Marketing Professional Services. How Can You Measure What Works?

1. Introduction
In recent years there has been a dramatic increase in money spent on professional services marketing. In this article Dr Tom Kennie and Chris Ward of the Ranmore Consulting Group, examine the measurement of professional services marketing in order to ascertain its effectiveness.

According to recent press reports;

Ernst & Young entertained over 9,000 people last year at the Monet exhibition in London,
Andersen Consulting spent £27 million on a television advertising campaign, and on average
Law firms spend £2,900 and accounting firms £2,050/fee earner on marketing last year.

Is this time and money well spent? To answer that question presumes that we are currently measuring the effectiveness of our investment in marketing activities, otherwise how can success be judged. In this paper we consider the current approaches to the measurement of marketing activities in professional services (section 2), some questions Managing Partners might wish to ask of their Marketing teams (section 3), some of the pros and cons of the most commonly used measurement techniques (section 4), before concluding in section 5.

2. Typical Reactions to Measuring Marketing Effectiveness

Reactions to the issue of whether, and if so how, marketing effectiveness can be measured varies considerably. Figure 1 below summarises four possible reactions.

Figure 1

The least sophisticated view is expressed by the 'Trust me - I know what I'm doing' type - often exhibited by those who have rarely (if ever) been asked to justify their marketing activities. They view all of this strategy and measurement stuff with a very high level of disdain. Although an increasingly rare breed they can, amazingly, still be sighted (e.g. on a clear day in the summer months on the centre court at Wimbledon!)

Next in line is the 'Trust me - I'm a professional marketeer' type. Often imported from the world of marketing Fast Moving Consumer Goods (FMCG) they find the world of professional services marketing a little challenging. First, they often have little real understanding of what these professionals actually do - and despite a great desire to be involved in 'strategy' they often find themselves excluded from the corridors where such discussions take place (although they often talk as if they are personally responsible for creating the 'strategy'). Measurement is not their strong point, feeling much more at home discussing the finer points of the 'brand values' of the firm and its new mission statement.

A third reaction to the challenge involves a blind faith in the benefits of 'benchmarking'. 'If it can be benchmarked we'll benchmark it' is the clarion call of this group. Of course effective benchmarking comparisons are useful, if not essential in today's competitive market place. However, lots of measurement with no connection to the overall strategic direction you are, or wish to progress in, can do more harm than good. Paralysis by analysis occurs. Overwhelmed by data the benefits become lost. This reaction is increasingly more common in the FMCG world and, thankfully, rare (at present) in the professional services sector.

A forth reaction, and one which is beginning to emerge in the professional services sector is a recognition that effective measurement processes can help drive behaviour change. 'What gets measured gets done' and 'what gets measured and rewarded gets done even more', particularly when the measures are directly related to the strategy for your firm. This new breed of professional services marketers combines the capacity to understand and influence the strategic direction of the firm through the use of effective measurement systems. They are also more likely to be more cautious about marketing expenditure - they are more likely to live by the axiom 'if you can't measure it - don't do it'. Like the third category they are less common in the professional service marketplace (at present) - but increasingly required. The question to be asked might be whether today's breed of professional services marketers can embrace the opportunities of this approach?

3. Some Questions for Managing Partners to Ask Marketing Directors

So how can you assess whether your marketing function is aware of evaluating itself and its expenditure? How can you determine where your team currently sit in relation to the four types characterised in the figure cited previously?

One option might be to pose some, or all, of the following questions to your marketing team.

Who are our clients? (start with the easy questions first!)
How has our income and profitability from our top (say) 10% clients changed over the past 3 years?
What % of our income/profit over the past (say) 12 months is from
- existing clients?
- new clients?
- existing services?
- new services?
What are our key clients buying?
What services are increasing/decreasing in importance?
Who is buying our services?
How has our web of relationships with our key clients been changing over the past 3 years?
What sectors/prospects should we be targeting? Why?
What motivates our clients to buy from us? How do our clients select between suppliers of professional services?
What are the key criteria?
How important is each?
Which are increasing/decreasing in importance?
How does the weighting differ by service type?
How do we currently perform on these criteria?
How do our competitors perform on each criterion?
Why are we winning/losing business?
Who are we winning business from?
Losing business to - and why?
Are we measuring the right things?
Do we have client retention ratios?
Do we have client satisfaction data? (how has the 'very satisfied' category been changing?)
Do we conduct an annual valuation of our key clients?
- Total value/profitability
- Ratio of recurrent/new business
- Intellectual capital index (what time/money have we invested in intellectual capital for this client?)
Do we set business development time budgets for partners?
When did we last review what this time is used for?
Do we set and monitor the time spent by each partners team on business development activities with key clients? particularly in developing critical client relationships?

4. Measuring Marketing Effectiveness - The Options

Measuring the effectiveness of marketing activities is not a simple task. Too little data and the exercise is meaningless, too much and as mentioned before your can lose sight of the overall objective. So what are the options?

4.1. Benchmarking

Despite my earlier comments about benchmarking, when used effectively it can be an extremely useful means of getting the measurement issue on the agenda for the top team in the practice. Professionals, of all type, are highly rational beings. Much of their life revolves around the use of 'evidence', 'data', 'precedents', etc. To engage them in changing their behaviour (e.g. away from relying exclusively on 'informal means of obtaining feedback from clients to conducting more formal market research) requires evidence. For example, according to one recent benchmarking study apparently only 36% of law firms measure client satisfaction for their major clients and only 4% of the marketing budget of law firms is spent on research activities. Data of this type, particularly cross professional data, can be a valuable starting point for determining what type of internal benchmarking data it might be worth gathering, and how you compare with other firms in similar, and related disciplines.

However, it is dangerous to rely exclusively on benchmarking. Unless the data is being used as part of the overall business planning cycle, unless some effort is made to try and understand why the results vary and unless it is used as a learning process (not as a big-stick) in order to set targets for improvement (with rewards for achieving them), it is unlikely to lead to major changes in performance.

The use of benchmarking can also be helpful in identifying some measures of marketing effectiveness which can be monitored and reported on over time. Often the very fact that the marketing function is beginning to measure, albeit crudely, how effective various activities are in terms of performance, can send signals to the partnership that levels of accountability are being enhanced.

Some possible measures which might be worth considering as part of a process of internal benchmarking are detailed in figure 2.

Figure 2

4.2. The Balanced Scorecard

One of the more commonly used measurement systems in use in the corporate world (and becoming more common in professional services) is that of 'The Balanced Scorecard'. Devised by two Harvard accounting professors (Kaplan and Norton) it offers a simple framework for creating an integrated series of measures to help link the strategy to a series of tangible objectives. Figure 3 illustrates one translation of the process into the language of the professional service sector.

Figure 3

In essence, the process of using the balanced scorecard involves establishing a series of linked measures which identify the links between activities in the four areas of people, marketing, systems/processes and finance and how these are aligned with the firms overall strategy. So, for example, a firm with a strategic objective of dominating the volume personal injury market might be expected to have a strong weighting in the process/systems element of the balanced scorecard. From a marketing measurement viewpoint it can also ensure that the marketing/business development agenda is integrated and aligned with the finance, quality and HR plans for the firm.

On the downside, whilst the balanced scorecard concept has considerable value, particularly in relation to business and marketing planning, to be really influential it needs to be linked to the firm's remuneration policy. A further limitation is the need for the process to identify and map the causal links between various activities.

4.3. IT Based Modeling

One option which tries to overcome the limitations of the Balanced Scorecard is the use of IT based modelling. Recently, within Ranmore and as part of our work on creating business simulations we have been working on the development of a computer based model of marketing effectiveness.

Figure 4 - part of PROFSIM - models the interaction between four variables which Impact of business success.

Figure 4

The simulation models using Microsoft EXCEL, the interaction between the time spent on marketing activities, the marketing resources available in the firm, the skills of the practitioners in business development and the expenditure on marketing tactics (advertising, hospitality, seminars, etc.). Various scenarios can be tested and the impact of these on the financial success of the firm can be tested using the model.

5. Conclusions

The level of expenditure involved in the marketing of professional services is a major investment for any professional services firm. No longer can 'blind faith' be an acceptable basis on which to make such investments. Conversely investing in costly and overly complex measurement systems is not the solution. Rather, firms need to identify some key measures which are relevant to their needs and which can provide regular feedback on how effective various marketing activities are in practice. For some, the potential of computer based modelling may be worthy of further consideration.

Measurement has its place but it is also wise to remind ourselves of Charles Handy's words of caution on this theme (quoted from the Empty Raincoat, 1994). 'The first step is to measure whatever can be easily measured - this is OK as far as it goes. The second step is to disregard that which can't be easily measured or give it an arbitrary measure - this is artificial and misleading. The third step is to presume that what can't be measured easily isn't really important - this is blindness. The final step is to say that what can't be easily measured really doesn't exist - this is suicide'

Dr Tom Kennie, MBA is a Director of the Ranmore Consulting Group. He is also a part-time Professor of Practice Management at Sheffield Hallam University. His consulting and management development activities involve working with a range of law firms and other professional service firms in the property and management consultancy sectors.

Chris Ward, MBA is also a Director of the Ranmore Consulting Group. He has over 15 years experience of working with law firms on a wide range of law firm management issues. He has a particular interest in financial management and has developed a number of computer based tools to help practitioners understand practice finance. Chris has a background in business management and has also been responsible for training and development activities for a major firm of chartered accountants.

For further information contact;
T: 07050 351649
E:tkennie@ranmore.co.uk
URL:www.ranmore.co.uk