Jupiter research about SEM firms

I read an interesting Jupiter Research study about imminent changes in SEM agency/client relationships today.

Gary Stein, from Jupiter, has researched the American SEM marketplace and concluded that clients are likely to switch between agencies in the coming years, as they hunt around for better deals and better results.

Our surveys indicate most agency relationships are new and pretty stable. But they also point to imminent change. Quite soon, we’ll see clients change agencies. As average click costs increase, clients will scrutinize their agency’s work and consider whether they’re getting the best performance at the best value.

Churn should be expected. With the exception of the occasional brand that’s worked with one agency since the dawn of time, clients change agencies all the time. Often, this is the result of a client-side staff change: a new brand manager has different ideas about either how to market the product or, more frequently, wants an agency she’s worked with before. With creative shops, agency churn is often a key problem. Agencies are highly susceptible to trends: one shop is hot, another clearly is not, and good brands want to work with hot shops.

Of course, when agencies verify this kind of trend, they tend to emphasize the positive; they’re winning clients from their competition. Clearly, someone must be losing. The good news: though clients may be moving around, there’s a steady stream of new ones coming through the doors. The overall percentage of companies looking to outsource SEM tasks is steadily rising.

Yet winning new business is time-consuming and expensive. Agencies must focus on managing the clients they currently have. Sounds pretty basic, right? Well, not always. A few things to keep in mind:

• Expect some churn. Fight to keep your clients, but don’t be surprised when some defect. Keep your new-business pipeline steady and your staff focused. When a client does leave, make sure your people stay busy. The easiest thing is to assign them to a new business pitch.

• Assign account managers to each client. Clients need a single contact point with your agency. It helps them feel comfortable; they can talk with one person for status updates and answers. Make sure your manager knows she works for the agency, not the client. Too often, client service people feel overly connected to the client. They must ensure the client is serviced and also that the agency is protected.

• Be prepared for shootouts. Creative shops are often protected from churn because objectively comparing one agency’s work with another’s is difficult. Not so with search. Be prepared for a client to give a similar set of keywords to both you and another agency to see who gets better results. Be ready with the staff and focused approach to make sure you win.

• Focus on strategy. Clients want more than just management from their agencies. They want a clear idea of why decisions are made. An articulated strategy is paramount and the cornerstone of the relationship. A strategy isn’t a list of keywords. It’s customized plan for driving value based on the client and its needs.

Consistently bring new ideas to your client. Be viewed as proactive. MSN’s upcoming search products will offer a whole new set of optimization levers. This is a huge gift to agencies. Look for opportunities like this. Read every headline and ask how the news could benefit your client.

There’s no perfect recipe for keeping clients happy. Great agencies lose clients all the time (conversely, I suppose, crummy agencies win clients all the time). These steps are a start to help solidify the relationship.

There was no mention of the situation with PPC/SEO/SEM agencies in Australia. However, I think Gary’s dead on the money. As search matures, the best agencies with the most proactive approach, and the best ROI delivered to clients should win more business. It’s pure competition, survival-of-the-fittest business theory.

Either way, it just goes to show business fundamentals. If an agency provides sub-standard service at over-priced rates, or simply can’t show its added value, then it isn’t going to retain a whole lot of business.

Sure, some poorer-performing agencies may keep some clients simply due to clever marketing or fast-talking account managers. But as this market develops, marketing managers will become more accustomed with terminology etc, and should seek out the best practitioners.

The next few years will probably see a “weeding out” of some of the dodgier agencies and practices. There are definitely some weak agencies in this field (anyone deeply involved in search will know who they are), some of whom are also overpricing their services! Sub-standard web designers were weeded out four years ago. The same thing will happen with crappy SEM agencies.