Get the Top Trends in Pricing Today
Join the survey, Get the results.
By August J. Aquila
Price it Right: Valuing Accounting Services
Forty years ago, in 1977, the landmark U.S. Supreme Court decision in Bates & O'Steen v. State Bar of Arizona, 433 U.S. 350 (1977) changed the accounting profession forever.
MORE: How to Shift from Production to Marketing Orientation | 4 Ways a Production Orientation Can Harm a Firm | Price to Get the Maximum Fee | 7 Issues in Partner Retirement Planning | Is It Time for a Partner Compensation Checkup? | 13 Points of a Good Compensation Plan | 5 Ways to Keep Your Edge | The Toughest Job in the World: Managing an Accounting Practice | How to Become the Firm of Choice
Exclusively for PRO Members. Log in here or upgrade to PRO today.
That decision prompted accountants to pursue a wide range of marketing activities. And, ever since that eventful day, accountants have been struggling with the meaning of marketing and the impact of marketing on their practices.
Some would say that it has been the best thing that ever happened to the profession and others, of course, would voice just the opposite opinion. Whichever side of the debate you are on, there is one certainty: Marketing is here to stay.
The Marketing Mix
Any introductory marketing textbook will tell you that in order to effectively market your product or service you need to first identify your target market. A target market is the people or firms that you believe are most likely to need and purchase your services. These are your core clients.
Once you know who they are, you then need to develop a marketing mix (or plan) to present your services or products to the target market. The marketing mix traditionally has been referred to as the Four P’s: services or products offered, promotion, place or distribution, and price. More recently the Four P’s have been expanded to five – people.
“Unless you can demonstrate your benefits, all you are left to compete with is price.” – Jeffrey Fry, CEO, Profit Prophet
While the Four P’s are still relevant today, the growing influence of the Internet has certainly changed the relationship that a firm has with its clients and how firms use the current marketing mix. Since the mid-1990s the Internet has evolved from a communication vehicle (AOL and Yahoo) to a shared economy (Airbnb, Angie’s List, Uber, etc.).
People perhaps are becoming the most important part of the marketing mix today. When we think of this element we must remember that there are two components. While we may think of our current clients and referral sources, we must not forget about our staff and fellow partners.
Firms need to build strong relationships with their clients. This is the key to a successful communication of your service offering.
But equally important is having staff and partners who are engaged in the firm. These are the people who make clients happy and loyal. At the end of the day, it’s your people who will have the most dramatic effect on your firm’s bottom line – positively or negatively.
This element is what you are offering to the target market. You must determine, for example, if you will offer your target market only compliance services or if you will expand your firm’s scope to include various kinds of consulting and value-added services, such as wealth management, systems consulting and so on.
Many firms today are good at developing services for various target markets or niches that they have identified. For example,
- the services a firm offers to closely held and family-held businesses would include succession planning, family office, resolution of family conflict issues, compensation issues for family members and so forth.
- The services a firm offers to nonprofit clients often include, in addition to the traditional tax, accounting and assurance services, best practices for financial governance, outsourcing CFO, assessment for a new CEO and so on.
- The services that firms might offer to banking or other regulated industries would be quite different from the ones just mentioned.
Service decisions do not appear to be a critical issue for most accounting firms today. Clients, today, don’t really care about product or service features or usability if a product or service fails to solve their problem. Remember, it’s not about the features you want your product to have, it’s about the problems that customers need to solve.
This element is how you communicate your message – the benefits of your products or services – to your target market. Will it be by email; snail mail; social media, such as LinkedIn, Twitter or Facebook; or older methods of printed newsletters, print advertising, radio, cable television or even on billboards?
Promotional programs have probably taken the limelight over the last several years when it comes to marketing. In fact, there has been a great deal of confusion that marketing consists of only promotion and its components, such as public relations and advertising. It was quite easy to develop this particular segment of the marketing mix, especially since so many of the early marketing directors came from a public relations or communications background.
Promotional programs were also seen as a quick way to attract new clients. Once the basic needs and characteristics of specific market niches were identified, a promotional program could soon be developed. For example, promotion to the nonprofit market might include the use of bimonthly marketing roundtables, niche newsletters to the nonprofit organizations, seminars on membership services and unrelated business income tax (UBIT). Promotion for the construction industry might include participation at industry conferences, niche newsletters and advertising, and direct mail to bonding and surety companies.
Before the Internet, promotion consisted of creating messages about your brand or services and every firm could claim its services were the best. The Internet has changed all of that.
It is no longer what you say about your firm or services, it’s what consumers say about it.
If you are a traveler you will check out TripAdvisor. Crowd-sourced reviews are what matter today. Your clients can find opinions online at any time and about anyone. It is a lot harder to hide poor service today.
Delivering great services that help clients solve their problems is your first promotional goal. Next, you need to get your clients talking about their experiences.
In bygone days this element was how you would distribute your product/service to the market. There was an actual physical location. For a CPA firm this usually meant determining whether you would have more than one office and where each office would be located. It could also include how you physically delivered your final product to the client.
In today’s 24/7 environment where many businesses are always open, place becomes less important. I no longer have to go to Best Buy or Home Depot to research an item. I can do it any time and any place on my phone or laptop. Information about your services, people and firm needs to be available anytime and anywhere. Physical and digital worlds are now coming together, even for accounting firms.
Depending on the kind of professional service being offered, location and distribution vary in importance. For example, for an individual tax-oriented accounting practice, place would be more important than for a full-service business-oriented firm. With the advent of client portals, electronic filing and cloud computing, it is becoming more common for the client and the accountant to deliver and interface via some form of electronic media rather than face to face.
This element is how much you charge for your product or service. It can take many different forms and names, such as salary, rent, tuition or fee. Price has a major impact on the other four components of the marketing mix. But, unfortunately, in most accounting firms less time is given to developing innovative pricing strategies than to any of the other elements of the marketing mix.
It is possible that determining the price for your service is the most difficult task facing every accountant. New accountants and experienced accountants alike all struggle with the issue of pricing.
Ultimately, the people who buy your product will determine the price of a given product and service. The emphasis today is more on value, and value is determined by the client. Clients have more choice than ever before and only services that provide great results can charge a premium today.