5 basic principles to follow.
by august j. aquila
let’s look at the different focuses or orientations that firms can take toward managing and running their practices and see which ones the traditional pricing methods encourage.
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any organization, whether an accounting firm or not, usually tends to have one of four focuses. they are either selling-oriented, product-oriented, production-oriented or marketing-oriented.
each focus will have a direct impact on how a firm looks at servicing clients and pricing its services. the predominant focus is often dictated by the value system of the founders of the organization or its current management team. perhaps when the firm was first started, the predominant focus was appropriate. however, a danger exists when the external environment changes and the internal environment of the firm stays the same.
in the ’70s and early ’80s firms did quite well by following a production orientation focus. in the late ’80s and the ’90s, this strategy did not work as well. and it certainly does not work today.
selling orientation
historically, a company with a selling orientation was centered on selling efficiency rather than customer needs and wants. the selling orientation assumes that clients will not buy the product or service unless the organization makes a substantial effort to stimulate their interest in its products.
for example, you might think of a door-to-door salesperson selling magazine subscriptions that you really don’t want or need.
accounting firms have never lowered themselves to this level. there are, however, many firms today that have hired part- and full-time sales professionals to develop leads for the firms. in a way, these firms are trying to increase their market share merely by increasing their selling power.
selling a professional service is a complex endeavor. while a sales professional can uncover an opportunity, it is really the service provider that the client wants to know. and, if there is no trust or chemistry between the client and the service provider, a sale will never happen.
clients will often ask a new service provider these questions:
- why you and your firm?
- what’s your experience in this area?
- what’s your experience in our business?
their real concern is how you will solve their problems and how well you will work for them. the true selling orientation does not usually address these issues. and firms that embrace the selling concept may spend more on advertising, public relations, social media and other kinds of activities that increase demand for their services.
finally, organizations that really believe in this orientation have a very strong sales force. also when there is a surplus either of the service or goods, firms will begin to take a stronger look at hard selling. in the accounting profession today, there is a surplus of providers, especially in the commodity market. even if outside sales people are not used, there will be more pressure on partners to “sell” more as long as the external environment continues its current course.
product orientation
those firms that follow a product orientation believe that clients will purchase the service or product that is the best in the market. the organization’s primary task is to constantly improve the quality of their products. it is through product quality that these firms believe they will keep and obtain new clients. product quality in the accounting profession is very difficult to distinguish from one firm to another. it is virtually impossible for the client to determine who has the best quality.
most clients cannot judge the quality of your audit work, the quality of your tax research or the quality of your systems consulting expertise. for professional and intangible services, trying to differentiate your service based on a quality product or product enhancement will be extremely difficult. the major problem with this orientation is that a firm can believe that it knows what its clients really want. however, product-oriented firms seldom speak with or listen to their clients.
production orientation
in a non-accounting environment, the production focus is often appropriate where the demand for the product/service exceeds supply. in today’s marketplace, there are very few areas in the country where demand for accounting and tax services exceeds supply. there is, however, another situation where this concept makes sense. if the product’s cost can be reduced through production efficiencies, then it may make sense to follow this concept.
however you look at it, the production focus means that the organization places most of its emphasis on making and distributing the product or service. philosophically, what this means is that the organization believes that its customers are there to buy whatever the firm produces, rather than the firm trying to determine the needs of its clients and then developing services or products that could best meet those needs.
most accounting firms, whether they realize it or not, go into production orientation during tax season. i can think of many accountants who know exactly how many tax returns they were able to complete during tax season and the higher the number, the prouder they are. no doubt these individuals have either achieved a high degree of efficiency in producing and distributing tax returns or worked an unseemly amount of hours during tax season. but what about the clients? was sufficient time spent with the client?
neither the rule of three method nor the cost-plus method of determining billing rates takes into consideration an effective way to measure the value of the service to the client. by focusing on volume and cost, both the rule of three and the cost-plus methods foster a production orientation in firms. firms that use these traditional methods sell hours, forgetting that it is the benefit or value of the service that is most important to their clients and prospective clients. the result is a production orientation in firms.
marketing orientation
focus is what sets the marketing orientation apart from the others that we have just discussed.
those firms that embrace the marketing orientation seek to understand the needs of their target markets and then offer them the services and products that best meet those needs better than any of their competitors.
if we apply some of these ideas to an accounting firm, the first thing that comes to mind is to ask ourselves, “what knowledge do we have of our prospective clients’ and our current clients’ needs and wants?” many accountants that i speak with tell me that they know what their clients want. when asked how they know this, they just answer, “i know,” even though they have never taken the time to survey their clients. marketing is discussed but not truly practiced in these firms. or they confuse the marketing concept with selling their existing services to clients who may or may not want or need those services. if the emphasis is mainly on selling or moving the services through the firm more efficiently, where does the client fit in?
how many firms actually organize their firms to satisfy the needs of their clients? firms that embrace the marketing orientation follow these basic principles:
- they find out what their clients really need and want through mail or online surveys and other means of communication.
- they provide the necessary services that will satisfy these needs and wants, whether they have the in-house capabilities or refer the service through some sort of strategic alliance with other accountants or consultants.
- they develop methods of delivering their services more effectively and efficiently than their competitors.
- they train their people in client service, communication and listening skills.
- they put the client at the core of their practice.