Accountants shouldn’t spend money on marketing
Mark Lee interviews Patrick McLoughlin, a marketing expert, who explains why accountants should stop spending money on marketing
ML: Hi Patrick, when we spoke on the phone you told me about your campaign against accountancy marketing. Not the message I’d expect from the owner of an accountancy marketing agency. What’s it all about?
PM: Well Mark, it’s so frustrating watching accountancy firms, especially the smaller ones, continually waste time and money on ‘marketing’. My campaign was sparked by a conversation with the managing partner of a practice in the North East. After explaining his marketing intentions to me I asked him what return on investment he was targeting. His response was along the lines of “we’re sticking to the plan, it’s not about increasing revenue”.
Unfortunately that’s the norm. Marketing communications is important for the largest firms with substantial budgets, but for the other 99% of UK practices it’s hindering their growth.
ML: So are you saying that marketing is a waste of time for accountants?
PM: It’s not that it’s a waste of time Mark, but its impact is negligible. I would love accountants to ban the word marketing and focus only on new business development.
ML: Funny you should say that. When I started talking with accountants about non-technical topics I recall being advised never to use the word ‘marketing’ in the titles of my talks. So I think I know the answer to this question, but how would you distinguish marketing from business development?
PM: Simply that business development focuses on ROI (Return On Investment), attracting new clients or increasing fee levels in a firm. So you only focus on activity that you can measure and forecast a return from. Really, new business development is closer to sales, than to marketing.
That means no more branded tax cards, chasing Twitter followers or template newsletters. It means all marketing investments and returns are measured. If you employ marketing staff in-house or use external help, you only do so with a clear and measurable forecast return. If they don’t achieve an acceptable return, then I’m afraid they have to go.
ML: Wow. That is all quite revolutionary. In your view, what ROI should an accountant expect from their new business development?
PM: Well, before we look at the level of ROI, let’s decide how we are going to measure it. For the few firms that do measure it, it’s usually based on the first year’s fee from a new client.
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ML: I think I can guess where you’re going with that.
PM: Indeed. The problem is that it really distorts the picture as most decent firms retain new clients for a number of years. So, the return on investment in securing a new client should really be measured over the lifetime value of the client. Not simply the first year’s fees.
Imagine that John is considering whether to invest in a new business development campaign. He wants to secure 10 new clients willing to pay an average fee of £2,000. The campaign requires an investment of £10,000. John looks at the numbers and turns the project down because, after factoring in his costs, he “isn’t even going to breakeven”.
And yet, the reality is that John’s average clients, who pay him that sort of fee, generally stay clients of his for at least seven years. So the investment of £10,000 should be buying him fees of £140,000. The comparison isn’t 2:1 (£20,000 of fees for an investment of £10,000) but 14:1. That’s equivalent to paying just 7p in the pound for new business!
ML: I can see the logic there although I’m sure the other concern is that the investment in business development may not be as successful as was hoped. Mind you, that’s always the way with marketing costs generally; even more so when there is no specific objective in mind.
PM: The idea of looking at the lifetime value of clients can totally transform how you look at ‘marketing’. It switches your mindset to how much can I afford to pay to attract a client? That feeds back into the practice and focuses the firm in two crucial areas. Firstly, how can I increase the GRF and the value I provide? Secondly, what can we do to improve client satisfaction to increase the average clients’ time with the firm?
The more you can improve those two numbers, the more you can afford to pay to attract a client. And, if you can afford to spend more than your competitors, you’ve effectively cornered your market!
ML: You’ve told me what firms shouldn’t invest in, but what kind of activity is going to bring new clients to their doors.
PM: Well it’s not a one size fits all kind of thing. Amongst the services we offer is telemarketing, but that’s only going to work for a minority of accountancy firms. Last year we put proposals out to well under 50% of the firms that approached us for telemarketing support. We told the others that we didn’t think it was right for them.
The focus has to be on lead generation, be that traditional forms like direct mail and telesales or inbound / digital marketing. I know a firm that generates a stunning ROI from seminars. The difference is their events focus on winning new business not increasing awareness. That means everything from the wording on the invites to the follow-up is measured, tested and improved.
ML: I know you share my view that accountants can help themselves by doing more to stand out from the crowd and to distinguish themselves from their competitors. Care to share some thoughts on this before we finish?
PM: My best tip is to identify and understand your ideal clients. They are the clients that appreciate that special difference a specific accountant or practice brings. To these clients fees become a secondary issue. All we have to do then is profile them and target their mirror images, ie: those organisations that match, but don’t yet know the difference that specific accountant can make. It’s only then, once you understand your ideal clients that you should start your new business development.
ML: Thanks Patrick. You’ve shared some valuable insights and advice there. I wonder what readers of AccountingWeb will make of it.
Patrick McLoughlin runs A4G.
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