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From the Publisher"...for inspiration and insight, read Marketing the Professional Services Firm..." (The Entrepreneur, Vol 33 (9) September 2005)
"...An invaluable read..." (The Marketer (CIM), Feb 06)
Professional services are estimated to be worth up to $700 billion worldwide, but as the market matures there is an urgent need for new marketing thinking for global players or small businesses alike. This book applies the core principles of strategic marketing to professional services for the first time, in an approach that is at once accessible and compelling. With case studies from a range of companies including J. Walter Thompson, market research companies, the 'big four' accounting firms, Headhunters, Interbrand and large US legal firms, it is intended to become the definitive book for effective strategic marketing in professional services.
"...An invaluable read..." (The Marketer (CIM), Feb 06)
Strategy sets the direction in which a firm wants to go. The leadership of every firm has to develop a strategy rooted in the realities of the market and communicate it throughout the firm. It can be explicit, formal, intuitive or informal, but, without it, the business could be fatally damaged. Strategy is neither short term nor tactical. It calls for the formulation of a perspective on the market and the firm's position within it, taking into account its size, skills and market environment. This chapter examines a range of possible marketing strategies applicable to different firms, from a sole practitioner through to a boutique up to large international firms.
The value of strategy
Good strategy is a framework of ideas, developed by the leadership, which sets a course that the leadership wants for the firm by creating a common purpose. It involves making decisions about direction, communicating those decisions and allocating the resources to go in that direction. A firm's strategy should become a touchstone for all decisions throughout the organisation.
In fact, all strategic devices and tools, such as mission statements and visions, are aimed at achieving this common understanding. Properly communicated, members of the firm will use it as a reference point when making decisions. Without it, decisions throughout the firm are based on the judgement of local people with a local perspective and information which, while valid, may conflict with the perspective of the total firm. Chaos and lack of results can then follow. It contrasts to tactics, which are short term, action oriented and accomplish limited goals.
All firms, even when no strategy is explicitly developed or communicated, must take a direction. However, if that direction is a rudderless drift, or if it flies in the face of market realities, or if it is not communicated throughout the firm, the health of the business is likely to be damaged. The leadership of the firm has, therefore, a duty of care to create clear, market-conscious, achievable strategic direction.
It is well known that many strategy techniques came originally from the military, where they evolved over a long period of time to help improve decision-making, resource allocation and success. Military history has shown that success in the heat of battle is more likely if there has been prior thought given to likely scenarios. For instance, the Chinese general, Sun Tzu, said in 500 BC (Sun-Tzu et al., 1996): 'In warfare first lay plans which will ensure victory and then lead your army to battle; if you will not begin with stratagem but rely on brute strength alone, victory will no longer be assured.'
A little forward planning, using methods that have been successful elsewhere, reduces risk and increases the likelihood of success. Stunning military successes as diverse as the Roman campaigns against ill-disciplined tribes, Napoleon's conquest of Europe and General Norman Schwarzkopf's 'Operation Desert Storm' in Kuwait, have demonstrated the power of experience and forethought.
If good strategy is effective in military endeavour it is likely to be effective in business. Over time business leaders have adopted and shaped many of the military's strategic techniques in order to improve their chances of success and developed many of their own. If, after thousands of years of bloody combat, mankind has learned that good strategy is more effective than rushing at the other side with sticks, business leaders should surely acknowledge that good business leadership is a little more than 'gut feel' or decisions made on the hoof.
Strategy as a management discipline appears to have been through several evolutionary phases. In the 1970s, for example, it consisted of new management tools (such as the Boston matrix or scenario planning), focusing largely on the corporate strategy of large corporations. By the 1980s strategy was often overseen by large, central strategic planning functions in multinationals running complex strategic models. This was reinforced by the apparent success of Japanese firms and their famed focus upon long-term planning.
By contrast, in the 1990s, the combination of recession, the collapse of the Asian model and a tougher competitive environment, with the perception that business must be more short term, created much more of a feverish, short-term focus. This culminated in some of the excesses of the dot.com boom, when the lack of a proper business model was no barrier to raising large amounts of capital. Since the burst of the dot.com bubble and the associated recession, strategy has become more short term and need driven. In fact, many of the strategy houses report that strategy projects have become a distress purchase, responding to hostile bids or the need for turnaround. The appetite for large, long-term strategic planning and analysis appears to have diminished in many sectors. Strategy, in the sense of longer-term detailed strategic plans, is less valued.
The professional services industry can learn from this experience. Whatever the size and shape of the firm, leaders need to take time to think of the future health of their business and how they go to market. They need to focus on the strategic imperatives relevant at any one time and allocate resources appropriately to chart the next steps of the firm. This should be done in a style and manner geared to the culture of the firm and the judgement of the leadership. It can be elaborate, documented or intuitive. But it should be done.
Marketing specialists would argue that within business strategy are issues related specifically to the market which require marketing tools, judgement and experience. For instance, Nirmalya Kumar of the London Business School (Kumar, 2004) argues that numerous decisions taken by chief executives are, in fact, marketing decisions which influence the direction of the firm. Leaders should therefore aim to adopt market-oriented strategy and planning.
At the very least, leaders should take a perspective on the market and their firm's position within it. Yet this is not as straightforward as it appears. For example, they may wish to base their decisions on client research. However, the clients that are researched, the techniques used to gain insight and the interpretation of results will all affect the quality of the decisions based on this approach. A wrong research approach could reduce the quality of strategic decisions and damage the firm.
This also applies to issues like competitive strategy, opportunity analysis, brand strategy, segmentation of markets and channel strategy. These elements of marketing strategy need to be developed and integrated with the business strategy and are rounded out if experienced specialists are engaged in their formulation. This interrelationship of strategic perspectives is illustrated in Figure 1.1.
Approaches to determining strategy
The development of strategy can be either 'procedural' (where a number of prescribed steps are followed to arrive at a particular point), 'functional' (where it is someone's job to draw up a well-presented and detailed strategic document), or 'extant' (consisting of a pattern of decisions by a business leader which are largely intuitive and often seen in retrospect).
All of these approaches to strategy are seen in the professional services industry. A procedural approach is often present, for example, in large corporate firms with a technology heritage, whereas extant strategy is often seen in smaller, one-partner firms. All have their strengths and weaknesses and none is an ideal approach.
(i) The procedural approach. Recommended by many business schools and followed by many companies, this approach follows a logical process to determine strategy. It comprises a calendar of interrelated planning activities, often driven by a company's need to report results to financial analysts and shareholders.
This approach will often distinguish between different time horizons influenced by the firm's market and investment horizon. There may be a set of 'one-year' operational plans focusing upon short-term goals, in addition to medium-term (three- to five-year) plans where investment is needed. The strategic framework needs to embrace them all. It will often distinguish between corporate planning, strategic market planning and business unit planning (Table 1.1). For instance, IBM has a well-crafted, detailed planning process to which the service business (one of the largest in the world, incorporating several professional services business units) must comply.
(ii) The functional approach. In this approach a function exists which has responsibility for the creation and management of strategy. This may be held by a director of strategy who works closely with the chief executive and may also include an executive responsible for marketing strategy. Such a role will often also include responsibility for research, competitive intelligence, internal reporting and market analysis. Strategic planning is the focus of the role. The unit is expected to manage the planning timetable, execute ad hoc strategic studies and share their analytical perspective in appropriate debates. Some large professional services firms have executives in this role.
(iii) Extant strategy. Determined only by a retrospective view of direction, extant strategy is the direction deduced from decision-taking of, normally, one dominant business leader. The pattern of past decisions reveals the direction of the firm. Staff in such firms can feel that they have no strategy to follow because there aren't well-crafted written documents or clear planning schedules. Nevertheless, experience shows that firms led in this way can be dramatically successful, achieving their strategic intent, particularly if the leader makes the direction clear to the people in the firm.
Marketing strategies for the professional services firm
For the single practitioner
There are several different possible marketing strategies open to the single practitioner. Each depends upon their aspirations and their resultant business strategies.
For instance, their first marketing task is to focus on the launch of the business. This, however modest or grand, is a 'market penetration strategy', penetrating the target market in order to establish the business. A fast, volume penetration might include a memorable start to achieve impact and limited price penetration such as a discount or free trial in the first few months of trading. The single practitioner might also work in association with a network of other independent practitioners (a distribution strategy), in order to feed each other work.
On the other hand, a practitioner wanting to concentrate on low volume, high value projects may aim for a longer-term, soft launch to build up demand and reputation. Both need to be clear about their own offer and the clients they intend to serve. This needs to be precise and clearly thought through. Vague ideas of esoteric management concepts, or a lack of knowledge of who buys the type of service, will put their livelihood at risk.
Tactics associated with the volume approach are likely to include a visible launch. This might comprise an announcement to all possible contacts, followed by an invitation to a 'launch' party. Such an event, perhaps associated with interviews with local press and the trade association, will rest in the memory of the audience and will yield referrals as the latent business reputation grows.
Exponents of a low volume, high value approach, however, must be prepared for a longer haul. They must take the time to build a reputation by speaking at conferences, publishing articles and networking. They must focus on quality of image, quality of execution and quality of client care. Some offer a 'no question, money back' guarantee to clients if dissatisfied. Also, if their target conversion rate is one in three bids, they must be prepared to spend the early months of the business losing more than they win. Bravery and generosity to clients in these early days are important attributes of the high value practitioner.
The marketing strategy of the single practitioner is next focused on initial growth. This again is a market penetration strategy. The practitioner needs to consider marketing objectives such as: target annual revenue, achievable day rate, primary project offer, client penetration, partners to work with and intended visibility. They should also set up, preferably independent, mechanisms to understand how satisfied clients are with the work, their propensity to buy again and the likelihood of them referring the business to others in need. (In the early days this mechanism could be a colleague, relative or friend but it needs to be independent, because people are often reluctant to be honest.) Records should be kept of this feedback so that trends can be examined as the business grows.
Revenue is a derivative of the time the practitioner intends to sell (say 150 days a year) and the day rate achievable (a judgement based on industry average and personal standing). This becomes the pricing strategy of the firm. The target market might be firms or individuals in a geographic area or those interested in either a particular skill or sector expertise. Many small firms grow by obtaining work from one major client, others by a volume of small projects. The practitioner needs to decide where they wish to focus.
Growth may also come from referrals from other firms. The practitioner must therefore decide who in their circle of contacts they wish to cooperate with. Other single practitioners are often willing to refer potential work as a service to their clients when they are seeking a particular skill. The new entrant needs to handle these with care, executing work well and, over time, making referrals back. They must also make no attempt to steal the client. Negative reputation arising from such poor behaviour soon circulates in a pool of small independent providers, damaging the business.
An early decision is how to enhance reputation. The practitioner might join relevant professional associations for networking, they may try to gain press coverage, and they might contribute articles to relevant publications. While the drive for this comes from the practitioners themselves, they should consider using specialists. For instance, a public relations (PR) provider will find it relatively easy to gain placements for articles in relevant magazines (plus writing skills if needed) and speaking spots on conference platforms. They will also find it easier to sell the single practitioner to these communications channels than the practitioner themselves. The practitioner must decide the level of investment in such a resource and the period over which they wish the return to grow.
The 'guru' strategy
Those single practitioners wishing to focus upon margin rather than volume growth should consider a 'guru strategy'. The aim is to build a personal reputation, even fame, which will generate strong demand for an individual's expertise. This is primarily a pricing strategy. The practitioner must generate sufficient demand to create a strong pipeline of high value work. They must never compromise on their day rate. Successfully and carefully done, this strategy yields high returns.
Suppose the industry average day rate of single practitioners in the field is, say, $3000. An allocation of 50 marketing (and administration) days to achieve 150 sold days will achieve annual revenue of $450 000. A successful guru strategy will achieve a day rate which is much higher than industry average. If, for example, the sole practitioner invests in reputation enhancement programmes costing $50 000 a year plus extra administrative support of $50 000 (to allow sold time to remain at 150 days), day rate may be doubled in three years. Revenue of $900 000 less $100 000 enhanced costs yields a healthy payback. Some single practitioners are, at the time of writing, achieving day rates of $10 000 or even $20 000 depending on market and reputation.
Excerpted from Marketing the Professional Services Firm by Laurie Young Excerpted by permission.
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About the Author.
Introduction: Setting the scene.
Part I: STRATEGIC ISSUES.
1. Growth strategies.
2. Gaining market perspective.
3. Client segmentation.
4. Creating and managing a professional services brand.
5. Competitive strategy.
6. Handling international operations and culturaldifferences.
Part II: MAKING MARKETING AND BUSINESS DEVELOPMENTWORK.
7. The organisation and management of marketing in professionalservices firms.
8. Personal business generation.
9. Creating or relaunching services.
10. Communicating with markets.
11. Client service.
12. Marketing and human capital.
Part III: THE MARKETER’S TOOL KIT.
Posted October 8, 2008
As professional services firms become more prevalent, their industry is also becoming more competitive. Professional services firms must understand how to tell the marketplace about their special qualifications and accomplishments. Author Laurie Young¿s textbook includes the information marketers need to do this, but because it is, in fact, a textbook, readers will have to sift through both theory and details to find practical suggestions. Young backs up his sound conceptual ideas with numerous case studies of major companies. getAbstract recommends this book to students and to practitioners looking for a comprehensive understanding of marketing practices in the evolving professional services industry.Was this review helpful? Yes NoThank you for your feedback. Report this reviewThank you, this review has been flagged.