Subscribe Did a colleague forward this newsletter? Sign up to receive your own copy. News Webinar: Increasing Marketing Effectiveness at Professional Firms Join marketing experts Suzanne Lowe and Larry Bodine as they share and analyze the results of their recent, first-ever study that focused exclusively on professional services marketing metrics. When: July 20; 1PM - 2PM EST Registration and details IQPC Workshop, co-presenting with Larry Bodine: Proving ROI on Marketing by Measuring Marketing Effectiveness. September 26, New York City. Event brochure. Branding: Let’s not get fooled (again)!, (PDF) co-authored by Suzanne Lowe and Larry Bodine for The Marketer, June 2006 Measuring ROI for Marketing Efforts, by Suzanne Lowe and Larry Bodine, Accounting and Financial Planning for Law Firms, June 2006 Advice for Firms in Need of a Better Way to Measure Their ROI (PDF), IOMA Law Office Management and Adminstration Report. Versions of this article also appeared in IOMA's Contractor's Business Management Report and Design Principal's Report, June 2006. (© IOMA) New from the Expertise Marketplace Blog "At what cost?" Moment-of-Truth Decisions. What does it “really cost” us when we make certain marketplace decisions? Clients in Control. Professional firms need to shift their marketing programs to embrace the very real possibilities of clients controlling their message. To Tell You the Truth. We all know how difficult it can be to pull the trigger on telling the truth, especially when there is money at stake. Marketing ROI, Getting Started. Do's and Don'ts for starting a measurement program Listen to me - three blog posts about measuring a firm's client-listening initiatives Part 1- listening metrics Part 2 - outcomes Part 3 - measuring client listening See all the posts at the Expertise Marketplace blog Subscribe to the blog's RSS feed for regular updates. (Need RSS help?) Recent Issues Targeting and Segmentation in Professional Service Firms Measuring Your Top Marketing Strategies, May 2006 Five Goals for CMOs of Professional Service Firms April 2006 You can order Marketplace Masters from Barnes & Noble, Amazon, your favorite online bookseller, or CEO-READ.

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Singing the Cross-Selling Blues

This month’s issue explores professional service firms’ (PSFs) approaches to cross selling, otherwise known as “increasing our firm’s share of our clients’ wallet.”

We’ll examine our research evidence that PSFs give cross-selling short-shrift even though it produces positive results, and we’ll take a look at examples of how cross-selling is treated as a tactical activity instead of the strategic initiative that it should be.

We’ll also look at some of Michael Porter’s thinking about how professional firms can improve their results from cross-selling by investing in their firm’s “value proposition” and begin to more actively manage their service portfolios.

We’ll also offer perspectives from three senior marketers about how their firms are working to make “increasing the firm’s share of a client’s wallet” a more valuable activity for everyone involved!

Suzanne Lowe
Author, Marketplace Masters: How Professional Service Firms Compete to Win
President, Expertise Marketing, LLC

The State of Cross-Selling in Professional Service Firms

Cross selling is a “high results” practice, and PSFs know it’s important. They still give it short shrift.

What professional service firm isn’t trying to pursue revenue growth? No matter what sector your firm represents, we call this “cross-selling,” or “building a book of business,” or (my favorite) “increasing a firm’s ‘share of the client’s wallet.’” First your company must acquire that client’s engagement or assignment, then retain their business, and then increase your share of that client’s wallet.

Sounds like a simple progression of steps, right? Yet growing a PSF’s book of business with clients is challenging and complex. Of course there are the obvious complexities inherent in the way most professional service firms are organized (a matrix of service lines, geographies, industry concentrations or practices). There’s the inevitable complication that people are the product.

In addition, it seems like every day, clients put up new cross-selling hurdles:

• “Our new parent company won’t allow us to buy too many services from the same vendor.”
  
• “From now on, all our consulting* projects have to be screened by our new purchasing department” (*accounting, engineering, executive search, law, etc.).
  
• Now that we’ve merged with Company XYZ, we have to use their service providers.”

Despite these and other “share of wallet” obstacles, my 2006 “Increasing Marketing Effectiveness” study (conducted with Larry Bodine) found that PSFs say they are very committed to cross-selling their services to clients. They say their efforts are paying off, too. Out of 30 marketing and business development initiatives, “programs to increase the firm’s share of a client’s wallet” was ranked 4th highest as a “best results” initiative. Certainly this fits with well-know business adages: “your best client is your current client,” or “it costs less to grow business with a current client than it does to find a new one.”

But if PSFs get such great results from their cross-selling endeavors, and if it’s such a generally accepted good business practice, why do PSFs still give cross-selling short shrift?

We found quantitative evidence of this disconnect in our study. When ranked as one of a professional service firm’s five main marketing and business development goals, “increasing our share of a client’s wallet” ranks dead last, by a large percentage, as the most important goal.

Anecdotal evidence about this disconnect is also abundant. You don’t have to scratch very hard below the surface to hear horror stories from senior marketers about the panoply of cross-selling barriers at their firms:

• Cultures of distrust: Rainmakers protect their client lists jealously, so that cross-selling can’t be managed seamlessly.
  
  
• Too many or too few gatekeepers: In the “too many” case, PSFs try to assign client relationship managers to too many levels of the client organization, or separately by service line, project or geography. In the “too few” scenario, a client manager becomes a bottleneck. Both result in little opportunity to grow the company’s share of the client’s wallet.
  
  
• Rewards - wrongly prioritized, too few or lacking: Most PSFs reward individual rainmaking with new and current clients, and under-reward cross-selling. Roger Brossy, president of Los Angeles-based executive compensation firm Semler Brossy, says, “If firms employ the ‘expert model,’ where client managers grow up into their positions via the ‘stovepipe’ of their expertise, the bias to sell within the expertise will win over the bias to broaden a relationship with cross-sold services. This is not necessarily the fault of measurement or pay systems. The culprit is inside an expert's head, where comfort and satisfaction comes from winning with one’s expertise. In firms where the client managers are generalists who have succeeded so far via their relationship management and consulting process skills, the main job is to ensure that measurement and pay systems don't get in the way. For example, micro P&Ls around service offerings or geographies may be great for creating focus and accountability but they thwart a natural inclination to serve clients with the most valuable possible offering.”
  
  
• Unsupportive technologies: Client relationship management, practice management or accounting systems are not well-integrated, making it impossible to easily view the revenue activity, services “consumed” by clients, or emerging buying patterns.

Most PSFs treat cross-selling as a tactical, internally focused and service-static activity

Part of the reason why I’m singing the cross-selling blues is because most PSFs view it (and measure it) from a tactical, internally focused perspective and as if the services being cross-sold are static, inert entities. To see what I mean, take a look at the following verbatim quotes from our study about how PSFs look at increasing their share of wallet with clients.

• “Amount of billable annual revenue per client. Also, the number of projects conducted per year per client.”
  
  
• “Frequent pipeline analysis; client billings analysis - both at a firmwide level and an individual partner level. . . .”
  
  
• “We measure on the basis of client sales in the absolute and by function within the client, as well as by average size of engagement vs. prior years.”
  
  
• “By comparing revenue #s year to year.”
  “When every matter starts, we note where the client has come from - if they are an existing client but last used us in a different capacity, this is noted and discussed with management. . . . Management may not keep appropriate records or act on the information.”
  
  
• “Count how many other of our service offerings the client purchases after we've made the first sale. . . .”

These are reasonable early steps for PSFs to take in their quest to grow their revenues with clients. But these share-of wallet reviews appear to be conducted in a one-way fashion, seemingly without regard to the clients at all. There doesn’t appear to be strategic thinking about how to grow the firm’s business. (Uncharitably, it’s as if PSFs think clients are inert vacuum tubes that will suck up anything that gets pushed near them.)

PSFs must become more strategic in their approaches to cross selling

Professional service marketers, business developers and marketing-savvy fee-earners know that clients’ needs and requirements are continuously evolving. They know there’s something stale about trying to grow their business by tactically pushing a menu of mature services of, say, accounting, law, or architecture, onto their discerning buyers.

Of course, many PSFs are working to improve their sales blocking-and-tackling basics first. As they do so, they will make efforts to increase their share of a client’s wallet from far more important perspectives: the underpinnings of strategy, the concept of a value proposition for clients, and the idea that they must manage their services as portfolios.

As Harvard Business School professor Michael Porter has said in a variety of his prolific writings* over the last two decades (I’ve paraphrased below):

• Real growth is based on creating economic value for clients.
  
  
• A good strategy requires a unique value proposition.
  
  
• Services should be considered as part of a value chain, containing some lower margin (commoditized) services and some higher margin services where clients are willing to pay higher fees for more value-added work. This value chain is unique to each business.
  
  
• Clients buy not only the service offering itself, but also the support activities that deliver that service. These elements are the building blocks of a value chain.

Using Porter’s thinking as a springboard toward growing more effectively, PSFs must take a fresh look at “increasing the firm’s share of the client’s wallet.” They must approach it with a commitment to create or improve their service development (innovation) or experience-development processes, and a rejection of the temptation to simply add a set of me-too competitor services.

* Competitive Strategy (The Free Press, 1980); Competitive Advantage (The Free Press, 1985); What is Strategy? (Harvard Business Review, Nov/Dec 1996);

	TalkBack - Increasing the strategic nature of cross selling at professional firms This month we asked PSF professionals their thoughts on cross-selling. Victor Dominguez - Managing Director Corporate Communications, CB Richard Ellis: “CB Richard Ellis offers the broadest scope of commercial real estate services, reaching across 58 countries while serving every classification of owners, occupiers and investors. The position we enjoy today could not have occurred without the pivotal evolution from a transaction house to a trusted advisor. That simply means we put the client’s interest first. By progressively inserting the voice of our customers into our strategic planning, we are led to new markets while developing new service offerings. Therefore cross-selling is not a revenue mining strategy; it’s our response from listening to our clients. Our challenge is to make sure each professional shares the same values, ethics, and vision to serve the client as an integrated unit. This kind of culture change won’t happen without leadership and relentless internal communications. Technology certainly helps the process (e.g., CRM, intranet war rooms). So does our investment in team building and mentoring that leads to the optimal collaborative environment.” Susan Lanfray – Director of Marketing, New York City accounting firm ERE LLP: “We try to make cross-selling logical. We know that when we can benefit our clients, our firm will then benefit. Our marketing team meets regularly with the partners to discuss our services as they relate to economic and marketplace trends and competitive intelligence we have gathered. Presenting summary information in charts and graphs helps partners visualize how the firm is doing at providing clients with the right services. We combine this with an unscientific, but essential, approach in which partners meet with clients periodically just to talk about what’s going on in their businesses and how their needs may be shifting. When many clients voice the same need—and it matches what we see developing in the marketplace (internal controls, for example)—we develop and offer them the new service.” Brad Thurman, Principal, Tulsa-based Wallace Engineering: “Our primary measure has been increasing revenue with a given client. The main element is that we are interested in developing the relationship with the client. With some clients, the process involves increasing our share of their work with the services we currently provide. With others, this process involves developing additional services that we can provide to them. We discovered some clients have an interest in one of our newer services -- infrared camera surveys of walls, for example. There aren’t many firms in the country that offer this service. Because we started doing this with some new clients, we have offered it to other existing clients. Now we’re marketing it separately as well.”

Your feedback is important to us. Please contact us with your comments and questions.

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