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The science of cross-selling in professional services
Another day, another announcement. In this case it’s that law firm Allen & Overy plans to start offering regulatory consulting later this year in addition to the legal advice it already offers in this area.
Four factors have upped the ante where diversification is concerned. Buyers have changed: To use the Allen & Overy example, regulatory work isn’t just being bought by the CFO but has become an area over which every functional head has some responsibility. Services have changed: Most of the high-growth markets right across professional services are those that combine traditional capabilities in new ways—look at the way cybersecurity work now involves behavioural change, strategy and—no doubt—legal advice, to name a few. Suppliers have changed: The last 10 years have seen strong top lines for most of the largest players, fuelled by a combination of organic and inorganic growth, but many are concerned that they won’t be able to match that in the next 10 years, and diversification—the perennial search for the greener grass on the other side of the fence—has become achingly attractive.
Finally, and perhaps most importantly, our research suggests that there’s a positive correlation between buying multiple services and client satisfaction. Prima facie, that’s obvious: a happy client is surely more likely to be open to buying a wider range of services than an unhappy one. But anyone working in the industry will tell you that clients like specialists, so it’s by no means easy—and sometimes not desirable—to persuade them that you can work in other areas. Clients often assume that a firm that diversifies will dilute the depth of expertise in its core business. In practice, the relationship between range of services and satisfaction is more complex. While clients may not like a firm that presents itself as able to do everything, they’re more open-minded to the idea that a firm can be a multi-specialist. Moreover, the more specific services a client buys from a single firm, the higher a client rates the quality of work the firm does overall. Clients, it seems, like the master-of-several-trades model even more than they like the master-of-one.
But none of the above means that you can simply waltz into your best client and say, “now buy this.” Clients’ minds may be open, but it doesn’t mean their wallets are.
Our research has consistently found that, in order to cross-sell your services effectively, you need to do three things. First, you have to have done good work for the client in the area they associate with you: Nothing is possible without this bedrock of satisfaction. Second, you need to be able to demonstrate that you can do—and have done—equally good work in the new service you’d like them to buy. Third, you need a consistent price point. Cross-selling is often seen as an opportunity to up-sell; it’s about increasing profits just as much as growing the top line. But clients get confused by this: Why should your price point change just because you’re offering a different service? Unless you can demonstrate that you’re using entirely different people, paid differently—and that’s much harder than it sounds—you’re going to be met by cynical indifference.
Cross-selling, in our opinion, isn’t something you can leave to accident or serendipity. It’s certainly not something that’s possible in all circumstances, so sending out firm-wide dictates that everyone should be doing this is a waste of time and may even damage your people’s confidence. It needs instead to be deliberately planned. Do the maths: Find the clients who are very satisfied but only buy one service from you. Go to them with ideas about what they could do next and proof that you’ve helped other organisations do this. And keep the same price point. There are plenty of firms out there working on the basis that cross-selling is an art. It’s not: So let’s get more scientific about it.