeism and even a staff exodus.
The challenge of over-servicing clients can be seen in other industries. Ignition previously analysed its incidence in the accounting industry, where over $100,000 from unbilled out-of-scope work was being left on the table by agencies every month.
Ignition recommends automating invoicing and payment systems through a client-engagement platform so that other issues with servicing can be removed, as marketing and advertising agencies also described struggling with overdue payments.
Most agencies reported dealing with payments more than 10 days overdue.