Bentley University – Art and Science V Conference – Silvia Hodges, ABD – June 18, 2009 Slide 1

The Choice Matrixof professional services

June 18, 2009

Silvia Hodges, ABD, Diplom-Kauffrau Nottingham Law School/UK

Bentley University – Art and Science V Conference – Silvia Hodges, ABD – June 18, 2009 Slide 2

Rationale for studyResearch contextIdea for studyResearch questionsMethodologyFindingsThe model: Choice Matrix

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Rationale for study – marketing

Professional services firms (PSF) have started to adopt marketing strategies similar to other (service) businesses (Sharma & Patterson, 1999).

The presence of professional managers and marketing departments in PSF such as law firms has become increasingly common (Mayson, 2007).Changed circumstances force firms to “learn to compete in a completely different manner. Those that do not, or that cling tooth and nail to the past, will not survive” (Bogel & Huszty, 1999: 7).

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Rationale for study – buying

PS markets have matured from relatively inefficient markets with great asymmetry of information, little information regarding price or quality or efficiency of service to increasingly robust and efficient markets with lots of information and sophisticated clients, which results in diminished client loyalty,increasing use of formal competitive processesand changed expectations in terms of service (Jones, 2006).

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Research context – marketing

Marketing in PSF:under-researched and therefore warrants further academic investigation (Day and Barksdale, 2003; Harris, 1997; Hodges & Young 2009; Mangos et al., 1995; Morgan, 1991; O’Donohoe et al., 1991; O’Malley & Harris, 1999; Vickerstaff, 2000).

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Research context – buying

Given the large market for PS and the perceived complexity and higher risk of services purchases compared to goods:surprising to find a small number of studies focus on the purchase process(exceptions include Day & Barksdale, 1994, 2003; Dawes et al., 1992; Lynn, 1987; Parasuraman & Zeithaml, 1983; Stock & Zinszer, 1987; Tinsley & Lewis, 1978)

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Understanding of organisational buying particularly important in B2B markets, where the two parties interact over extended periods of time.

Park and Bunn (2003) considered that such an understanding should be of particular interest for medium-sized companies.

Bentley University – Art and Science V Conference – Silvia Hodges, ABD – June 18, 2009 Slide 8

Idea for study

Rather than studying providers and clients in isolation: Wilson (1996) recommended simultaneously examining both sides: comparing the marketing of the provider and to the buying behaviour of the clients(Context: Legal services)

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• RQ1: How do legal services provider firms market their services to medium-sized companies? Specifically, do they approach marketing to medium-sized companies differently from marketing to larg(er) organisations?

• RQ2: How do medium-sized companies buy legal services, in the sense of their decision-making process? Specifically, what are their criteria for selection and evaluation?

• RQ3: What marketing approaches should legal services providers apply to reach medium-sized companies? Would these be different from marketing to larg(er) organisations?

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Methodology

Due to the paucity of research in this field: Basic research, qualitative methods Generation of theory: Grounded theory (Glaser & Strauss, 1967) Qualitative data collection: general interview guide approach Information-rich cases sampled via “snowball sampling” (Patton, 2002)

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Research participants (jurisdiction: England & Wales)

Legal service provider firms who service mid-sized companies: Managing partners and marketing directors (“MP” and “MD”)

Clients (decision makers): managers and manager-owners in medium-sized companies (“MC)

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Findings – RQ1

While all firms in the study emphasised the importance of medium-sized companies as clients and claimed to be interested in and focused on medium-sized companies, they typically did not market their services to medium-sized companies differently from marketing to larg(er) organisations.

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Firms did not have strategies to address their special issues and challenges. If anything, it was hoped and expected that a more general marketing approach to organisation should also take care of the medium-sized companies.

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Findings – RQ2

The empirical study did not confirm the formal, lengthy risk-reduction strategy of a multi-tiered decision-making process. Instead, decision-making in medium-sized companies was found to be a short “process”, mostly based on informal word-of-mouth recommendation and perceived ‘chemistry’ with a particular professional.

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Relative informality of the process was significant to the point that clients often do not even check on the firms that were recommended to them by their peers. The positive experience of their peers with a firm appears to suffice for most decision-makers in medium-sized companies. This also means that firms that are not part of the evoked set of clients and referrals, have little chance to be chosen, independent of other marketing instruments such as newsletters, brochures, hospitality, or advertising.

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Clients in medium-sized companies particularly motivated by cost (and not just value), unless the issue was deemed to be a high-stakes matter, when cost became less important than expertise. >> Quality does not seem to be a criterion, as it is assumed.

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The Choice Matrix

Developed to answer RQ3: What marketing approaches should legal services providers apply to reach medium-sized companies? Would these be different from marketing to larg(er) organisations?

Bentley University – Art and Science V Conference – Silvia Hodges, ABD – June 18, 2009 Slide 18

Buying behavior influenced client’s existing experience.Non-personal information sources to create initial awarenessOnce the firms have been identified, personal information sources become most important and useful.Commercial sources more important for clients without prior experiencePersonal contact was more important for those with prior experience

Bentley University – Art and Science V Conference – Silvia Hodges, ABD – June 18, 2009 Slide 19

For experienced buyer: Firms need to focus on building and earning ‘trust’:

“You need people you can work with. It’s all about trust” (MC7).

“[The decision] is more emotional [than objective]. It’s very personal. I’m the business. I need to trust people. Do I like them? Trust them? Feel comfortable with them?” (MC4).

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Buying also influenced by decision-making power-autonomy and related job security.

In-house counsel typically have to report within their hierarchy, justify decisions, and have therefore less autonomy in their choice. Decision-makers in medium-sized companies (entrepreneurs/owners or CEOs) typically make buying decisions for legal services alone and do not have to internally justify their choice

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“[Y]ou have to make in-house counsel look good to their bosses. They are typically more interested in their own career path rather than the business. This is not the case with mid-sized companies” (MD2).

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This difference in autonomy/job security influences the decision-making:

The selection of suppliers with ‘good’ reputation and high credibility is explained by the clients’ desire to reduce the risk. ‘No one ever got fired for buying IBM’ remains one of the clearest statements of emotional promise in B2B marketing. >> It basically means that buying/hiring the market leader or most highly regarded brand, is the safest choice as brands are signals for quality

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Not having to be concerned with ‘looking good to their superiors’, nor having to legitimise their choice of law firm (if important litigation case lost), choice of independent decision-makers more likely to be based on what they deem to be a sound business decision, and what they consider to be ‘value’.>> less brand-specific and security-oriented than the choices of (more risk-averse) more dependent buyers

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Figure 9-2 from PhD thesis: “Marketing legal services to medium-sized companies”

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The model does not suggest that all in-house counsel are at the ‘low’ end of job security/autonomy, nor that all medium-sized companies are on the ‘high’ end of job security/autonomy, as it would not be the case with VC-backed companies. It also does not suggest that experienced in-house counsel do not focus on value. As in-house legal departments are increasingly under cost-pressure and expect law firms to work with them to deflect that pressure, law firms need to seek ways to add and demonstrate value

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Thank you for your interest!

Silvia Hodgessilvia_hodges@emerson.eduhodges@silviahodges.com(248) 495-0374