Service With Your Style
TEXT Doug Stewart
Several years before freak-show pop star Michael Jackson’s hair was singed during a commercial shoot, Pepsi figured out that young people were more valuable customers than old people. This significant insight fuelled what later became known as the Cola Wars–Pepsi and Coca-Cola fighting for market share with huge advertising budgets that stretched around the world.
The insight is embarrassingly obvious, as the best ones tend to be. Pepsi calculated that a loyal 12-year-old Pepsi drinker had a lifetime value of $75,000. No other consumer group was more important than 12-year-olds because they had more years to invest in consuming more gallons of Pepsi, plus it was cheaper to win a 12-year-old’s loyalty than to convince a 36-year-old Mom to switch brands.
Pepsi’s insight is a retention strategy; it calculates that the cost of winning a customer and retaining his business over an extended period is less then the cost of winning new customers to replace old customers. Regardless of your thoughts on the commercialization of 12-year-olds, this story has a direct application to an architectural firm’s management strategy. What is our business development strategy? Do we emphasize acquisition of new clients or retention of established clients?
At the heart of a successful retention strategy is a dedication to service excellence. It is a tangible, proactive dedication of resources and partner leadership that places emphasis on how a client experiences the firm’s work. This drives client loyalty which, when expressed as a business retention rate, will reduce marketing costs year over year while expanding revenue resulting in profitable growth.
Service is a catchall word to describe how a client experiences a firm’s work. However, many companies that are actually in the service business underestimate its value if not misunderstand the term. “Service” is not schmoozing, taking people out for lunch, or being obsequious. It is a proactive effort to bring value to your client’s experience. While the word is generic, the experiences that service describes are not. They are deeply meaningful to your client, and are of critical importance.
Ask yourself how your firm’s staff interact and respond to the needs and pressures of the client and the client’s staff. Does your firm understand the client’s business and act accordingly? Does the lead architect lead with strong communication, collaboration and co-ordination skills?
This intangible “client experience” is crucial because it is the one aspect of your firm’s work that they are able to best understand and quantify. As David Maister wrote in his 1993 classic Managing the Professional Service Firm, “a firm’s technical ability is ambiguous to its client.” Your client will value your work not for your technical merit but by the manner in which they experience you doing your work.
Therefore, because service is central to your client’s evaluation of your firm, the goal in a retention program is service excellence. Service excellence is the effort to provide your clients with an experience that exceeds their expectations and encourages them to retain your firm for future engagements.
The financial benefit of service excellence is that it costs less (and is more enjoyable) to make a client happy and to win a second project from them then it is to endure submitting 12 RFPs in order to win one new client. Research published by the American Institute of Architects (AIA) found that highly profitable firms have a low cost of sale–profit results from the decision to reduce time invested in pursuing low-probability projects and reinvest this time in making current clients very happy and winning their favour on future opportunities.
To do this, you must first understand the client’s perspective: their experiences, priorities, fears and goals. These priorities become the benchmark foundation of your retention or loyalty program.
In July 2007, our firm Catapult conducted an online quantitative study of the facility directors (plus capital planning senior management) of Ontario’s 42 colleges and universities. These are experienced, knowledgeable people who care deeply about their work and who find “service” as being of critical importance. I will underscore their importance by the fact that 85% of them stated that their institutions require equal or greater work from architectural firms in the 2008-2009 period than in the preceding 2005-2007 period. The study aimed to understand how firms have conducted themselves. Essentially, to what degree do clients experience service excellence and, importantly, what does it consist of?
Catapult asked the facility directors to identify what percentage of firms they had worked with since 2003 that had provided “service excellence”: 40% of firms had done so; 52% had provided competent service; 8% of firms had failed. What does this mean? Well, 60% of projects are being conducted at an unsatisfactory level if you accept that being “competent” is not what your firm should aspire to.
This is extremely interesting and has direct implications for firms interested in entering, growing or protecting their business with Ontario’s post-secondary institutions. In short, there isn’t significant loyalty between firms and these institutions as the service rating is too low. That spells opportunity for some firms and problems for others.
Firms that have documented proof of their service excellence will find this a critical tool in their marketing strategy: 54% of respondents said that documented proof of service excellence would be a significant factor in their selection decision and an additional 46% of our respondents said it would be a modest factor. To spell this out, 100% of facility directors value this type of information.
And it gets better. As your firm aims to win larger and more interesting projects, the value of service excellence grows. 62% of our respondents stated that there is a relationship between a firm’s service quality and the size of the project they are awarded. Literally, service excellence pays with larger contract wins.
Interestingly, only 21% of colleges and universities document their service experiences. If you want to stand out relative to your competition, perhaps measuring your firm’s service delivery on each project would be a rewarding strategy. This would communicate a) your sophistication as a professional service firm, and b) your confidence that your firm’s culture and project management will produce outstanding results.
Not surprisingly, our respondents found that it was not common practice for firms to ask for direct feedback on their service performance. 64% of respondents stated that firms occasionally ask for feedback and one in three stated that no firm had actually ever (ever!) asked for feedback.
It isn’t perhaps the sexiest issue, but when you strategize for you firm’s profitable future, the key role of service is critical. Every project has a client team of people with their own issues, priorities, fears and hopes, and how your firm and your sub-consultants work with these people matters. It matters to such a degree that over time, service excellence produces a successful, stable firm that wins exciting projects, attracts great staff and has happy, loyal clients. Now that is sexy.
Doug Stewart is the principal of Catapult Inc., a Toronto-based research and strategy firm that works exclusively with architectural firms and their institutional clients.