Biz Tips: Client Retention: What’s Your Agency’s “Sauce Policy”?

Biz Tips: Client Retention: What’s Your Agency’s “Sauce Policy”?

Biz Tip:

Client Retention: What’s Your Agency’s “Sauce Policy”?

Don’t be too stingy. Some policies might help short-term profits… while hurting long-term client retention.

Your agency’s policies send client retention signals—what are your policies “saying” to clients?

  • We’re draconian: “Clients are the enemy” might help your short-term profits, but it’s bad for long-term client retention.
  • We’re a pushover: “The client is always right” is an easy yet financially-dangerous choice.
  • We’re balanced: “We value our clients, but we need change orders when there’s scope creep” helps you balance Warmth & Competence while building partnerships with clients.

It’s important to have client policies—they help you manage expectations while maintaining your agency’s profit margins. But don’t take policies too far—like when fast food restaurants are stingy about sauces and other condiments.

Witness the above sign from a McDonald’s franchise here in Raleigh—about their “SAUCE POLICY” for McNuggets. After 1-2 free sauces, extra sauce packets are $0.29 apiece.

I assume the franchisee’s Sauce Policy came about because some customers abused their access to previously-unlimited sauce. While 29 cents isn’t much, it’s a customer signal—here, a signal that the owner sees customers as the enemy. (Or at least some customers are the enemy.)

It certainly saves them money in the short-term, as this article on QSR restaurant condiment trends suggests. But it sends certain signals on a long-term basis—including negative signals to reasonable customers who were never the intended audience of the policy. This externality can hurt client retention—and thus hurt your Lifetime Customer Value (LCV).

Your agency isn’t a fast food restaurant—but you might have some stupid policies, too. I believe policies are important—but remember, you want to find a balance on Warmth & Competence.

Do a Reality-Check on Your Policies

Want to confirm you’re not sending the wrong client signals with your agency’s policies? I recommend these steps.

1. Create a list of your client-related policies. (You’ll want your team’s help on this.)

2. Pretend you’re a reasonable client. (That is, someone who wants what they want, but that isn’t trying to take advantage of your agency.)

3. Review the policy list to see what seems reasonable vs. unreasonable.

4. Enlist a colleague or two to repeat the process. (We don’t all think the same way… diversity is helpful.)

You might find that some of your policies come across as unfriendly and un-partner-like. You now have a decision to make:

  • Keep the policy as-is.
  • End the policy.
  • Rewrite how you deliver the policy.

Let’s look at how to rewrite the McDonald’s Sauce Policy for a friendlier delivery—and better client retention.

Deliver Client Policies in a Friendlier Way

To avoid annoying good customers, the McDonald’s franchisee could have done something like this instead:

“We’re proud to offer you tasty food at low prices. Some customers have been abusing this by taking 10+ sauces with their Chicken McNuggets. To help us keep prices low, we now include a certain number of sauces with each size of McNuggets. If you’d like more, you can get unlimited additional sauces at $0.29 apiece.”

Of course, you’d need to rewrite that again—to create a simple, quick-read version that fits the small space on the window. For instance:

“To keep prices low for our customers, we now charge for extra McNugget sauces. Your 4- and 6-piece includes one sauce. Your 10-piece includes two sauces. Extra sauces are 29 cents apiece.”

Keep rewriting ’til you get it right—or “right enough.” Investing the extra time now means you won’t get pulled into things [as often] later.

As the agency owner, you can enlist your employees to help you triage client situations—let’s look at how that might work.

Empower Employee Decisions via Swim Lanes

You can use Swim Lanes to empower your employees to make decisions themselves—including when to hand out extra “sauce” at your agency as a “strategically free” client retention choice.

This can take several forms—the easiest might be to create tiers for how much free work an employee can approve. For instance, an SME might have the option of doing an extra hour or two without getting approval. A PM might be able to do 2-5 hours. A director might be able to do 10-15 hours. A VP could approve 20-25 hours. Anything beyond that, you need to be involved as the agency owner.

You’ll need to choose the tiers or ranges that work for your agency—but the goal will ultimately help you prevent two problems:

  • Getting interrupted when something’s too small to involve you.
  • Not getting involved when something’s big enough to involve you.

Remember, this is all about optimizing your Lifetime Client Value—running an agency means balancing short- and long-term needs.

Beware the “Tyranny of One”

Don’t automatically add an agency-wide policy because one client is abusive—I call this reactionary approach the “Tyranny of One.

Instead, look for patterns—where are situations where your current approach isn’t doing the job. Those are cases where it makes sense to create a policy.

When I created my then-agency’s Client Bill of Rights in 2010, my goal was to address a pattern of issues across clients. The document stemmed from a particular unreasonable client—but I went beyond the individual situation to avoid making it a “Tyranny of One” policy. It helped us a lot.

Look for “Unlimited Sauce” Opportunities

When profit margins are tight, every 29 cents counts—but I hope your agency’s profit margins are better than that.

With that in mind, what if you could offer some things on an unlimited basis?

These client retention ideas are ideally things that have either:

  • Zero or minimal fulfillment costs to you, yet are high-value to clients, or
  • Some fulfillment costs but that consistently produce additional profits via upsells or retention.

“Unlimited Sauce” Examples for Agencies

Wondering how to do this at your agency? Here are some ideas:

  • Clients get free access to your monthly webinars on marketing trends—including the live webinars and on-demand recordings. (Benefit to you: You become a key source for client education, and savvier clients appreciate your work.)
  • Retainer clients get free brainstorming sessions on a quarterly—or semi-annual or annual—basis. (Benefit to you: Built-in upsells.)
  • Clients get free access to your library of client training modules. (Benefit to you: Minimal fulfillment cost, fewer expensive “how do I…” questions to your team.)
  • Clients over a certain size get free off-site storage of their editable files. (Benefit to you: Easier for you to make edits for them.)
  • Current and past clients get a [nominal] credit for client referrals. (Benefit to you: More referrals. I like doing a $250 credit to the new client and the referring client.)

I bet you can think of even more ideas—what else would let you offer “unlimited sauce” at your agency?

Question: Which current policies are helping your short-term profits but hurting your long-term client retention?

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