GETTING MORE JUICE FROM THE ORANGE

 Improving productivity in professional services marketing

            There is a valuable aspect of professional services marketing that seems to defy assessment.

            It’s productivity. Productivity is an economic measure of the increased value derived from the more efficient use of labor, capital and raw materials. In manufacturing, or non-professional services industries, improved productivity could substantially improve the return on manufacturing investment.

But productivity is more than an economic abstraction, although it’s an economic concept that can be profoundly nuanced. According to an article by William W. Lewis in the McKinsey Quarterly, studies found that the primary force in increasing productivity is competition, which is, after all, the primary force in managing today’s professional firm. “Competition,” says Lewis, “is that mechanism that helps more productive and efficient companies expand and take market share from less productive ones.”

If productivity is relatively easy to measure in smoke stack and certain white collar industries, measuring it in a professional service, and in professional services marketing, can be frustratingly difficult.

It’s relatively easy to assess the value of a marketing effort for a product. Run an ad and see how many products you sell. Run a promotional ad for an airline and see how many tickets you sell. Issue a press release for a product, see how much of the media picks it up, then count how many inquiries you get from the publication of the release. An oversimplification, of course, but not by much. A generally direct and measurable relationship exists between product marketing efforts and results.

Why not, then, for professional services marketing as well? Because in production, the three elements of capital, labor and material are measurable. In a professional service, however, the raw material is intellectual capital, which is extremely difficult – if not impossible -- to measure. One lawyer or accountant in a firm may be substantially smarter than another lawyer or accountant in the same firm. You may be able to empirically divine the difference, but can you measure and quantify that difference on a consistent basis? And as a measure of increased value to the firm on any specific matter? Not likely.

Not only is it difficult to measure the contribution marketing activities make to building a practice – a client is produced by the sum of many activities -- it's virtually impossible to put a value on marketing’s real cost to the professional firm, even though performance measurement is improving.

But the measure of performance is not the same as measuring productivity, which is the true measure of the cost of effective performance versus the cost of ineffective performance. If you don't know that you're getting the best and most cost effective performance for what you're paying, why should you buy it? Measuring productivity, then, is not an arbitrary exercise in economics. As more dollars go into professional services marketing, the need to measure the value of a marketing effort becomes more acute. Not being able to measure productivity in professional services marketing as one would do in manufacturing is at the root of a great deal of resistance to more extensive and effective marketing activities.

Product marketing can generate a need for a product where none existed before, and then it can differentiate a product from those of competitors’. Professional services marketing, on the other hand, can only differentiate a service from that of competitors – and then only sometimes, and only with great ingenuity and effort. It can build name recognition and project a firm’s skills. In direct mail, a good mailing can sell a product by return mail. In professional services marketing, the best that a good direct mail campaign can do is get the opportunity to make a presentation in person, because nobody hires a lawyer or accountant from a letter without meeting the professional who performs the service. Professional services marketing can’t, by virtue of superior marketing performance, persuade a happily married man or woman to get a divorce, or persuade someone to get an audit for its own sake, when the bank or the government or the prospective merger partner doesn’t want it. It can’t create a client where no prior need exists.

We’ve come a long way, in the past three decades, in learning how to measure the efficacy of a professional services marketing program or its activities. There are many systems, ranging from the ultimate gauge -- counting the number of new clients – to measuring clippings in a publicity campaign. A name recognition survey by a professional research firm will tell you a great deal about the depth of the impact you’ve made in name recognition, and even in recognizing your firm’s skills (hence the fallacy of assuming that recognition is branding, and that branding is a viable professional services marketing tool). Setting forth substantive objectives and measuring performance against those objectives has great merit. The Balanced Scorecard approach delineated in the book August Aquila and I wrote – Client At The Core – is a highly sophisticated use of objectives to measure a marketing program’s efficacy.

All of these approaches have varying degrees of value, but none is yet as measurable as putting an ad in the paper that says, “Come to my house for free lollipops” and then counting the number of lollypops you give away. Or advertising an airline trip from New York to San Francisco for $50, and counting the number of tickets sold.

And all of these methods of assessing professional services marketing performance are flawed. None will tell you enough about absolute effectiveness of marketing efforts, in terms of the cost of those efforts, the return on the investment in these activities. You are always left with the question – could have it been done better? Could we have done more in the same time, for the same cost? In other words, could we have improved productivity?

It’s relatively easy for a trained and knowledgeable marketer – and even a clever lawyer or accountant -- to perform the tasks of marketing. A press release. An article, A seminar. A brochure. Joining an association or playing golf to network. But these are, essentially skills, easily learned, but not always productive measures.

A well-crafted press release is just a release, after all. A poor one is not as likely to get printed as the good one, nor is it likely to produce the objectives of doing the release in the first place. And if it’s a well-crafted release, and widely published, how do you measure its impact on the firm’s practice development program? As the old saying goes, it costs as much to feed a feed a poor horse as to feed a good one. If it takes the same time and effort to write a poor release as to write a good one, how do you measure -- and therefore have the means to improve – productivity?

The Measure Of Productivity

The basic definition of productivity, as economists define it, is relatively simple. It’s an increase in production without a comparable increase in capital, material, or labor. If you build 6 widgets in one hour for five dollars, and then find a way to build 10 widgets in one hour for the same five dollars, you’ve increased productivity. If you’re in the orange juice business, and you pay a worker a dollar to produce one gallon of juice in five minutes, then when you pay that same worker the same dollar to produce two gallons of juice in the same five minutes, you’ve doubled productivity, and thereby doubled potential profitability. It’s safe to presume that increased productivity improves profitability.

In manufacturing, costs are measurable. Labor, material, machinery, overhead all have fixed costs. The results of the manufacturing process are tangible, and readily seen. The exigencies of the economy may alter these costs, but essentially, the costs continue to function in relationship to one another.

            But in professional services marketing, the principle ingredient is intellectual capital. While intellectual capital is, of course, inherent in all human endeavor, it’s the primary ingredient and resource of the professions, including marketing, and perhaps it’s a marker that more than anything defines a profession.

In the professions – accounting, law and consulting – and in marketing professional services, the traditional tools to increase productivity are not so readily available as they are in manufacturing, or even non-professional services. A manufacturer can improve productivity in myriad ways. Change the work flow by shifting machinery. Cut costs by controlling raw material inventory. Simplify design. Improve morale. Outsource production. Increase automation. Build computer models and programs to strengthen process. Certainly, it appears that technology -- the computer, the fax machine, the internet – improves office productivity (although, surprisingly, not as much as the computer makers promise).

            But what can an accountant or lawyer do? There are no machines that of themselves increase the finite resources of intellectual capital, and possibly stretch intellectual capital to the infinite. Machines like the computer don’t make people smarter, they simply increase the speed with which certain processes are performed. Nor do they always save time. Rather, they shift the effort to other venues or time frames.

            Moreover, in marketing a professional service you don't always know what part of the marketing campaign actually produced the sales, or what or how much each part of the campaign contributed how much to the result. It’s usually a combination of factors – advertising, distribution, word of mouth, and so forth.

            If you were to apply the industrial formula to a professional service, you would be limited by the element of intellectual capital. You might be able to quantify the tasks.. The number of press releases written in one day. The number of brochures produced in one month. But clearly, this doesn't work, at least because quantity doesn't relate to quality. Six mediocre ads may not be as effective as three great ones. Artfulness, always an element of marketing, means more in professional services marketing.

And since so much creativity goes into the marketing effort, how do you measure that? Can you say, on an arbitrary scale of one to ten -- how creative is this idea or that ad? Not likely.

Elements of Productivity

            A clue to understanding how to manage productivity in professional service marketing may be seen in a study by McKinsey consultants Stephen J. Dorgan and John J. Dowdy, who note that just adding more computing power won’t have a substantial impact on productivity. “Some economists have argued,” they say in The McKinsey Quarterly, “that good management – rather than computing power – is the key to higher productivity.” This contention is backed by a study of 100 companies in France, Germany, Great Britain and the United States, which shows that it’s not the tools, it’s the management of the tools that matter – a point made often in these pages.

            Perhaps a good starting point for understanding productivity in marketing would be to look at the elements of productivity that might affect professional services marketing. They are..

Overhead (rent, lights, paper, equipment, secretarial help, etc.). Overhead, because it costs a measurable amount of money, can be measured. Rent, and the portion allocated to the individual performing the marketing function. Electricity, taxes, supplies and other support services can also be measured relatively easily. A secretary's salary is part of it, although the computer has tended to shift many secretarial services up the executive chain..

A secretary's typing speed, for example, might be a factor, but a new study of law firms shows that more frequently, secretaries are doing more paralegal work. With computers, most executives do most of their own typing. Shorthand seems to have gone the way of smoke signals—any dictation today is done by dictating machines. Voice mail has overwhelmed those little message slips. Machines are paid for once, amortized quickly, and are tax deductible, and they don't require fringe benefits.

Allocation of rent can be reduced -- up to a point. You can put two people in one office, which halves the overhead cost of rent. But then you run into another problem. Marketers are creative people -- another wild card in productivity. Two geniuses in one space may save on rent, but may also reduce creativity, which means the saving is illusory.

In marketing productivity, then, overhead is not the problem, nor can marketing productivity be substantially improved by cutting overhead. Cutting costs, remember, doesn’t necessarily improve efficiency. Improving efficiency may, on some levels, even cause increased costs.

Labor cost. Until we can measure labor input in a creative and marketing context, unless we can find a way to quantify intellectual capital, we can't solve the problem of measuring productivity in professional services marketing. Nor can we solve it until we can in some way quantify or evaluate the quality of output and its contribution toward meeting objectives.

The amount of time any individual puts into a project is measurable. And here is one area of productivity that can be improved. But in a creative process, is time the best measure of performance?

Time may be reduced by either skill, experience, or both. A skilled writer can produce a press release, a newsletter or a brochure in less time -- and more effectively -- than can a beginner. This, incidentally, is why we pay people with proven ability and experience more than we pay a beginner. The experienced person is generally more productive. But a glib writer is not necessarily more productive than a slow, thoughtful one, who may produce a stunning brochure, or mind boggling text on a web site that drives new clients through the door.

Risk. This adds another new element to the mix -- risk. In manufacturing, risk has been sharply reduced by the time a product goes into production. The product has been tested and found sound, or it wouldn't be in production. It may fail in the marketplace at some point, but the likelihood is that it's been market tested before production. Risk is minimized.

Beyond choosing smarter individuals, the sheer risk inherent in choosing one marketing plan over another is another wild card in productivity. Beyond the break-in point, a law or accounting firm that institutes a new area of practice exposes itself to very little risk when it agrees to perform that service for a client. But a new and expensive marketing program, logical as it may seem on paper, faces the risk of failure each morning of the career of that program. In fact, there is new risk in every marketing activity. Risk is inherent in ever aspect of marketing.

Each new idea, and each element of marketing practice, carries with it fresh risk. Will the press release be published and have its desired impact? Will the direct mail campaign work? Will the brochure be appropriately distributed, read, and perceived by the reader in the intended way? Will the promotional material for the seminar attract participants? The concept of productivity is left in the closet for awhile.

Objectives. In this interesting array of elements, perhaps the most significant is objectives, because output of any kind is meaningless unless it meets stated objectives. If the objective of an action is to produce a client, pure and simple, such as in selling, measurement becomes relatively easy. If the objective is to enhance name recognition, or understanding of a practice as an aid to practice development, then measurement is infinitely more difficult.

Improving Productivity

            What, then, can the professional or the marketer do in a realm that’s grounded in uncertainty, that depends upon imagination and talent rather than machinery and raw material, that relies on the action or reaction of others to define its efficacy?

            The problem is made more complex by the dynamics of economic change. The changing nature of the law and accounting practice means that the problems and situations faced by the professionals yesterday are different today. Witness the shift from pure accounting or law firm to business consultant. Look at the added processes engendered by Sarbanes-Oxley and other new regulations.

            There is a paradox here. Can we improve productivity if we can’t measure it, as is possible in a production process? And if we can’t measure and quantify it, how do we know when we’ve achieved it?

            The answer may lie in the things that can be done to improve performance , and the degree to which improved performance speeds up achieving goals. We know by this time a great deal of what works in marketing, even if we don’t fully understand how much what works really costs. We can do a lot, beginning with improving management skills...

• Understand objectives. No marketing program should be undertaken without a firm set of realistic objectives. Firm objectives, however, doesn’t mean inflexible. If you realize that improvement in competition is achieved incrementally, and that the difference between a leading firm and the one immediately behind is rarely massive, than you have a course of action, and a measure of performance.
• Understand positioning. Positioning is finding a core value of your firm that distinguishes you from others, and that – most importantly – springs not from what you want to sell, but is based rather on understanding the basic needs of your clients and prospective clients, and then demonstrating that you can serve those needs. Client-based positioning is the most effective method of projecting your value to clients, and differentiating your firm from those of your competitors.
• Program realistically. Based on your marketing objectives, build a program that’s a realistic blueprint to achieve marketing – and firm – objectives. If you don’t know where you’re going, how do you know how to get there?
• Use intellectual capital. Smart people who can perform the skills of marketing are more productive than ordinary people who can only perform marketing tasks by rote. The full range of skills of marketing is available to everyone. The mechanics of marketing are not where the competitive advantage lies – it’s in the artistry with which the mechanics are performed. Hire smart people, with experience and the marketing skills – and trust them to do their jobs without interference. This is where productivity improves fastest.
• Take risks. If the marketing professional has an idea that’s out of the range of your experience, trust the marketing director – or fire the marketing director. People who jump the highest fences on horseback are the ones who know when to leave the horse alone to do what it does best. When everybody has the same marketing tools, taking calculated risk is the way to gain advantage.
• Build a marketing culture. This is not an esoteric term – it’s real. It’s when everybody in the firm understands the nature and role of marketing and the personality of the marketer, which may not be the same personality as that of  the lawyer or the accountant. It’s when the firm’s leadership understands and believes in marketing as a process that’s integral to firm management, and conveys that feeling right down the line. It’s when a measure of marketing responsibility is given to as many people as possible within a firm. And it’s when a firm’s professionals don’t see marketing as something that’s done by a person down the hall, but is done in one way or another by everybody in the firm.
• Focus on the client, not the firm. In this new era of marketing – of legitimate competition between firms – it’s the client, not the firm or the professional, who’s at the core of the modern successful practice. (See Client at the Core). You have only to look at the professional firms that are growing fastest to understand that this principle, more than any other, makes the competitive difference.
•  Client retention. That tired old saw that says it’s cheaper to keep a client than to get a new one is still incredibly true. Take no client for granted. Listen. Stay in touch. Remember that as a client’s business changes, or the climate in which that client functions changes, so too does the opportunity for you to better serve or improve the relationship.
• Focus on skills. Can you imagine an artist who’s inept with a brush? Keep in touch with the skills and ideas of marketing. As the motto of The Marcus Letter says, A mind at rest tends to remain at rest. A mind in motion tends to stay in motion. Think. Does the way you did it yesterday still seem to be the best way to do it today? Challenge concepts. This is the way to make best use of intellectual capital, and to get a greater return on investment in marketing.
• Technology and Outsourcing. While increased productivity is made possible by much of technology, it’s not a magic bullet. A writer can write faster on a computer, but not necessarily better. E-mail can be a blessing or a curse. A well done web site can be an exciting representation of your firm, or a solid bore that’s visited once, but never again. As for outsourcing, no matter how talented the marketing director is, there may be a public relations or design firm, or a web designer, that’s better, and more cost effective. Know when to go outside for specialized services – it’s cheaper than doing it badly in-house.

Marketing isn’t just something you do to get clients – it’s a process to help you compete. It’s a process to help you shape your practice to your own and your partners/ desires and dreams. You may not persuade someone who doesn’t need an audit to get one, or a happily married person to get a divorce, but if you do it right, when an audit is needed, a good marketing program will bring that person to your firm rather than the one on the next block. It will bring a person who needs a divorce to come to you, rather than to the firm across town.

And if you do it all right, and you improve your productivity, you do it with a greater return on your marketing investment. Can you accurately measure marketing productivity? Maybe not. But you’ll know it’s increased when you see it.

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