Expertise Marketplace - Professional Service Firm Marketing Blog

Trust begins with you and me

The Guerrilla Consulting blog just posted a link to Edelman's 2006 annual "Trust Barometer."  Here's a slightly altered version of the post I made in reply:

The findings verify much of what many of us already understand ("offer quality services, attend to clients' needs, price fairly, etc.").

But there's a nugget buried about 3/4 of the way through the report that should be of particular interest to professional service marketers. It's the graph about change in the relative importance in how people are influenced in their trust for a company: traditional media is becoming less influential than comments from "people like you and me."

It appears to me that professional service marketers are still overly focused on getting their firms' names favorably covered in the media; the majority have yet to clear their heads for some bandwidth about the tremendous importance of managing their messages in more informal networking situations.

I'm not talking here about PSFs beginning to utilize new "communication vehicles" like blogging and podcasting (which is appropriate, nevertheless). But I'd wager that PSFs' rush to embrace of these "new media" still leaves the question of TRUST too far off their radar screen.  Kudos to the folks at Edelman for finding a way to remind us that trust starts with the individual.

Can Loyalty Exist with Innovation?

Fast Company just posted on its blog the following quote from an article written by Susan Lyne, the CEO of Martha Stewart Living Omnimedia: "If people get what they expect from a brand -- and more -- they're going to stick with it." 

This makes sense as it relates to fairly repeatable purchases or rarely-changed products.  But some professional service firms are wondering about the delicate balance between loyalty and innovation.  No two professional services are ever exactly the same, even those delivered by the same individual at the same firm; the client's needs are a continuously evolving target; and needless to say, professional service firms have yet to crack the code on formal innovation.  Lyne's very simple sounding remark succinctly articulates the challenge for professional service firms: growing their clients' loyalty, given a continuous flux of intangibles.   

Has any one heard about a professional firm that has successfully managed the juxtaposition of loyalty and innovation?   

Where are YOUR clients going

Earlier this week, I received a promotional e-mail from BTI Consulting about its new research on "How [Law Firm] Clients Hire, Fire and Spend."  The report summary outlines some of the findings: 53.7% of clients ousted their primary law firm; Only 30.7% of clients recommend their primary law firm; 64.3% of clients plan to hire a new law firm.

These are daunting numbers, but perhaps they will begin to shed light for law firms (and other professional service sectors) on one of the key findings that Larry Bodine and I recently found in our own study, "Increasing Marketing Effectiveness at Professional Firms."   

• Professional firms that said they were extremely effective used three particular client-focused metrics in combination with each other.  These three are:  (a) Growing client revenue:  “Did you grow revenue with your client or not?” (b) Moving the phases of a sale through a pipeline:  “Did you close the sale or not?” and (c) Listening to the client:  “Did you listen to your client or not?”

Let's face it: if the law firms in BTI's study were really doing a good job of measuring their "listening-to-the-client" initiatives, their percentage of retaining those clients, and growing their book of business with them, would be higher.  We found that it's not enough for firms to undertake simple client satisfaction surveys.  Rather, our findings reveal that successful professional firms take deliberate steps to improve their client satisfaction information-gathering approaches! 

Ask yourself:  "When is the last time we asked our clients whether our satisfaction surveys (feedback interviews, etc.) are really getting at their most critical issues?   When is the last time we revised our client research approaches to go deeper than shallow client satisfaction questions, or sytematically analyzed the factors that REALLY grow our client relationships?"   

Check out some fascinating new thinking on the subject of researching client loyalty in Fred Reichheld's new book, "The Ultimate Question: Driving Good Profits and True Growth."  Our research findings and BTI's results offer additional perspectives on aspects of Reichheld's research: that one simple question -- "Would you recommend us to a friend?" -- is the one true measure of a firm's performance in the eyes of its clients. 

It may not matter where professional service marketers get the point (our study, BTI's work, or Fred Reicheld's fabulous new book), but get it they must:  becoming more competitively effective and attaining true marketplace growth will inevitably require professional service firms to think differently about how to measure and deepen their clients' loyalty. 

Defining, Managing and Measuring Loyalty

Professional service firms have largely quenched their thirst on Client Relationship Management (CRM). Now they appear ready to turn to a more nuanced and complex arena: client loyalty.

Professional service firms’ initial approach to the concept of client loyalty can seem simplistic. Inevitably, though, they spawn others that lead to the heart of strategic opportunity and – hopefully -- a truer understanding of what “value” is really all about.

Defining loyalty. Client loyalty used to be thought of as (and in some cases still is) “generating the highest revenues.” I admit I’ve been somewhat myopic about the idea of “loyalty” myself, and have been pleasantly surprised to see my horizons expanded. Only time will tell if professional service firms will allow themselves to recognize that other client behaviors may be better indicators of true loyalty than "they give us a lot of money."

Managing loyalty. Once professional service firms can meaningfully define loyalty, they’ll move swiftly to try to increase their clients’ loyalty, and to gain and build the loyalty of other clients.  But first they'll have to wade through some pretty trendy-sounding concepts: buzz marketing, Word-of-Mouth Marketing, creating customer evangelists. The more difficult initiatives, but probably more rewarding, will be aligning client loyalty programs with well-established client satisfaction initiatives, and even employee and alumni relations programs.  I hope professional service firms will have the patience to see this through. 

Measuring loyalty. This will be the toughest professional services nut to crack. In my recent business readings, the topic of measuring clients’ value is nearly inescapable. Management and marketing consultants appear to be working overtime to develop new acronyms: Customer Lifetime Value (CLV); Customer Equity; Return on Customer / client (ROC).  For example, ROC is described by author Don Peppers in the Financial Times on August 8th as “a firm’s current-period cash flow from its customers, plus any changes in the underlying customer equity, divided by the total customer equity at the beginning of thee period.” Whew! Peppers and his Return on Customer co-author Martha Rogers suggest that ROC is as important a measure of firm-performance as ROI. I can just see it now: professional service firms will be stumped by the rather fuzzy notion of “customer equity”. Is it the effort of analyzing the likelihood that each client will make repeat purchases? Or that they will buy services across multiple lines of business? Even if these metrics are well used in the consumer products or manufacturing sectors, clearly, they will have to be retooled for the professional arena. And measurement has always been a challenge for professional services firms.

In search of a return on customers

In late 2005 the Financial TImes included the interview: "In search of a return on customers," (registration required) by Simon London.  London interviews Return on Customer co-author Don Peppers (co-author of The One to One Future) about his new book, whose central message is that "any decline in the lifetime value of customers costs me money today." Peppers stokes the debate about the concept of "measuring customer equity," and calls on businesses to embrace more non-financial business performance metrics.