In their paper “Intelligence Generation and Superior Customer Value,” Slater and Narverat say that an organization’s (I’ll take that to include accounting practices) ability to continuously generate intelligence about customers’ expressed and latent needs, and about how to satisfy those needs, is essential for it to continuously create superior customer value.
The continuous evaluation and determination of client needs is one that I continuously and proactively suggest to members of the Instant Practice Builder and Practice Builder Publishing community. A practitioner must always be performing exhaustive Client Needs Analyses. It doesn’t stop after the prospect has signed the Engagement Letter and has become a client.Client Needs Analysis doesn't when the prospect signs the Engagement Letter Click To Tweet
What Slater and Narverat point out, and which I had not stopped to think about, is that there are four distinct modes of intelligence generation, or Client Needs Analysis, each of which becomes a part of an intelligence-generation capability and leads to the development of a practice or firm’s competitive advantage.
Knowledge as a source of competitive advantage is a common refrain among practice marketers. Top firms gather knowledge about clients and their needs as (1) individuals acquire intelligence, (2) then share this intelligence throughout their firm, (3) other members of the firm develop some shared interpretation of this knowledge, and (4) the firm modifies its tactics, its strategy and, possibly, its business model based on the shared interpretation.
Slater and Narverat start by reiterating that the value of your services to a client or prospect is the benefit they achieve minus the costs of your services. The clients value to you is the benefit you receive in the form of fees, minus your costs of providing your services or products. Your competitive advantage comes when the value you provide has more value to your prospect or client than the offer your competitor makes.
More specifically, Slater and Narverat intimate that your competitive advantage comes about when you create superior client value.
The delivery of superior client value is achieved through the meeting or filling of the client’s needs with a specific targeted solution, although it can be done through the providing of generic services, until a competitor identifies the true client needs and presents a service offering which has greater value in the prospect of client’s eyes through a more thorough filling of needs.
There may be multiple sources of value to a client, but the most powerful is the targeted filling of needs, which must be identified through a Client Needs Analysis, directly or indirectly. A well performed client needs analysis involves knowledge or intelligence gathering, and is performed through conversations with the prospect or client, through examination of facilities and resources that the client or prospect has available, and through the review of internally gathered intelligence and knowledge.Your competitive advantage comes about when you create superior client value. Click To Tweet
To quote Slater and Narverat: “In the 1980s, U.S. businesses awoke to the threat posed by the superior quality of many foreign-made goods. Numerous studies based on the Profit Impact of Marketing Strategies (PIMS) database supported the existence of a relationship between product quality and performance. As Day put it, ‘Boosting quality is now seen as the surest route to creating superior customer value.'”
“If the 1980s was the ‘quality decade,’ perhaps the 1990s was the ‘product development decade.’ In many industries, product life cycles are measured in months, not years. This is largely due to the ability of fast-followers to reverse-engineer a product and to develop an equivalent and less expensive version in less than a year. The continued success of companies such as Hewlett-Packard and 3M is based on the fact that they are able to generate the majority of their revenues and profits from products introduced in the preceding 3 years.”
Combine those thoughts with the fact that the average accounting client only stays with their provider for five years, while payroll clients typically only stay with the major payroll processing firms only three or four years, and tax clients return to the same tax preparer for about six years.
If you take marketing estimates that it costs five times as much to acquire a new client as it does to make an additional sale to an existing client, then it becomes important that a way be found to extend the average client lifetime.
Consequently, it becomes more and more important to identify and fill client needs in order to provide additional, billable, services, and that can only be done through the acquisition of knowledge regarding the clients problems and needs.You can quickly estimate market share and practice growth with two key indicators. Click To Tweet
In order to track how you are doing, there are two key indicators to watch. I just discussed the first, Client Lifetime Value. The other, how you are doing relative to your competition is a little trickier to evaluate, but I’ll give you an idea oh how I used to track my market share and used that as an indicator of how I was doing relative to my competition. It may not be as exact as a high powered survey, but it gave me an idea of how I was doing as a small independent local practitioner.
My KPI for competitive advantage was my client or fee share relative to what I calvulated the average to be market-wise.
Now, I did not have statistics for the total accounting fees billed in my market, but I did have mine, so I extrapolated my fees across the market by determining how many total direct competitors I had in my market.
My first step was to determine the size of my market. IRS and Census Bureau Statistics gave me the number of establishments in my market. Next, I determined my average fee and extrapolated it across the strata of the market I was able to reach, as determined by some statistic such as asset size, sales volume or number of employees.
Next step, find out how many competitors you have. This time, don’t stratify, count everyone. Even the ‘Big 4’ are going after the small customers these days. In my hypothetical example, let’s say there are a total of 100 accounting firms in my market, against whom I have to compete. But wait, that means the average competitor is only doing $6,250 per month, about half of what I am doing. I’m doing better than I thought.
From here on out, a repeat of this same exercise every year will give me an idea of how I am doing relative to my competition, sales wise and market share wise. I could even extend it to client counts if I wanted to that. It just depends on what measure I think will measure my success or failure.
Now that I have a measure, it’s time for me to start thinking about marketing, doing client needs analyses, and gathering intelligence.
The first that Slater and Narverat discuss is the task of gathering information about prospects and clients expressed and latent needs, as well as what your competitors capabilities and strategies are through their various offerings. You gather these pieces of information while doing your client needs analysis, asking both about the prospects or clients needs and problems, their resources and capabilities, and how those needs are currently being met.
Reviewing this information with staff and colleagues when you return to your office, and comparing or integrating it with knowledge and capabilities that already exist in your firm gives you the chance to develop additional knowledge and skills, and present a more powerful solution when you return to the prospect or client to make a formal presentation of your solution.
Other firms may use high level tools such as strategic research, market research and the like, but if you apply your ability to gather knowledge and industrial intelligence through a focused client needs analysis, you’ll be adding clients while your larger, and better funded, competitors are still in their planning stages.
Once you’ve reached the point where you are meeting and targeting key clients, your next step will be to develop the ability to tap into the clients industry database. Time for you to become a member of their community through membership in their trade organizations and subscriptions to trade publications.Once you have client specific knowledge, you can become the industry expert by designing industry specific solutions. Click To Tweet
From this point, and with your knowledge of client specific solutions, you will have the ability to design industry specific solutions, which you can adapt to individual situations. By developing industry specific solutions, or services, it becomes less expensive to adapt to individual situations, and improves your efficiency and profitability in this sector.