Philip Kotler and Richard A. Connor, Jr.

Marketing Professional ServicesA specific program for managers of professional services firms:

M ARKETING thinking and practice has beengradually moving into service industries. Its

role in service industries is still limited, however. Ithas achieved some utilization in banks and airlines,to a lesser degree in insurance, brokerage, and pub-lic transportation, and still less in law, accounting,management consulting, medicine, architecture,and engineering. Even marketing research firmsand advertising agencies tend to under-apply mar-keting concepts to the marketing of their own ser-vices.

Many professional practitioners in these in-dustries deny a role to marketing or, if they doaccept it, have a very inadequate idea of its contentand how it can be implemented in a firm. Market-ing, far from being a minor negligible function inmanaging a professional services firm, is one of themost important functions for helping such firmsmeet the unprecedented challenges they are facing.

Forces to Cope With

Professional practitioners must now cope withthree increasingly significant forces:1. Assaults on Professional Codes of Ethics—The

U.S. Supreme Court recently ruled that mini-mum fee schedules violate anti-trust laws andstated:

About the AuthorsPHILIP KOTLER is the Harold T. Martin Professor ofMarketing at the Graduate School of Management,Northwestern University, Evanston, Illinois.RICHARD A. CONNOR, Jr. is President of ProfessionalServices Marketing, Springfield, Virginia.

". . . Federal law requiring pricecompetition is applicable to legalservices." Justice Douglas opinedthat "for meaningful price competi-tion the fees must be made known"rather than suppressed by rulesagainst advertising.

There is talk about lifting the traditional ban againstadvertising.2. Changing Expectations of Clients—Fewer

clients today are in awe of the professional'scredentials. Client executives are becomingmore sophisticated in selecting, using, and,increasingly, replacing firms. They insist on"client-centered" performance in contrast to"technical-centered" service.

3. Increased Competition—In today's uncertaineconomy, it is not unusual to encounter situa-tions in which as many as six to eight firmssubmit proposals for new work. Some firmsare willing to "buy-in" to obtain off-seasonwork and a few firms are known to engage inquestionable solicitation practices.

Barriers to Marketing

At the same time, most professional services firmsare generally ill-equipped to cope with these forces,because of three barriers to marketing:1. Disdain of Commercialism—Few profes-

sionals like to think of themselves asbusinessmen. Many show hostility to anysuggestion that they are motivated by moneyrather than service to their clients. Discussionof fees is usually distasteful to them.

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2. Association Codes Ethics—Professional as-sociations have erected stringent rules againstcommercial behavior. In three professions—accounting, actuarial, and law—an absoluteprohibition has existed against anything re-sembling selling activity. Advertising, directsolicitation, and referral commissions havebeen banned. Other professional firms dotend to adhere to certain "standards of goodpractice" which tend to limit the use of effec-tive marketing and sales techniques.

3. Equating Marketing with Selling—Because ofthe bars or bans against selling, professionalservices firms show little interest in the subjectof marketing, having made the error of equat-ing marketing with selling. Marketing is amuch larger idea than selling.

By remaining ignorant of the concepts andpractices that make up modern marketing, thesefirms are without the skill to adapt smoothly to arapidly changing environment and to grow to theirpotential. Their professionalism is a blind spot thatkeeps them from acting to achieve their goals. Theirposition grows more precarious as a few of theircompetitors begin to learn and apply modern mar-keting techniques. It is unfortunate not to under-stand marketing in a strong market when no oneelse does; it can be fatal in a down market whencompetitors do.

This article is written to explicate the role ofmarketing in professional services firms. As a pre-liminary step, we offer the following definition ofprofessional services marketing:

Professional services marketing consistsof organized activities and programs byprofessional services firms that are de-signed to retain present clients and at-tract new clients by sensing, serving,and satisfying their needs through de-livery of appropriate services on a paidbasis in a manner consistent with credit-able professional goals and norms.

What Styles of Marketing are Possiblefor a Professional Firm?Professional firms, like other business firms, havethree major objectives: sufficient demand, sustainedgrowth, and profitable volume. They must turn tosome form of marketing to achieve these objectives.Three different styles of marketing can be distin-guished: Minimal, Hard-Sell, and Professional.

Minimal Marketing

A large number of professional firms practice min-imal marketing. They avoid or minimize consciousdevelopment of a marketing program. The firms feelthat they will attain their objectives by renderingthe best quality service to existing clients. Theyreason that a high quality of service will lead tosatisfied clients, who will place their new businesswith the firm. Furthermore, satisfied clients willrecommend the firm to others, thus leading to asubstantial inflow of new clients.

This logic is appealing and allows the firm tofeel it is adhering to the spirit of the ethical canonsprohibiting direct selling activity. Unfortunately,minimal marketing is a decreasingly tenable phi-losophy for professional firms.

• It places too much confidence in the assump-tion that quality speaks for itself. In marketingcircles, this is known as the "better mouse-trap fallacy."

• It assumes that the firm will deliver distinc-tively better quality services than competitors.But several firms are usually pursuing thesame philosophy, and thus no firm may strikethe client as particularly exceptional in thisrespect.

• It assumes that competitors are not practicingthe stronger forms of marketing. But an in-creasing number of firms are, and it is ques-tionable that a firm doing minimal marketingcan compete effectively.

• It is a reactive rather than a proactive approachto marketing opportunities. The firm does lit-tle to shape its future clients or services.

Minimal marketing means that the clientschoose the firm, rather than the firm choosing itsclients.

Hard-Sell Marketing

A few professional services firms practice hard-sellmarketing. They engage in glad-handing, wining-and-dining, sharp pricing and discounting, slickbrochures, partner bonuses for new clients, somediscreet badmouthing of competitors, and evensome direct solicitation and possible referral com-missions. Some of the hustling for business thattakes place borders on, or actually violates, the pro-fession's code of ethics. Even if it does not, themajority of practitioners consider it distasteful andpredatory in nature.

Marketing Professional Services / 73

Hard-sell marketing really reflects a sales orien-tation rather than a marketing orientation. It may domore damage than good for the firm and the profes-sion. It has two major faults:1. It does not use a disciplined approach to iden-

tify and cultivate the market. It confuses sales(which is an outside job) with marketing(which is an inside job). It neglects the basicmarketing process which is to choose targets,develop services, formulate plans, set up in-formation systems, and establish controls.

2. Firms using this approach often get carriedaway with the problem of attracting new clientsand are drawn into using more extreme tech-niques which begin to violate the ethical codeand may result in acquiring marginal clients.

Professional Marketing

We define professional marketing as an approach tothe service/market opportunities of the firm that isconsonant with the profession's canons of ethics. Itsmajor attributes are:

• Stating long-range marketing objectives andstrategies.

• Developing annual volume, growth and profitobjectives, and detailed plans and budgetsbroken down into individual responsibilities.

• Organizing regular training seminars to im-prove the professional person's effectiveness atmarketing and personal selling.

• Assigning formal responsibility to one or a fewpeople to organize, manage, and motivate themarketing activity.

• Allocating time and budget to support themarketing activity.

• Setting up a system of controls and rewardstied to individual and group performance inattaining marketing goals.

• Ensuring that the quality of professional workdoes not suffer as marketing activity is in-creased.

• Using only those marketing tools and proce-dures that are consonant with the industry'scode of professional ethics.

What are the Most Effective MarketingStrategies for a Professional Firm?We have suggested that professional marketing isthe answer to the professional firm's desire for sus-

tained demand, growth, and profitability. Now it isimportant to spell out professional marketing in itsstrategic, planning, and control aspects. Six strate-gies are available to the professional firm that isseeking disciplined growth:

1. Expanding Service to Existing ClientsMany professional firms see the key to growth to liein expanding their services to existing clients. Alauryer who is preparing a client's taxes may uncoversome poor asset management and propose someestate planning. A public accountant may note someareas of deficient performance and suggest that theclient utilize the firm's management services divi-sion. Cross-selling of services is a major source ofgrowth for the professional firm.

2. Identifying and Cultivating High PotentialProspective ClientsThis strategy calls for identifying eligible and attrac-tive potential clients and laying plans for their culti-vation. Each professional firm can identify specificprospective clients that it would like to serve. Thecriteria for good prospects include: high growth andprofit potential, actual or potential dissatisfactionwith their current firm, a base for attracting furtherclients in that industry, and the availability of a goodcontact or referral source.

One firm divides the new client developmentprocess into six stages:

1. Generating and evaluating leads.

2. Developing a plan for each good lead.

3. Making contact with the prospect.

4. Preparing and presenting the proposal.

5. Closing the sale.

6. Follow-up work.

Each stage is further modeled with specific proce-dures. For example, leads are evaluated with theformula shown in Exhibit 1. The partners allocatetheir times to the prospects ranking highest accord-ing to this formula. Periodically they report on theprogress they are making with each prospect.

Exhibit 1

Expectedvalueof aprospect

Probabilityof attractingprospectwith $C ofeffort

Valueof theprospect(if hebecomesa client)

Cost oftrying toattractprospect

74 / Journal of Marketing, January 1977

3. Widening and Deepening Personal ReferralSourcesThe professional firm also takes steps to cultivatekey referral sources. Each professional firm has itsown idea of the most helpful referral sources. Alawyer in a medium-size law firm ranked his refer-ral sources as follows: His best source for new busi-ness was bankers since bankers are often asked bytheir clients to recommend lawyers. His second bestsource was insurance agents; they recommendedclients needing estate work and revised wills. Thethird best source was other lawyers who had a highregard for this law firm's work in certain areas.Certified public accountants stood as a weak fourthin referral value to this law firm. The law^yer spendsa lot of time with these referral sources, especiallyin social settings. He practices reciprocity by rec-ommending his clients to these firms when theyneed a bank, an insurance agent, a specialistlawyer, or an accountant. He carefully chose hisreferral sources because he recognized that hisgrowth depended on their growth.

4. Favorable Awareness ProgramsThe professional firm also has to undertake steps toincrease its overall market visibility and reputation.The first step is to assess its public image. Mostprofessional firms have a distorted view of theirimage and are surprised to discover how they areactually perceived and talked about by competitors,referral sources, and clients. Exhibit 2 shows theresults of an image study of eight management con-sulting firms offering their services in France. Themanagement consulting firms in the upper rightquadrant are in the best position. On the otherhand, a firm such as 7 at the far left is seen ashaving fair quality but low awareness. Its task is to

Exhibit 2Images of Eight Management Consulting Firmsin France

HighQuality

LowAwareness

HighAwareness

8

LowQuality

maintain quality and expand its public relationsprogram to achieve higher visibility among Frenchexecutives. Firm 8 on the other hand, is seen ashaving low quality and medium awareness. Its taskis not to increase the market's awareness but ratherto first upgrade its quality and then proceed toincrease its visibility. Furthermore, image mea-surement is not confined to these two scales. Theprofessional firm may also want to measure itsimage of integrity, innovativeness, size, experi-ence, and friendliness.

Several methods are available to the profes-sional firm seeking to increase its visibility andfavorable image.

• Association memberships within the firm. Fa-vored associations are business and tradegroups, political parties, and charitable, reli-gious, civic, and educational institutions.

• Public speaking and writing. Those partnerswho are effective at public speaking shouldseek out opportunities to speak to target in-dustry groups, particularly those containing ahigh number of decision-makers. Partnersshould be encouraged to write good articlesfor journals that will reach a high number ofpotential clients.

• The development of seminars. The profes-sional accounting firm may build a seminararound a "hot" accounting topic such as"Accounting for Inflation," or a seminar di-rected at a target industry such as "New Direc-tions in Bank Accounting," or an annualseminar to summarize new developmentssuch as "What's New in Auditing Practices."Invitations are sent out to current clients, im-portant referral sources, existing contacts, andattractive prospects.

• Sponsoring scholarships, awards, profession-al chairs, and professional training programs.These goodwill gestures make a useful civiccontribution and at the same time draw favor-able attention to the firm.

A final way of achieving visibility is throughtaking a controversial stand on some public or pro-fessional issue. This brings immediate media atten-tion and free publicity to the firm. At the same time,this can be risky; the professional firm has to be onsure ground before staking out a role as iconoclast.

5. Service and Market Specialization

One of the major marketing errors of professionalfirms is to strike out in all directions for possiblenew clients. The partners join all kinds of associa-

Marketing Professional Services / 75

tions, speak everywhere and anywhere, and acceptall clients. This "total service" philosophy is coun-ter-productive. It is an inferior strategy to that ofservice and market specialization.

Specialization offers two distinct advantagesto the professional firm.1. Specialization gives the firm a preferred posi-

tion placing it automatically in contention forpotential clients seeking that kind of expertise.

2. Specialization permits a greater profit on vol-ume because the firm develops "cutting-edge"expertise and low cost procedures for handlingrecurrent situations.

These benefits came to a medium-size Chicagolaw firm that decided to specialize in the incorpora-tion of group medical practices. Now it is a leadingfirm in this area. The same firm, however, decidedto avoid bankruptcy law. It recognized that: (1)bankruptcies do not build long-term clients and (2)bankruptcies would diminish as the economyturned around.

The management consulting department of aBig Eight accounting firm recently rated possibletarget industries on the basis of their growth poten-tial, profit potential, specialized knowledge needs,degree of competition, and current available referralsources. They selected five industries for specialattention: insurance, savings and loans, healthcare,banking, and real estate. A committee of partnerswas then assigned to each industry to select thebest target companies, to broaden exposure andcontracts.

6. Replacing ClientsReplacing clients hardly sounds like a growth strat-egy but under certain circumstances it is. Some ofthe clients of a professional firm are small, havelittle potential, require more during the "busy sea-son," and may produce less than a normal rate ofreturn. The firm needs an objective system to iden-tify candidates for pruning. They need to knowhow to discontinue relationships with poor clientsand discourage similar potential clients withouthurting the reputation of the firm.

What Procedures are Required forInstalling Effective Marketing?We have argued in favor of professional marketingand have described six strategies that the firm canuse to pursue growth and more profitable volume.But these strategies are ineffective unless the firmundertakes specific steps to train and motivatesome or all of its practitioners to devote some timeto business development.

Where should the primary responsibility forbusiness development be located in the profes-sional firm? There are three alternatives:

1. Leave business development to those in the firmwho are most interested in it and effective at it.Every firm has certain partners, managers, and staffwho have a flair for spotting market opportunitiesand converting them into realized business. Thenatural marketers should meet from time to time asa marketing committee to exchange informationand develop plans. If the firm, however, is lackingin "natural marketers," it should make a point oflooking for this trait when it hires new staff. Thisalternative, however, really doesn't improve thebusiness growth rate that currently exists. While ithas the merit of not foisting a role on the staff that isunnatural or uninteresting to them, it has the faultof leaving business growth to spontaneous ratherthan organized forces in the firm.

2. Develop a special office for business develop-ment headed by a partner or specialist in market-ing. This "director of business planning" wouldhave the following responsibilities:

• Guide the development of a long range and anannual plan for business development.

• Search in a systematic way for new businessopportunities.

• Motivate through incentives, assist, and trainmembers of the firm to perform better in busi-ness development activities.

We regard the creation of this center of re-sponsibility for business development a necessarystep in tbe evolution of more effective businessdevelopment procedures. At the same time, it is nota complete solution.

3. Develop a firm-wide program for marketingtraining, incentive development, planning, andcontrol. The firm's leadership decides that everyprofessional in the firm—with the possible excep-tion of junior practitioners and specialists—shouldreceive training and incentives in business devel-opment.

A large public accounting firm made the deci-sion recently that practitioners should spend ap-proximately one-fourth of their time in practice de-velopment. Management, however, realized thatthis would be a pious utterance unless backed byincentive and budget. Practitioners could not beexpected to work a longer day. Nor could they beexpected to cut down their current "billable" time.The only solution was to create a budget account forbusiness development which could support the

76 / Journal of Marketing, January 1977

practitioners' club memberships, luncheons, andcharges to billable time.

Furthermore, the desired behavior stillwouldn't come about unless practitioners foundthat their effectiveness at business developmentw as included as a factor in determining their annualbonuses. In addition, the firm created a new posi-tion that, among other things, organized seminarsto help practitioners improve their planning andsales skills. The office designed planning forms thatare filled out by the practitioners each year describ-ing their intentions in the areas of cross-selling,prospecting, referral source work, favorable aware-ness activities, etc. These plans are reviewed quar-terly for accomplishment and for redesign wherenecessary.

A firm with many branch offices must intro-duce further mechanisms to build up business de-velopment effectiveness. Consider the followingmarketing planning model used by a public ac-counting firm:

Example: Planning Model

The planning process starts with the home officegathering information on the economy, market, andother factors that will influence its objectives for theyear. It also carries on informal discussions with thebusiness development coordinator in each branchoffice about possible growth goals. Based on itsinformation, the home office adopts a five-yeargrowth objective and specific growth and profit ob-jectives for the coming year. These objectives arecommunicated to the branch offices.

Each branch office has a business develop-ment committee, which looks at the firm-widegrowth objectives and develops specific objectivesfor the branch office based on both the overall goalsand local economic conditions. The business devel-opment coordinator in each office (who is a memberof the business development committee) announcesthe branch's objectives to each department andpractitioner.

Each practitioner prepares an individual bus-iness development plan in which he states his ex-pected contribution in terms of fee objectives, ex-panding service to existing clients, potential newclients, planned work with referral sources, favor-able awareness programs, plus speaking, writing,and seminar work. The individual plans are re-viewed by the business development committee.

with suggested revisions gained through individ-ual discussions. They are summarized for thebranch office to ensure that the time devoted tovarious marketing strategies is appropriate.

Branch office business development plans arethen forwarded to the home office for review andapproval. During the year, the home office receivesbranch office results and determines where consul-tation is desirable. The home office evaluates per-formance against objectives, using such measuresas profitability, market share, the ratio of reportedbusiness development time to total hours, the hitratio (ratio of successful proposals to total propos-als), the percentage of lost clients, and percentage ofnew clients.

Summary and ConclusionProfessional practitioners like to think of them-selves as removed from business development re-sponsibility in the practice of their professions.They would like to believe clients will come to themwithout organized effort on their part, simply as aresult of achieving a good reputation. They wouldlike to believe they do not have competitors, or thatother firms are not aggressively cultivating the samepool of clients.

Professional firms that want to grow and pros-per will have to shed this attitude and confront themarketing issues and challenges. The professionalfirm cannot base its future on minimal or casualmarketing nor, on the other hand, is it free to adopta hard-sell effort that violates the profession's ethi-cal norms. Between these extremes, a firm can prac-tice a professional type of marketing appropriate toits needs. Often this calls for establishing a center ofresponsibility for business development within thefirm. It calls for training members of the firm inmarketing planning and sales-building. It calls forestablishing a special budget and bonus system tosupport individual practitioners in their businessdevelopment activity.

The question facing professional firms is notwhether to do marketing. They are doing market-ing. The question is how to do it effectively. As thefirm's competitors resort increasingly to installingorganized programs for business development, theprofessional firm can no longer remain indifferentto the discipline of marketing.