The 60:40 rule for growth

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Paul Bainsfair, the Director General of the Institute of Practitioners in Advertising came on the show recently to discuss his organisation’s latest initiative for advertising agencies - the 60:40 rule.

Put simply, it is a way of measuring, calibrating and forecasting spend and effort in advertising budgets. the IPA’s position is that there are two types of advertising; brand and activation.

Brand is the long-term positioning and awareness-building, while the activation advertising is the calls to action, whether it’s a sale, a promotion or an offer. There are so many opportunities for activation advertising that many companies are ignoring the huge benefits of brand advertising. The IPA recommends that as a rule, companies spend 60% effort and budget on activation and 40% on brand - the activation part being the most budget and effort-intensive.

The 60:40 rule can also be applied to the world of new business in agencies.

In the world of inbound growth opportunities, there are clients you already have – your existing network, where you get your referrals and recommendations - this falls under the category of Business Development. And there are clients you don’t have but you want – your cold prospects, which falls under the category of New Business.

As a creative agency, if you invest all of your effort into generating revenue from your existing client base, while the income is good, it limits the amount of control you have over when and where it happens and your growth direction and rate.

Conversely, if you invest all of your time and effort in chasing new bits of business, you’ll be spending your budget chasing every pitch you can find, without a thought for the type of work it represents, or how well you can execute; it just becomes a number.

What you need is a sliding scale of effort.

When there’s lots of work coming in from your network, keep some of your powder dry for new business. You have no idea when something like a pandemic or a recession might cause your clients to flinch, so it’s always handy to have three or four new potential bits of business standing by.

This way, when times aren’t so good, increasing the effort you put into new business isn’t such a huge task because you’re already doing it; you just need to do more.

The 60:40 rule isn’t a fixed ratio but it’s a handy title for a process that every company, specifically every creative, PR, advertising and marketing agency needs to observe.

What can you do?

Always make sure that you keep a regular cold new business strategy working in the background - an hour or two per week, to run alongside your business development work.

Don’t just take my word for it!

There are many ways that we can help your agency, The Advertist is our flagship new business platform serving the PR, Advertising and marketing agency sector.

The Advertist is supported by our creative agency new business podcast – Fuel

If you would like to find out more about how I or my team can help you grow your agency using reliable, measurable and innovative outreach methods, then please email us.