Recent Survey Results PSF Marketing/Business Development Integration – Does it Benefit Clients? See the results of our research. Are Marketing and Business Development Functions Stuck in a Rut? See the results of our research. How well do Marketing and Business Development work with other operations, like Finance, IT, HR, Legal and more? See the results of our research. Do PSF practitioners WANT to market and sell? See the results of our research.   News Ken Lizotte's new book prominently features Suzanne Lowe's ideas on successful business practices for professional service firms: The Expert's Edge: Become the Go-To Authority People Turn to Every Time (McGraw Hill 2008)   The View from the Other Side: B2B Marketing Practices from Other Industries, ITSMA, June 2008. Adapting to a Downturn, Suzanne Lowe and Ford Harding, The Council of Public Relations Firms. May 2008. Read a summary of Suzanne Lowe's upcoming book The Integration Imperative™. New from the Expertise Marketplace™ Blog STILL the only verified link between marketing measurement and effectiveness Taking baby steps toward better serving clients In praise of building marketing and selling skills Does integrating professional services Marketing and Biz Dev Benefit CLIENTS? RainToday's Pricing Research See all the posts at the Expertise Marketplace blog Subscribe to the blog's RSS feed for regular updates. (Need RSS help?) Subscribe Did a colleague forward this newsletter? Sign up to receive your own copy. "What a great newsletter — about the only one I've ever found useful in the marketing space." — Marketing and Communications Director, New York investment firm Recent Issues Mastering Professional Service Firm Account Management, June 2008 Five Goals for CMOs, May 2008 Methods of Measuring Marketing ROI, April 2008 You can order Marketplace Masters from Barnes & Noble, Amazon, your favorite online bookseller, or CEO-READ.

The Marketplace Master™ is a monthly email publication on professional service marketing from Expertise Marketing, LLC.

About this month's issue

As I spend the next few months focusing my time and attention on researching and writing my upcoming book I thought I'd share some of the most popular Marketplace Master™ articles.

This newsletter article, originally published in July 2006, 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.

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

P.S. Is your firm employing unique marketing and business development strategies or tactics? Are you marketing your firm differently? Let us know if you would like to be featured in a future issue.

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);

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

Call for interview subjects: Do you know of a professional service firm that is taking steps to integrate its marketing and business development functions and would be willing to be interviewed for Suzanne’s upcoming book, The Integration Imperative™? If so, please direct them to our page on The Integration Imperative™ for more information.

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