by Alistair Mokoena (@AlistairMokoena) Business growth is essential to the survival of any business. With it, though, comes complexity.
Managing a portfolio of accounts is not easy. Accounts compete for the same agency resources and this calls for constant tradeoffs. Different clients have different needs and therefore require different approaches.
Balancing act
The answer is a well thought-out portfolio management strategy which recognises that different accounts have different roles to play in the agency’s game plan.
This balancing act not only makes for easier allocation of resources but it can help maximise revenue and profitability. Our clients know this only too well. They deal with portfolio-management issues all the time in their businesses.
The allocation of marketing resources among brands is a balancing act that is informed by the portfolio each brand plays. There are various tools that help with portfolio-management decisions and one of the more famous ones is the Boston Consulting Group Matrix.
The matrix is made up of two axes; the Y-axis measures market growth while the X-axis measures market share. In other words, the Y-axis measures cash usage while the X-axis measures cash generation.
Four quadrants
These axes translate into four quadrants, which are a combination of revenue growth and market share:
- Brands that sit in the low market-growth and low market-share quadrant are called dogs
- Brands in the high market-growth and low market-share are called problem children, or question marks
- Brands in the low market-growth and high-market share quadrant are called cash cows, and
- Brands in the high market-growth and high market-share quadrant are called stars.
To apply this to the ad industry, the Y-axis would measure creative opportunity while the X-axis would measure revenue. To use the same analogy:
- Dogs (or hyenas) in our industry would be low creative-opportunity and low revenue accounts
- Problem children would be high creative-opportunity but low revenue accounts
- Cash cows would be low creative-opportunity and high revenue accounts, and
- Everyone would want to work on stars, as these are high creative-opportunity and high revenue accounts.
Unique and relevant
The other important part of this exercise is ensuring that each quadrant or group of clients is approached with a unique and relevant strategy.
The star:
Stars are a no-brainer. The appropriate strategy for star clients is to invest in growing that account. Deploying your best resources on these accounts is a must.
Proactive work on these accounts is also crucial. I’m a big fan of running accounts efficiently and therefore profitably but, if there were ever a case for investing more time than you are able to recoup in fees, this is it. You should see this disproportionate allocation of resources to a star account as an investment, not waste.
The cash cow:
Cash cows are important to the overall financial health of an agency. They help cover overheads and they provide sustainability. The strategy that you should apply to cash cows is investing to maintain.
Even though the creative opportunity on this account might be limited, there are other ways to add value and innovation to the client’s business. Young bushy-tailed creative types are likely to find these accounts less sexy, so don’t bother with them. Find a strong, experienced and mature team that knows how to maintain long-term relationships because this business is important.
Two types of accounts that are problematic are dogs and problem children, not that you would ever refer to your client as such. These labels are a pure academic exercise to illustrate a commercial point.
The dog/hyena:
A dog/heyna is an account that presents both low creative opportunity and low revenue. The sane thing to do here is to resign such an account but I can hear many of my industry colleagues protest that “it’s easier said than done.” I get that that.
For me, there are only two reasons to hold on to this kind of business. The first exception is that this brand has to be part of a larger and more profitable client portfolio that you handle. The other exception is when there’s a strong possibility of getting more brands from this client, which are hopefully more profitable and more fun to work on.
Other than these two exceptions, I see no reason why you would hold on to these clients.
Some people might argue that some dog accounts might be important from an agency credentials perspective, either because that account is highly sought–after or that it allows you to claim experience in a particular category.
I find that argument flawed because experience looks at history, not the future, so the fact that you have handled this client in the past counts as experience. A forward-looking view is all about growth and creative excellence. Nobody plans for bad financial health and creative misery.
Problem children:
Problem children are not efficient but are creatively very sexy. Because clients know that working on these brands is every creative’s dream, they don’t bother to invest proper budgets behind these brands. We all know whom I’m talking about.
These accounts are very often a nice problem to have, provided you have bigger accounts that can make up for the revenue shortfall on these accounts. Creatives love them because they are the biggest consumers of proactive work; as a result, they end up befriending each other socially. Client service hates them because they have tiny budgets and they spend way too much unbillable time with our creatives shooting the breeze.
The strategy here is to invest, provided there’s potential for revenue growth, failing which my advice would be to devise a medium-term exit plan.
Focus on value creation
So, in summary, we need to be clear on the roles that the various accounts on our books play and even more clear about how we manage these for value. We are ultimately in the value-creation business, which is enabled by creative excellence, which in turn is supported by a well-oiled agency machinery. Accounts that shift our focus away from value creation should, strictly speaking, not be on our books.
But life isn’t black and white. There are fifty shades to our industry reality and therefore you need to be sensible in applying portfolio management rules.
Alistair Mokoena (@AlistairMokoena) is a Unilever-trained Chartered Marketer with lots of blue-chip marketing experience who is currently MD of FCB Johannesburg. One of his favourite pastimes is driving around in the bush, photographing wild animals. Alistair contributes the monthly “The Switch” column to MarkLives.com.
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