- Organizational Purchasing of Professional Services
One of key differences between product marketing and service marketing is the fact that services are intangible and hence evaluation of service quality is very difficult prior to consumption. This is exacerbated for professional services as due to their very nature (complexity) even after consumption it may be very hard for a client to evaluate the technical nature of the service provision as they do not have the training that professionals have and hence they may not understand fully what was offered and if problems arose, whether they were handled competently. In the traditional marketing text, service marketers are told to make tangible their service offerings so clients can use these 'tangible cues' in their decision making. So for example, one would not expect a lawyer to be located in a shopping mall and wearing jeans and t shirt (although this can be seen in the US). This is fine except that if we do not know what these tangible cues are, the PSF is shooting in the dark somewhat when trying to gauge what clients look for and what criteria they use to judge a firm pre and post purchase, when a project is completed.
Two major questions face PSF marketers:
- Who participates in the buying process and what influence do they have?
- What criteria are used pre and post purchase to evaluate a firm?
When considering who and how different people in the client firm influence the decision process, one needs to consider the nature of the purchase. A straight forward audit year after year is not going to elicit the same type of consideration from the client that the appointment of a provider for specialist tax advice in a foreign subsidiary. When selling legal services to a large multinational, the in house lawyers will play a major role, yet when dealing with a medium or small sized firm, the owner/MD will probably be the key person. One must also consider people outside the organization who influence the decision process of the client firm. For example, when assessing the competence of a firm, one may rely heavily on the tangible cue of recommendations (word of mouth marketing). These recommendations may come from business advisors, friends, or other industry/association professionals. The point is that you cannot simply limit your marketing efforts to the target firm if other factors have a major influence on their decision. Within the client firm, there will be a group of people (known as the buying centre) that potentially influence a buying decision. These people will probably be at different levels of the firm and in varying positions/departments. It is crucial for the PSF marketer to identify who these people are, what influence they have, and what kind of information/criteria is likely to sway their decision making. For example, one of the major trends affecting law firm services and purchasing is convergence. Large firms worldwide are culling the number of firms they deal with in an effort to improve their efficiency in dealing with outside firms. In order to get on that list of say 100 approved firms, the law marketer must have a deep understanding of what is driving the decision process and whom. If you are trying to become a legal provider for McDonalds, which has numerous in house lawyers, you may be wasting your time marketing specifically to the GC as he/she may not be involved in the decision making for matters that are not critical. If it is an intellectual property issue then that's the person you may need to direct your efforts at. For the user of law services within the client firm (i.e. in house counsel, specific department managers), they will want to ensure the firms they use are easy to work with, responsive, and provide access to a senior level partner who can answer their queries quickly and effectively. However, the user may not necessarily be the buyer or decider, in a smaller firm this would most likely be the MD and other senior staff such as the CFO. In larger firms it may also be the CEO (depending on the significance of the purchase) as well as division heads. One of the major considerations for the buyer will be the price structure and terms of contract. No one wants to sit through pages and pages of hourly billing documents that make little sense or have little application to the work that was done. This has led recently to the concept of value billing. Many client firms are insisting that law firms and other professional service providers do away with billable hours and move towards fixed fee contracts and other similar structures that simplify the pricing process and even provide lower fees based on the promise of more work. This may sound like discount pricing for a bulk purchase and in some ways is. But the PSF marketer must understand that the commercial practices and terms that their clients are accustomed to using are practices they may have to adopt due to client pressures. There is nothing wrong with moving to value based pricing if it simplifies matters for both client and firm. In complex buying situations, deciders (often senior officers) want to know the value that the firm brings in resolving problems. Being able to articulate a clear value proposition based on the competencies of the firm is crucial if the PSF expects to be chosen ahead of its competitors. For example, a law firm may have specialist knowledge and substantial experience in M&A's and hence it becomes important to be able to communicate that to the client in a way that identifies the value and benefits that the client seeks. Having an appropriate target market and clear value proposition based on organizational competencies makes it much easier to stand out in the crowd and improve tender success rates. It will also make it much easier to target your communications to those involved in the buying process and hence influence them in a way that matters.
In terms of criteria used to judge a professional service provider, existing marketing texts geared for the professional services have two problems. Most of them use anecdotal information such as understand client needs and be professional. Advice that I am sure today is well heeded by professionals but of limited value in standing out from the crowd. Other texts use materials that were developed in the US market and their relevance to Asia is questionable due to cultural differences. For example, although many professionals use extensive advertising and on line directories to highlight their services, research in Hong Kong suggests that consumers of professional services find such advertising inappropriate for professionals and not something they would use to judge the competence of a professional or use for selection. In fact, the same research suggests that these consumers would be put off by such marketing tactics.
As mentioned previously, different people in the buying centre may use different criteria when judging a provider, hence expecting a one size fits all list of evaluative criteria is unrealistic. Much will depend on the relationship between the client and firm as well as the situation and nature of the purchase. For example, research conducted in the US by Jackson et al (1985) showed that CEOs were concerned about areas such as results of the firms work and expertise in the needed area. Price was of little consideration although that doesn't mean it won't be for other constituents in the buying centre, as other research suggests price is important. One of the key things in the purchase process is knowing whether client perceptions match those of the firm. Many firms believe they are good at certain things and that their level of customer service is high, yet research constantly points out that client perceptions often differ. Just because one assumes people have a certain image of your firm does not necessarily make it so. It is vital that research is carried out to identify not only how a client chooses a provider but how current and prospective clients view your firm in terms of these key criteria.
Another consideration is the stage of the buying process. Selection criteria that is used at the short list stage maybe different than at the pre selection stage, hence it becomes important for the PSF marketer to have knowledge of when a project is due to be tendered out as well as what stages are being progressed through. Research in Asia and the US suggests that different criteria are used at different stages. These stages have been conceptualized as follows:
Figure 1 The Organizational Buying Process for Professional Services
(*Feedback may occur to any previous stages. Source: Day, E and Barksdale Jr, H C (1994) Organizational Purchasing of Professional Services: The process of selecting providers. Journal of Business and Industrial Marketing, Vol 9, No 3, pp. 44-51)
It becomes clear when looking at such a framework that both client and provider would be wise to identify the criteria used at key stages to ensure a more efficient selection process for all concerned. Additionally, being able to communicate and successfully deliver on those criteria are what a professional service firm lives for. In one way or another, all variables point to quality, whether its technical aspects or relational ones, the problem is that at least at stages 1, 2, and 3, the professional service provider needs to demonstrate this quality even to be in the ball game, and since such a service is intangible that is not always easy to do. Factors such as previous experience (a portfolio of work) and company reputation maybe crucial at the early stages when client uncertainty is at a high.
When looking at existing evidence in the evaluative criteria being used by purchasers of professional services, it tends to come back to 3 or 4 key areas, depending on where the research was done and which professional services were examined. Work done in the US (Day and Barksdale Jr, 1992) identifies 4 dimensions that are considerations in selection in the A&E industry. These are identified in table 6.1 along with research that has been conducted in Hong Kong and Singapore.
Table 1 Evaluative Criteria for the Selection of Professional Service Providers
Study A
Experience, Expertise, Competence (i.e. management, reputation, visible and active principals)
Understanding Client Needs and Interests (i.e. knowledge of project beyond RFP)
Interaction, Relationship, Communications (i.e. trust, team work, listens)
Contractual/Administrative Conformance (i.e. efficiency, on schedule)
Study B
Background of Firm (i.e. reputation, experience)
Past Performance (i.e. time and cost control)
Capacity to Accomplish Work (i.e. qualifications, personnel)
Project Approach (i.e. time schedule, work quality)
Study C
Technical Capabilities (i.e. experience, resources, creativity)
Management Capabilities (i.e. competence and service delivery systems)
Financial Capabilities (i.e. soundness)
Quality Attitude (i.e. quality control)
Study D
Task Performance (i.e. experience, creative)
Contextual Performance (i.e. social skills, conscientiousness)
Network Factor (i.e. reputation, relationships)
It is important to note in the above table that these studies were done in the B2B market and do not necessarily reflect the views of individual consumers. In fact, research done in the UK (Ellis and Watterson, 2001) shows that consumers were more concerned with firms having a traditional image and offering a range of services. This is in contrast to organizational customers who were more concerned with reputation of the firm and specialization. This is in line with findings of the aforementioned studies. When looking at the different criteria mentioned in table 1, there is a marked similarity in the results whether the research was done in the US or Hong Kong. It is probably safe to say that a number of the areas are already intuitively known by professionals but having concrete evidence will allow both the marketer within the PSF and the principals to make a legitimate push to put resources into the key areas that will have a tangible affect on firm performance. This has been termed as the knowing doing gap by Pfeffer and Sutton. The authors show just because people know what to do does not mean they will actually do it. This comes back to the very beginning chapters of this book. Developing a marketing culture is something that has to be done from the very fabric of the firm and what it stands for. For instance, lets say you wish to strengthen the firm image in a particular specialism and it is decided that partners will give talks at certain industry/client events for a total of 4 hours per month. This doesn't sound like a lot but when you take into account the preparation time and traveling it may add up to quite a bit, say in the region of 20 hours in total per month. Now if your firm lives and dies by the billable hour and compensates accordingly, what incentive are the partners going to have to allocate 5 hours or more a week to be ready to present at certain industry events that will, over the medium to long term raise the profile of the firm and enhance its reputation. The answer is none. Marketing, as has been stressed numerous times in this book, is not something that can be done in isolation or is purely the responsibility of the marketing staff. It takes a firm wide effort and commitment to truly become client focused and market oriented. It also times time and expecting instant results or a measurable ROI is not realistic when considering marketing as a whole.
Based on the criteria in table 1 and the stages identified in figure 1, the PSF will now have the basis for which it can form a coherent approach to improving areas that are deficient. It is crucial to ensure the identified areas are important to clients and that the chosen activities and tangible cues are appropriate to signify the ability to deliver on those criteria. One would not want to focus on creating an image of a modern firm when it is not something which is valued by clients. Yet there are still other factors to consider. The size and culture of the organization will affect the buying process as will the issue that is under consideration. Smaller projects or trivial matters may be handled by more junior staff in the target firm whereas more critical projects will be handled by senior officers and more people will be involved in the decision process. If you are a relatively young or new firm to a client (one that you have not worked with before), expecting them to give you a major project straight off maybe unrealistic, you may want to get your foot in the door first working on less important or smaller projects. Centralized highly bureaucratic organizations tend to limit decision making at the top whereas flatter organizations tend to decentralize decision making. Firms like GE has revolutionized the way they hire and deal with professional service providers. In his book, Inside/Outside: How Businesses Buy Legal Services, Larry Smith offers a number of anecdotes and insightful comments on law service purchasing in his many interviews with firms of different types and suggest some strategies how a law firm can access and develop business with these firms. Although it is US based, there is much practical insight.
II Putting It All Together
David Maister, a well known consultant to the professions, states that understanding the purchase process is the most important talent in selling professional services. The problem however is that little well grounded evidence is available for professionals that could be used as a framework for better understanding of this process and concomitantly improving the marketing and selling process. Most books, including those of David Maister, are based on subjective experience or anecdotal evidence. This creates the issue of whether such anecdotes are transferable from one situation to another, or one culture to another (i.e. from the US to Asia). The purpose of this chapter so far has been to present evidence that is empirical in nature and Asia based. Based on this, a conceptual model of the purchase process for organizational buying of professional services is identified in figure 2. The model attempts to integrate the evaluative criteria used by clients with the different stages of the purchase process as well as the possible activities that could be undertaken by the PSF to improve their success rates.
STAGE 1
Recognition of Need or Problem
Identification of the Initial Consideration Setè Experience & Understandingè Right Cues
Refinement of the Consideration Set "Can you do it?"
STAGE 2
Evaluation of the Consideration Set è IQ & EQ è Right Cues
Selection of the Service Provider "Do I want to work with you?"
STAGE 3
Evaluation of the Quality of Service Deliveryè
Evaluation of the Quality of the Outcome Perception Matches Expectationè Right Cues
Level of Satisfaction "Did you do what you said?"
Figure 2 A Framework for Understanding Organizational Purchasing of Professional Services
From this framework, it becomes clear that different criteria will be used at different stages and if the process is longer term, it is possible that buying centre constituents will change and hence criteria may change. It is then imperative that the PSF marketer keeps their finger on the pulse when dealing with client firms at all times.
In what I have termed stage 1, the PSF firm is charged with getting into that consideration set, or even possibly making the client recognize a need or problem that perhaps they were unaware of. For example, in the UK, the Chartered Institute of Surveyors created a campaign targeted at small businesses that showed billions of dollars being wasted in poorly managed real estate assets. The idea was to drive business to local surveyors based on a problem that most target firms were unaware of. In any case, becoming part of that consideration set and being able to move onto stages 2 and 3 is the goal of focus. Experience and understanding seem to be the key evaluative criteria here and it's up to the PSF to identify the appropriate cues to signal that ability. This will include previous experience (a portfolio of work), a recognized reputation as well as high visibility. Word of mouth (WOM) marketing maybe particularly important here, hence having delivered quality projects in the past and ensuring previous clients were satisfied with your work is crucial.
In stage 2, the client has narrowed down the initial set into a more limited list for thorough evaluation. This will certainly involve face to face meetings and the provision of some sort of tender document in the majority of cases. Both IQ and EQ are important here. Not only will the client want to know that you have the technical ability, which to some extent was demonstrated in stage 1, the client will want to know whether you are good to work with (EQ). Can you work as part of a team, be flexible, use language that others can understand, and above all else, will you listen and respond to client concerns and consider their project an important one? Clients want to know whether you treat their needs seriously and that you will allocate the necessary resources. Nobody wants to be at the bottom of the pile. If you feel that the client's project is too insignificant/out of your scope and that there is little long term strategic advantage in developing a relationship with this client then don't do it. Exit gracefully and keep your reputation intact!
In the last stage, clients will now begin to evaluate the work you have done and whether the results or outcomes are acceptable. One of the problems here is that many types of professional services lack credence qualities and hence outcomes maybe difficult to evaluate. For instance, just because a law firm lost a litigation suit does not mean they did a poor job. Similarly, if you go the dentist and your tooth cannot be saved does not always suggest the dentist lacks the requisite skills. Hence it becomes necessary for both the service provider and client to work together to create a key performance indicator profile that details what the provider will do (and when) and what the client can expect in outcomes. Being realistic is very important here. Creating unrealistic expectations and then not being able to deliver on those only leads to high levels of client dissatisfaction. One factor that can affect both client and firm satisfaction will be the prior experience of the client in using the specific type of service being sought. Clients with minimal experience and hence limited knowledge of what to expect may need to be 'educated' by the provider as many times the client can have unrealistic expectations. It should be stressed that if both client and provider work together from the initial stages in developing the evaluative criteria and what each needs of the other the buying process would be considerably smoother than such is the situation in most cases. Whilst the idea of beauty contests seems to be very popular in certain professional industries (such as ad agencies) the benefit of almost blind pitching without some sort of prequalification discussion between client and firm is at best limited, and at worst a colossal waste of resources for both client and firm. Much of these issues are discussed in the domain of relationship marketing both here and elsewhere.
III Conclusion
The vast majority of this chapter deals with organizational purchasing of professional services with minimal attention to consumer buying. It also tends to focus on winning new business as opposed to continuing or expanding a relationship with existing clients. Having identified the key concepts in both the decision stages and purchase process it becomes clear that marketing and selling professional services to organizations is a unique and complex process. The PSF must ensure that they have a good understanding of the evaluative criteria that clients use to evaluate and select providers as well knowing the stage of the process the client is at. If both client and provider work out together the explicit details of what can be expected and delivered it would go along way to enhancing satisfaction for both parties. Additionally, since relational qualities and EQ are such important factors in the decision process, the PSF must make sure those people who present to the client as well as those who work on the project and are client facing have the necessary social skills to interact effectively. This may often mean using client service staff that are not actually professionals (i.e. qualified accountants or lawyers) themselves. Finally, Asia is distinct from other parts of the world, hence relying on promotional tactics that work well in the US to raise company visibility may not be appropriate in this part of the world.
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