Here's how to help your clients cross-buy
Helping clients cross-buy is one sure way to grow organically in a stagnant market. Yet so few firms recognise the opportunity. The chart in this post provides empirical evidence that clients actually value using multiple service lines from a single firm. In other words, clients want to cross-buy. So all firms have to do to grow organically is to cross-sell.
Last year Beaton published research that busted the myth that law firms clients buy services on a ‘horses-for-courses’ basis. Now this post shows the same is true for clients of consulting engineering and environmental services firms.
This is how the research is done. Each year since 2003 Beaton Research + Consulting has surveyed the opinions of thousands of clients of law firms in a study known as the Beaton Benchmarks. For those interested, details of the Beaton Benchmarks survey may be found here in the text, graphics, PDF and trailer.
The Beaton Benchmarks survey
Our most recently reported survey of clients of consulting engineering firms was done in November 2014–January 2015. The 4,200 respondents represent the clients of the 32 largest consulting engineering firms in Australia. The respondents are users and buyers of the firms’ services and come from the ranks of the in-house project managers and engineers, procurement, and senior general and functional management of Australia’s public and private companies and governments.
In our survey we measure and represent the respondents’ reported experience with their consulting firm in a composite score that reflects their overall satisfaction. The scale on which they provide their answers ranges from 0 (extremely poor) to 10 (excellent). In the course of the survey each respondent is also asked which service lines of the firm they have experienced in the last 12 months. By combining these two results we are able to analyse how clients’ overall experience varies with the number of service lines to which they have been exposed.
Clients value being able to cross-buy
The chart shows the more service lines a client buys and uses in a given year, the more satisfied they become. Or perhaps it’s this way round, the more satisfied the client is, the more they buy. Afterall, this is only a correlation we are looking at. Either way, it doesn’t matter. Happy clients buy more.
Here are three reasons why the finding that clients report increasing satisfaction with wider exposure to a firm’s range of services are readily explained:
First, a client’s transaction costs are lower if they work with one provider; less time and fewer people with whom to deal.
Second, clients have greater purchasing power; able to negotiate for bigger discounts and most MFN pricing status from their supplier.
Third–and perhaps most importantly–the deeper the relationship, the more the provider learns about the client’s business and the industry in which the client operates. Beaton’s research is emphatic on this point–a major attribute in why clients choose firms and what they value in the service they receive is how firms “understand my business/industry” (check out this post for more on this subject).
It’s clear, clients benefit from cross-buying, i.e. procuring multiple services from one firm. But what does this mean for the firms themselves?
Cross-selling is the fastest way route to profitable organic growth
Cross-selling is the fastest way route to grow organically in a stagnant market because selling to an existing client is always easier and less costly than selling to a cold prospect. The cost of acquisition is simply lower. In these days when bid:win ratios can be as poor as 6 or 7 to 1, the very idea of a firm’s best clients buying more from the firm is akin to manna from heaven.
And it needn’t be at a discount as this post proves.
Interested in knowing more?
Register here to attend the beatonlive Growth, Ownership & Exit Strategies Conference on 14 May 2015 in Sydney.
Further reading
If you enjoyed this post, then you may also want to read these:
This post was written by George Beaton, a partner in Beaton Capital and executive chairman of Beaton Research + Consulting. George is also on LinkedIn and tweets at @grbeaton_law, @grbeaton_cee, @grbeaton_psf and @NewLawNewRules.