08 Nov The Plague of Overservicing
Most business sectors suffer from overservicing—or working for nothing—but probably not nearly as bad as the public relations profession.
Overservicing is a chronic PR problem, of course, and cost the industry precious revenue. Despite their best intentions PR firms of all sizes fail to push back when clients or prospects try to squeeze more work out of them essentially for no pay. This is dreaded “scope creep,” in which activities not originally budgeted for are requested by the client and executed by the agency.
“There’s almost a guarantee of overservicing among smaller accounts,” said Darryl Salerno, owner of Second Quadrant Solutions and strategic management consultant specializing in PR, who spoke at a recent Counselors Academy forum focusing on overservicing. “But large accounts that are overserviced can be even more damaging because the dollars are larger.”
Fear of losing the client is the fundamental problem when it comes to overservicing and lowballing their rates, Salerno said. “They feel if they don’t cut the price another agency will. It’s ‘keeping down’ with the Joneses.”
PR agency owners and C-level executives need more confidence in the value of their products and services, lest they continue to provide services gratis.
For example, if PR firms overservice a client by 10 percent they essentially are working for nothing after they return from Thanksgiving. And if they overservice by 30 percent they will work for nothing virtually the entire fourth quarter (see image, left). Note that the timing for the 40 percent figure in the chart stems from roughly mid-September. (Source: Darryl Salerno.)
Salerno shared three ways for PR firms to reduce overservicing.
- Have PR executives work at the right level. When a person is promoted she should begin to do work at the higher level and the work she did previously should be handed off to employees who are further down the org chart. With the promotion usually comes a higher salary, which increases costs to the agency. But if she continues to do the same work the agency will also see an increase in overservicing and decrease without an increase in fees, the agency will also see a decrease in profit.
- Change the financial language. For most agency owners, talking about monthly retainers tends to start the conversation with clients about compensation. PR firm owners and C-level execs need to pivot and, instead, start the conversation by speaking about how the relationship would work on an annual basis.“If you start talking about monthly retainers, it locks the client in to a specific, low, dollar amount,” Salerno said. Instead, talk about the objectives of the annual program with an annual budget. Then you can break the annual budget down into monthly increments. The objective is to provide the client with work commensurate with the amount paid over the course of the engagement, not to try and provide the same amount of work each month to match the retainer, Salerno said.
- Eliminate non-value added activities. If PR firms want to get a handle on overservicing, they must cut down on busy work. For example, reduce the number of meetings you typically have for client work. And when you do have meetings, make sure they include essential personnel only. Don’t produce umpteen reports and vanity metrics lists when a less-is-more approach will suffice. “Demonstrate results to the client rather than reporting them ad nauseam,” Salerno said. “For your firm to remain competitive and succeed in the PR industry it is important to run the business profitably. This will provide the resources to attract and retain the best employees and invest appropriately in products and services that will make you more valuable to your clients.”
To see Salerno’s full powerpoint presentation regarding overservicing, please click here.