Leaky Buckets and Marketing Rules Still in Play

I believe in the leaky bucket theory and 80/20 marketing rules in selling professional services.

If we lived in an ideal world, all of our clients would be loyal and stay with us forever.  In addition, these clients would have new projects for us every year.  Unfortunately, the market doesn’t work this way.

Clients leave us for a host of reasons.  Sometimes it is our fault in the delivery of services or client’s perception that we should have done more.  Competition is another reason.  However, most clients don’t have a project for us every year.   This dynamic is the basis for the leaky bucket theory. 

We must be constantly pouring new clients and projects into the bucket in order to grow the business or at least maintain equilibrium with the clients that flow out through the holes.  When we understand this dynamic, we can take a careful look at the 80/20 marketing rule.  The bottom line is that we need to find 20% of our business each year in new clients.  Since the cost of obtaining a new client is upwards of 6 times the cost of keeping an existing client, we devote 80% of our marketing resources to obtaining new clients.  Although the percentages will not be the same for every firm, it is safe to say that there are no firms using a 100/0 marketing rule.

Even in the age of social media and technology these rules are still in play.  If you disagree, please let me know.  That gets me to the point of marketing process.  We all want to work smarter not harder.  Every firm needs to make effective client touches in order to be successful in obtaining new business and seeing a return on their marketing investment.

A few weeks ago the SMPS LinkedIn group had an interesting discussion centered on the question of how many client touches are enough.  One of the members questioned the need for client touches.  He implied they were something like window dressing that wasn’t needed if the client gave you his personal phone number or you asked the right questions.  There is a big difference

between maintaining continuity with an existing client and building a relationship with a new client.

A county executive once asked me why I needed to know which local architects were in line for an important project.  I represented Walker Parking Consultants at the time and was doing research on which architect we should team with.  He said, “ You guys are the best in the country.  Teaming with any local architect is like rolling the dice.”  I replied, “If we don’t team, we won’t have any dice to roll.”

On one level touches are a lot like rolling the dice.  I think the member who downplayed touches only saw them on this level.  In practice touches are marketing tools like dice that allow us to stay in the game.

Outside of the context of a strategic marketing plan a single touch doesn’t seem like an effective way to fill the leaky bucket.  Combined with a comprehensive marketing plan, client research and a process, each touch brings you closer to top of mind with the client. 

The magic number is simply whatever it takes to win the client’s business.  It might be three or it might be 23.   As you extend the number of touches there comes a point of diminishing returns.  First, firms don’t have unlimited resources so decisions have to be made as to the value of pursuing a particular client.  When in doubt, go back to the marketing plan.  Don’t forget the residual value touches have on other clients you are chasing.  Most client touches impact multiple potential and existing clients.

Second, there has to be a method to the madness of client touches.  They aren’t included because they sounded good at the time the annual marketing plan was being developed.  For example, did you know all of the potential new clients and projects that were going forward prior to completing the annual marketing plan?  Probably not.  Yet, the plan is flexible enough to accommodate new entries.  How many marketing plans changed when the “dot com” bubble burst or the real estate bubble burst?  Are you prepared for the next bubble to burst?

In other words, if the mission is to keep the bucket filled, you shouldn’t spend resources chasing projects that aren’t going to happen.

This is why traditional marketing theories and rules are still in play today.  Social media is the great connector of people.  However, it is still what you do with the connection that counts.  More importantly, as far as new business is concerned, it is what you do FOR the connection that makes all the difference in keeping buckets filled, maximizing marketing resources and improving your return on investment.

The Difference Between a Pipeline and Lifeline

When I consult with new clients, the one question that always comes up is, “Do you want to see our pipeline?” I don’t want to see the pipeline until I know how the projects were entered into the pipeline as well as historic trends.  The project pipeline is part of a process.

Whatever you call the business you are expecting to come forward in 6 months to two years, the process for arriving at the number is integral to your success.  I have used both the pipeline and funnel analogies in my training programs.  The pipeline is a process where known projects and their high probability for success are entered into the flow of firm projects.  Most of these projects are existing contracts where additional services are expected or contracts with multiple phases.  The pipeline also includes new projects that have been won but contracts have not been completed or start dates are in the future. The pipeline can also include potential projects with a multiplier for potential success.  Most firms are able to make an accurate projection of the revenue that will be generated in the current year from these projects.

The funnel is more about new clients or existing clients with new projects as opposed to existing

projects. At the top of the funnel is the universe of projects.  Since your firm is not qualified to compete or deliver on all of the projects, a percentage of the project universe can never enter your funnel.  Marketing and business development work together to qualify which projects can enter the funnel. 

The projects that enter the top of the funnel are then researched to determine how they fit with the mission of the firm, competition, budget, schedule, resources needed, decision makers and profit potential.  Projects are then filtered further into the funnel.  Business development then gets aggressive with the projects at this stage of the process.  Meetings are scheduled and more research conducted.

The end result is what I call “The best of the few.”  These are projects where you are now connected to the decision makers, they fit your mission and expertise, and your chances for success are high.  Competition has been identified and you can leverage your strengths and weaknesses accordingly.

Every professional services firm should recognize the difference between a pipeline and lifeline.  Some would say that a pipeline/funnel is a lifeline.  I would disagree.  Here is the definition of lifeline:  An anchored line thrown as a support to someone falling or drowning.

 
Firms don’t start a pipeline  or funnel process because they are failing.  Companies that have cut marketing and business development resources, and now see their fortunes declining might need a lifeline.  However, there isn’t a magic wand in the process for acquiring new business.  Even with solid processes in place of both a pipeline and funnel, signing new business today is more difficult today when you consider increased competition, the economy and business challenges being created by the federal government.

What about the firms that have pipelines but now need a lifeline?  Sometimes it goes back to the research and due diligence of client acquisition.  Sometimes we track the wrong projects, include projects that are never going to proceed or miss the changing tides of client politics. Bad math and coming out on the losing end of 50/50 projects also contributes. Responding to RFPs without understanding the project or client is a recipe for failure.  If you don’t believe this, consider the fact that a competitor who has completed due diligence probably wrote the RFP for the client.

Last October, McGraw Hill predicted the level of construction starts in 2012 was expected to be $412 billion.  New construction starts in March jumped 23% to a seasonally adjusted annual rate of $482.4 billion, according to McGraw-Hill Construction.

The Architecture Billings Index expanded for the fourth month in a row in February with the highest number since 2007. This data is good news to large firms, medium firms and small firms. There is a lot of work out there and it is getting better.

On the competition side increased construction activity might get large firms out of the medium and small projects market they have slid into because of the economic downturn.  In addition, more medium and small projects might come off the back burner as the economy continues to improve.

Therefore, industry firms need to reassess their process for acquiring new business and take an honest look at where their expertise can be put to best use in solving client issues. When was the last time that you looked at your unique value proposition? In addition, the marketing and business acquisition process might need to be revised.  Resource allocation should be a primary element of any review.  Maybe this is a wakeup call, but it is certainly better than waiting for a lifeline in the murky waters of business development.

Training the Next Generation

The world is changing fast and, as it has in the past, the future belongs to the young.  The professional services industry has seen an influx of young talent, especially in the areas of marketing and business development. 

While they might be technologically superior to the boomers they work with, have the next generations received the training in marketing and business development that will make them the new superstars?  Higher education still teaches the disciplines that makes them competent in their chosen field of practice.  However, the curriculum in these schools does not include much in the areas of marketing and business development.  For example, Marketing 101 never convinced an owner to hand over a million dollars for the design of a new building.

Do the best schools of architecture, engineering or law feature courses for future practitioners to develop the skills needed to build business at their firms.  Do marketing schools for the non-professionals spend much time in the professional services arena or is there a more general, one size fits all approach to their students?

The Generation Y and Xers come into your organization with different expectations than boomers did.

In fact, while most professional services firm passed on their marketing and business development secrets to the next generation, today a “smart gap” might exist.  The economic downturn and loss of talent through cutting resources has something to do with it.  The ability of multiple generations in the workforce to speak the same language is another.  The new generation might already believe they have a better way of doing things and don’t need the “old school” approach. 

Generation X has been defined as the “latchkey” generation.  They are cynical to say the least.   They also challenge authority and question everything.  On the positive side they are adaptable to change and are independent. Generation Y has been defined as the “internet generation”.  They are hopeful, but they also had parents who provided everything for them.  They were the protected generation and the beneficiaries of “soccer moms”.  Gen Ys need supervision but they are great team players, have a
“can do” attitude and thrive on multi-tasking.

Everyone knows there are generational differences.  How does this impact your organization when it comes to marketing and business development?   They have been working in your firms for the last 10 years and you have survived.  You have probably taken the “if it is not broken, don’t fix it’ approach.  If it is working in the areas of marketing and business development, congratulations!  I know from experience that not everyone is patting themselves on the back.

 
How do you create effective learning experiences for these people that will resonate with improved performance?  Marketing and business development is still about the people connection business.  The next generation of leaders in your firm needs to understand why technology must be tempered with “old school” proven methods.  Whatever approach you take, here are some things you need to know about GenXers when it comes to training: 

·         Immediate and meaningful rewards

·         Avoid micromanaging

·         No BS

·         Promote development –What is in it for them

·         Create choices about how and when training gets done

 There are different needs when it comes to training Gen Y employees:

      ·         Develop a mentor program

·         Value outside training organizations

·         Include social media and technology in training programs

·         Value an interactive experience as well as diversity

 

Why do clients buy your services?  The answer to this question is at the root of any training program for your employees as they embark into the business development and marketing disciplines.  However new skills are never learned until attitudes and behaviors change.  Maybe it is time to take a different approach to how the next generation will lead and prosper your firm.  You can no longer hand someone a bunch of project photos, a 30-second elevator speech and expect them to succeed.