Close-up: Live Issue - Agencies turn to cold-calling companies for new business

But are they a valid way to start a relationship with a client?

In the client world, brand owners often employ "lead-generation agencies" to gather intelligence on potential customers.

Now, with marketing budgets showing some signs of growth, ad agencies are increasingly turning to "cold callers" themselves to help drive new business. But for a business where people and relationships really matter, does this type of cold-calling approach pay dividends?

At the smaller end of the spectrum, it offers some obvious cost benefits for start-up agencies looking to build a client base without incurring the expense of a permanent new-business department.

Lead-generation agencies tend to be employed on a retained, fee basis and receive additional remuneration for each meeting they set up, which is considerably cheaper than funding a dedicated full-time new-business team.

But bigger agencies are increasingly following suit. Saatchi & Saatchi, currently a healthy 11th in the new-business league, retains a lead-generation agency. It chooses not to dedicate a full-time person to the job of cold-calling potential clients. Instead, the agency began using an outfit called NB earlier this year.

But there are some very real pitfalls. The agency minnow Vallance Carruthers Coleman Priest does not have a designated new-business department. It recently decided to employ a lead-generation company on a three-month trial basis.

The trial was not a success and VCCP has returned to its former way of generating new business, with the partners once again heading the push for new accounts.

Charles Vallance, a partner at VCCP, explains: "The nature of the contacts we ended up speaking to was not the same as if we had done it ourselves. The (lead-generation) agency certainly got us in front of people, but they tended to be smaller clients with more ad hoc requirements, or a marketing manager with spare time on his hands. It meant that often it was not a high-quality opportunity."

Observers also argue that clients are increasingly knowledgeable about advertising agencies, which renders cold-calling superfluous. And with time being such a valuable commodity, clients are more likely to arrange credentials meetings with agencies only after careful consideration.

While users say that lead-generation agencies do try to understand the business of the agency, it is often not a bespoke service. Anecdotal evidence suggests that many lead-generators do not tailor agency credentials with the precision and knowledge that some clients have come to expect.

And some lead-generation callers have been known to employ deception in their relentless quest for meetings. One client recollects being approached by a caller claiming to be a new-business director. But when questioned further, specifically on the agency's recently appointed creative director, the caller faltered, obviously oblivious to the details of the agency he was representing.

Suki Thompson, a managing partner of the consultancy The Haystack Group, believes there is a danger that the use of lead-generation companies can exacerbate the sometimes fraught relationship between agency new-business departments and marketing directors.

"Clients can see straight through the lead-generation callers," she says. "Some of them have no idea about the advertising agencies they are representing. Our research has revealed that clients already have a low opinion of new- business directors, and it certainly isn't helped by this."

Philip Gladman, the UK head of innovation at Diageo, is also not a fan of lead-generation agencies.

In the past ten years, he claims never to have followed up one of their calls when deciding a pitchlist. He says: "I know who I want to work with in this world and I will go and do that. The people who rely on cold-calling do so for a reason."

With so little difference between the big advertising agencies, establishing a strong upfront relationship with clients is key to getting on to and, more importantly, winning pitches. It seems unlikely that this is going to happen through what is essentially a glamorised telesales function.

A call to the right person at the right time might yield an invaluable opportunity, but it's not the best basis for a long-term new-business strategy, as Peter Cowie, the new-business director at J. Walter Thompson, concludes: "I would not want anyone else representing our company who cannot know exactly what makes us tick. How can someone from a lead-generation agency really be able to have a fruitful conversation with a prospective client?

"For an agency such as JWT, it would only reduce our power and our brand."