Now in its seventh year, the PM Forum Marketing Leaders’ Benchmark shows professional firms in growth mode and marketers balancing focus and agility. Alastair Beddows analyses the findings.
What does 2019 have in store for professional firms? If the last 12 months provide any guidance, then the sector is in for another unpredictable year. Political paralysis, economic turbulence and regulatory upheaval are a mixed blessing. On the one hand they can stimulate demand for professional services. On the other hand, they make the operating environment much tougher and the possibility of long-term planning more challenging.
In 2019 we may also witness more profound structural change, particularly in the accountancy sector. The recent Competition and Markets Authority (CMA) investigation into the audit market concluded with recommendations for significant change to rebuild trust in audit and make the market more competitive. The BDO and Moore Stephens merger – expected to complete this spring – represents the biggest shake-up among top tier firms for many years.
The legal sector also faces continued pressure to change, and with no sign of ‘disruption fatigue’ the legal market will continue to reshape itself over the year ahead. Further consolidation is likely here too, as many mid-tier firms without a clearly differentiated offering will find increased competition continues to put pressure on margins. Scalability is a tempting solution for many firms. The Big Four accounting firms look set to continue making inroads into law. EY’s recent acquisition of Riverview Law is a likely precursor of what’s to come.
A bullish view of 2019
Despite change and uncertainty on the horizon, professional firms are very confident in their prospects for 2019. The Forum’s annual Marketing Leaders’ Benchmark, in association with Meridian West, took the pulse of CMOs and Directors of Business Development in the UK’s leading professional firms. Asked about their firm’s strategic priorities, two thirds (66%) name revenue growth as their top priority. This ranks significantly ahead of efficiency and margin improvement (cited by 21%) in second place and business model transformation (cited by 14%) in third place.
Exactly how firms achieve this growth will takes different forms. Nearly half (47%) say they are likely to pursue lateral hires over the next 12 months. Nearly four in ten (38%) plan to develop new service offerings or propositions for clients. A quarter (23%) plan to enter a new market or client sector, see Figure 1. A blend of targeting new opportunities and improving cross-selling is the norm.
Most significantly, a quarter (24%) of marketing leaders surveyed plan to refresh firm-wide strategy over the year ahead. This is a clear signal that new thinking is required to boost revenues and find innovative ways to create value in new client or market segments.
Although only one in seven (14%) firms say business model transformation is their top corporate priority, more than two thirds (68%) place this in their top three corporate priorities. Firms recognise the route to growth is strategic flexibility, and the ability to respond with greater agility to external market changes.
A step-change in the role of marketing and business development?
Marketing and Business Development functions have a critical role to play in supporting the development and implementation of growth strategies for their firm. As one respondent remarked:
“My vision for the marketing and business development function in this firm is to be proactive and commercially-focused, and to act as the commercial heartbeat of the firm. Our goals are to identify, forecast and generate sustainable revenue growth. Our business development and marketing plans are aligned with achieving these goals.”
This aspiration is shared by many respondents. However, a significant challenge remains evident: how to achieve a step-change in the contribution of marketing and business development functions so that they are considered genuine strategic business partners by fee-earners and other leaders in the firm.
As an illustration of the scale of the challenge, just 58% of respondents – who are the most senior marketers in their firm – say they have regular interaction with their firm’s clients. Only 58% agree the role of marketing is sufficiently understood by fee-earning staff. Less than three-quarters (73%) say their marketing team has sufficient authority to perform its role successfully. Looking back five years these numbers have flatlined since we last asked the same question in 2015.
Authority, client interaction, collaboration with fee-earners are essential ingredients of a value-adding marketing and business development function. At the heart of the issue is the degree of recognition marketers are given for furthering firm-wide goals. This is, of course, a two-way process. Just 28% report it as easy to demonstrate return on investment (ROI) of time and money spent on marketing initiatives. Without clear measures of success it will be more difficult for marketers to create a step-change in 2019 and beyond.
Client experience remains top of the agenda
With the challenge to demonstrate value acutely felt, where do marketing leaders plan to focus their efforts during 2019? The clear area of focus is improving client service, cited by 22% as their top priority activity for the year ahead, though down from 32% who cited it as the top priority in 2018. This is followed by obtaining feedback from clients (up 10% on 2018) and relaunching the firm’s brand (up 3%), both at 16% this year.
With a continued focus on client experience, marketing leaders report a variety of different approaches to tackling this priority, including:
• “Driving a culture change towards one that is more focused on business development at all levels within the firm.”
• “Enhancing our reputation for service innovation, which in turn helps build demand for our new approaches.”
• “Maintaining our influence with the management board to invest in service improvements, product development, and client listening.”
• “Helping lawyers to sell themselves and differentiate the service they provide to clients.”
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Budget growth masks resourcing challenges
To fulfil their growth aspirations, marketing leaders need to make the case for continued investment to fund the initiatives that will support firm-wide goals. This year’s benchmark results show marketing budgets increasing year-on-year by 2.4% on average, and spend on marketing salaries up by 3.1%, see Figure 2. Both these metrics are at their highest level since 2016.
Yet behind the headline numbers the picture is a little more complicated. Just 21% say it is easy to find high quality talent to fill vacancies that arise in this team. More than a third (35%) say their marketing budget will remain static or decrease over the year ahead. The proportion of overall firm revenue spent on marketing and business development on average is also down from 2.6% in 2018 to 2.1% this year. This suggests that other business priorities – not marketing and business development – have benefited from the healthy top line growth most professional firms experienced over the last year.
These changes matter because they show markets under pressure to balance competing demands of adaptability and focus. This requires tough choices about which projects to green light and which to cull. Ask yourself: which activities will drive forward strategic goals, and is funding and resourcing aligned to these areas?
One senior marketer captures things perfectly in this eye-catching analogy:
“Business development and marketing at a professional services firm can be like eating an elephant. You have to tackle it methodically bit by bit, strategically, starting with the bits that will make the most impact for your stakeholders.”
Alastair Beddow is Managing Director at Meridian West, and a co-author of Professional Services Leadership Handbook.