and how marketing fits in.
by bruce marcus
professional services marketing 3.0
we’ve seen accounting and law professionals learn to work as partners with marketers. typical proponents of this new form of marketing are accountants who have learned to think and act like marketers, accountants who have developed new kinds of accounting firms and new kinds of governance structures. it’s a system that in at least one aspect draws upon a product marketing practice – in that the marketers participate in designing aspects of accounting and law practice.
more: how marketing has evolved | accountants don’t sell soap. | why competition matters most | nine fundamentals for a healthy marketing culture in an accounting firm
editor’s note: 卡塔尔世界杯常规比赛时间 was privileged to have a long relationship with bruce w. marcus, who was ahead of his time in his thinking and practice in marketing for accounting. we are publishing some of the late expert’s evergreen work, which retains wisdom for the present.
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it’s a system in which accountants relate to clients in more constructive ways, and in dialogues rather than monologues. in accounting firms in which the barriers between partners and associates who are skilled and talented have eroded, and client service teams that not only serve clients better, but function as marketing instruments, by virtue of developing better ways of demonstrating the possibilities of extended service.
some examples
david urbanik is one such individual functioning under marketing 3.0. neither a lawyer nor a trained professional marketer, no lawyer or marketer better understands both the legal profession and its practices, as well as the art of practice development. urbanik pointed out that,“product companies do market research and alter their products to better fit what their customers need or desire. traditionally, professional service firms look at markets and attempt to deliver services they have to the opportunities they see.” maybe the shifting paradigm, he says, is the need for professionals to listen more carefully to clients and change what they do and how they do it (shape a product/service)) in response to what they hear.
and, notes urbanik, “you can’t shape something if you don’t understand it and can’t communicate clearly with those who must be at the core of building it … meeting the explicit or implicit client need, which very well may require something different from the traditional law firm model.”
working with urbanik, we added a new marketing component to the firm’s practice groups. this not only enhanced each group’s marketing efforts, but helped build a firm marketing culture. we then focused marketing efforts on those prospects and markets with the greatest potential for growth and profitability, without totally ignoring those at the other end of the spectrum. the emphasis is on focused. it worked.
in the brochure and website we did, we broke our services into groups that addressed the specific need of clients – what they needed – not merely what we had to sell off the shelf. thus, we spoke of meeting the needs of clients in areas of value creation, operational support, transactional support, risk management, preventative law, asset recovery, litigation services, and wealth preservation and distribution. in other words, we tailored our product – these categories – in terms of the client’s needs and opportunities, not just laundry lists of our services.
in this context, the need to bring a firm’s capabilities to the market is resulting in new kinds of firms, structured to address and serve the markets for its services. these new firms focus on client service and firm productivity, without in any way diminishing professional integrity
examples
outstanding examples of the new kind of law and accounting firms arising in this context are shepherd law group, valorem law group, exemplar law partners, seiler llp and axiom legal. they have in common a drive to remake the law and accounting firm business models to better and more economically serve clients. their focus is on putting the client, rather than the practice and the firm, at the core of their business model.
ronald baker, founder of the consulting firm and think tank verasage, was a pioneer and early advocate of value pricing (which is most often at the core of the contemporary firm), including considerable original thinking on the definition of the concept of value to a client, for both law and accounting firms. a former accountant – he started a career as a junior accountant in the former big eight accounting firm peat, marwick mitchell (as did i, a decade or more earlier, and in a different capacity) – baker has been a driving force in persuading firms to consider value pricing. where it’s used most successfully, it’s based on his models, which are then further adapted firm by firm.
the contemporary law firm is epitomized in the boston-based shepherd law group, both in concept and in practice. specializing in employment law and litigation, it was started some 13 years ago by jay shepherd. about eight years ago, functioning on value-based principles delineated by ron baker, shepherd abandoned the hourly billing format to develop a workable system of ascertaining the value of his service to his client and billing accordingly.
value pricing, says shepherd, is more than just a replacement of the anachronistic hourly billing system – it’s a manifestation of understanding the meaning of value – but value to the client, before the considerations of the firm. the result is not only satisfied clients, but increased profit for the firm. at the same time, says shepherd, value pricing impels the firm to avoid unnecessary processes – to be more efficient.
the shepherd law group is a small firm, but they are leading specialists in employment law and litigation. while it’s been said that a litigation practice is difficult to price by value rather than by billable hours, shepherd has clearly demonstrated how it can be done, particularly where a firm’s expertise supplies the knowledge and experience. he is the firm’s owner, with no other partners, and functions with a small staff of specialists. this form of operating, he says, is a paradigm that breaks a mold, and that functions particularly well.
interestingly, shepherd disdains the term “alternate billing,” particularly because it assumes that the other alternative is the billable hour. the problem with the billable hour, he and others have pointed out, is that if there’s any value in hourly billing, it’s to the firm, not the client. to perform a service to clients with no value to clients is to be anti-competitive – particularly with today’s sophisticated clients.
shepherd’s use of value pricing is so effective that he has established a subsidiary operation, called prefix, to both teach other firms how to do it and to consult to, and advise, law and accounting firms on specific pricing problems. his 14 points of how to determine a value price are widely known and are increasingly used by other firms, both in the united states and abroad.
those points are …
- i analyze the client.
- i assess the importance of the situation.
- i assess the urgency of the situation.
- i pay attention to what my competitors charge.
- i consider the relative values of each possible outcome.
- i figure out how hard it would be for the client to get better service elsewhere.
- i determine how important my firm’s expertise is to the likelihood of a successful outcome (in other words, is this going to be easier because of our particular skills, or could any monkey on the internet find the answers?).
- i consider what we charged other clients in the past for similar work.
- i consider whether those charges were heavy or light in retrospect.
- i consider the likelihood of getting more work from this client.
- i assess how much work we’ve done for this client already.
- i wonder how important getting this particular job is to our firm (if it isn’t, i might raise the price).
- i decide whether to do a single price for the whole gig or how to break up the job into mini-gigs with separate prices.
- then i say, “this is our price.”
valorem was founded in 2008 by the noted attorney patrick lamb and several like-minded attorneys (now five), all of whom saw the traditional law firm model as less than relevant to the changing needs of the contemporary clientele. their objective in starting the firm was to find ways to improve client service at reasonable fees. they, too, function with value billing. the five lawyers are all partners, all with equal compensation. lamb is widely known for his work as a practicing attorney and, particularly, for client service.
there is a freedom from the traditional top-down pyramid law firm to a firm more concerned with client service than the formalities of the traditional firm. this approach is enhanced by the elimination of the billable hour and a focus on value – both in resolving client needs and problems and in billing. one of the foremost thinkers and practitioners in the legal profession, lamb has been a pioneer in alternative, value-based fees. as a founder of valorem law group, he is also a pioneer in new forms of management and governance for the contemporary firm. his book, published by managing partner magazine, is alternative fee arrangements: value fees and the changing legal market, (ark, $450.00). it demonstrates the new perspective of lawyers who think beyond the traditional practice formats, and is one of the most comprehensive discussions of the subject. it’s based upon lamb’s extensive experience in the process. more than merely a primer, it explores concepts of value and different pricing models and their effect on a practice, and particularly on client service. its concepts are the foundation on which valorem is built, and the book is having a profound impact on the emergence of value billing as a replacement for the billable hour.
in an extensive article in his outstanding blog, adam smith, esq. (bruce macewen), reports that exemplar law partners was started in 2006 by christopher marston, who was fresh out of law school. dissatisfied with what he saw as an outdated law firm model, including the cumbersome billable hour and top-down management structure, he felt that no one, least of all the clients, benefited from the traditional standards. his firm hires lawyers with business degrees or extensive industry experience and a team orientation. it offers a client service guarantee. and significantly, it has been an enthusiastic marketer since its inception. among the innovative practices (at least for law firms) he has adopted are:
- billing only on the basis of fixed prices – fees are determined for each project by a pricing committee, which addresses each engagement individually
- offering clients a satisfaction guarantee
- hiring only lawyers with business degrees or with extensive industry experience
- hiring ultra-selectively. among the criteria new hires must have are social graces, an interest in and confidence to develop new business, a team orientation, and the willingness to risk their own compensation from day one by accepting no guarantee of starting salary in exchange for profit-sharing participation.
- making an “over-investment” in an experienced management team from non-lawyer backgrounds – the coo has many years of experience in banking, while the cmo has many years of experience in various industries, most recently in direct sales. “i sought out varied backgrounds for a new, fresh approach,” marston says.
- instituting a “no grinch” teamwork approach
since its inception, exemplar has grown to six offices, serving the mid-market legal profession. moreover, it has expanded into investment banking, raising capital for clients and other businesses, taking the concept of the business-oriented law firm into new dimensions.
axiom legal was started in 2000 as a virtual law firm by mark harris, a then-29-year-old associate in a large new york law firm. it’s one that functions without the trappings of the traditional law firm structure or large offices. relying on a large network of attorneys recruited from major law firms, they offer experience and service without the high fees of firms with real estate to house high-priced partners. clients are often served with teams of lawyers with different but relevant specialties. its focus is on value for the clients, rather than the traditional trappings of the old model law firm. the firm has grown to nine offices, including london and hong kong. this new business model, designed to meet the changing needs of clients, has grown rapidly, and portends the likelihood of the law firm business model of the future.
gale crosley, a thoughtful and pioneering consultant, reports in the accounting publication, accounting today, that one of the leading and innovative accounting firms she has encountered is a 53-year-old firm that is on the leading edge of the profession – redwood city, california-based seiler llp.
traditionally specializing in real estate-oriented, multigenerational family enterprises, when it was struck by the real estate bubble in the late 1980s, managing partner jim demartini responded by going after silicon valley high-tech companies and restructuring the firm to streamline its competitive advantage. dimartini, crosley reports, is convinced that business development is a skill that can be learned, and demonstrated it by growing what is now a 15-partner $33 million firm. its growth is entirely internal, rather than by acquisition.
clients are served by carefully structured teams with technical expertise that includes tax and estate planning. clients prefer teams with a blend of appropriate knowledge and skills to serve them, rather than by a single individual, according to dimartini. says crosley, “members are assessed on their long-term value to the organization, and not for their most recent acquisition of a promising client. equity ownership is based on career performance as well.”
the rapidly growing firm has about 140 individuals in two locations – redwood city and san francisco. the firm functions with high levels of client satisfaction and very low rates of client and employee turnover. building from within, says crosley, helps ensure that the firm’s younger members will have a place to thrive.
cravens & cravens, a former client of mine, is a two-person father and son accounting firm in a small town in southern illinois with growth ambitions and a keen understanding of the role of marketing in its practice. their top advantage was an exceptional knowledge of the small and medium-sized businesses. we marketed the firm by focusing on that capability and by featuring the rolling forecast and the firm’s business acumen rather than on the traditional small accounting firm services. it’s been a very successful concept and campaign, made possible by the two partners’ willingness to reach beyond traditional accounting practice techniques.
that contemporary firms, such as those described here, tend to use value pricing is no surprise. in today’s competitive environment, anything but a firm structured to give value to its clients, as does value pricing, is not likely to long sustain itself long against its competitors. the question is, which came first – the contemporary firm or value pricing?
actually, it’s a moot point. breaking from the traditional billable hour requires a mindset that tends to function with not only the client at the core of the practice but with an eye to improved productivity. and while exploring a concept like measuring the value of service to clients is a sharp break from the past (not only for the firm but for clients as well, although experience indicates that once they understand the process, clients readily accept it), it’s not all that difficult for a firm to adopt. in both legal and accounting practices, changing a business model is often a form of defensive practice, particularly when competitors are doing it successfully. this is the way of the evolution of ideas.
at a recent verasage conference, ron baker addressed the question of why no top 100 accounting or law firm has switched to value billing. he notes that major firms that are national and international advertisers use timesheets to compensate their ad agencies.
but the answer, he points out, is not difficult to discern. “there are decades of culture,” he says, “around the culture of timesheets.” they are literally at the center of all financial reporting in the firm, and there is too much investment in timesheets and related financial systems for senior management to move in different directions. “it’s human nature to remain on the shores of the familiar,” he says. as for the future of value billing, he is optimistic, as am i.
much of my thinking about finding ways to use successful product marketing techniques and business practices came from peter drucker, who said, “if you think of yourself as a marketing company that fills the channels of marketing you open with the products you make, you have vast expansion opportunities.” thus, many years ago, i was with a major public relations firm (ruder & finn), and bissell carpet sweeper was my client. we realized that they were missing an opportunity to thrive in a new marketing-oriented environment. “right now,” we agreed, “you are just a manufacturing company. you make carpet sweepers. you call in your sales force and say, ‘yesterday we made x number of carpet sweepers. today you have to sell x number of carpet sweepers.’’”
i said, “you have a great sales force. ask them to come back with ideas of what their customers want and would buy if you could manufacture them.” company president mel bissell agreed and thus was born the bissell shampoomaster, followed by several other products. he hired a detergent chemist from dow, and his shop foreman designed the machine. and thus began a whole line of home cleaning products. bissell, once just a manufacturer, became a marketing company.
these are examples of a new generation and a new approach to marketing professional services that successfully adapted the practice of accounting and law to meet the needs of clients specifically.
while all selling must ultimately be done by the accountant or lawyer, the practice of practice development, incorporating as it may the traditional tools of marketing, will be done either by a lawyer or accountant or a business-oriented person who is totally immersed in the practice, and has the skills and knowledge to reshape aspects of the practice – how it is presented and how it delivers its services – to better meet the needs of the contemporary client.
i know that an increasing number of successful accounting firms today are doing pretty much what i’ve described here. some of the best marketers are accountants. some of the worst are, too. but the marketing profession is defined by its best – not its worst.
under marketing 3.0, practice development executives will have a business, not just marketing, background. marketing mechanics will be done by lower-level practitioners, while the strategies will be formulated by the marketing 3.0 specialists – the professional/marketers partners.
what has changed here is a new kind of professional services marketing in response to new market needs and the need to compete under these new circumstances. what is changing as well is a new kind of partnership between the professionals and those who market their services.
that’s marketing 3.0.