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Calculating the Value of the 'Promoter' Clients

Clients that recommend a firm are clearly of high value as their unprompted, or stimulated, comments to others can lead to considerable potential increased business at little additional investment for the firm. It is possible to estimate the referral value of such Clients. Many loyal Clients are prepared to talk freely to potential Clients about their suppliers. To estimate the value attributable to these Clients, it is necessary to ask three additional questions to the 'Promoters'. Let us call our firm A'.

These additional survey questions are as follows:

• 'Did you select firm "A" because of a referral from a business colleague or friend?' (Yes or No)

• 'Have you referred business colleagues or friends to firm "A" during the past 12 months?' (Yes or No)

• 'How many referrals to firm "A" did you make in the past 12 months?' (Number)

It is considered best practice to ask these additional questions of Promoters after allowing a little time to elapse following the overall Client satisfaction survey.

VALUING THE PROMOTERS

To estimate the value of referrals, all you require in addition is the average expenditure per Client. Let us suppose that our research reveals that, on average, 60% of Promoters said 'yes' to the first two questions and in answering the third question made four referrals in the past year. If we already know that we acquire 10% of our Clients through referrals, we are achieving 60% x 4 x 10%, or 0.24 Clients per Promoting Client. So for every just under five referrals from 'Promoters', firm A' can expect to gain a new Client. If the average revenue per Client is £50,000,the potential value to ourfirm of a'Promoter' is 0.24 x £50,000 = £12,000. We could perform similar calculations to investigate the potential loss from 'Detractors'. Clearly we should also examine the economic impact possible by moving Clients from 'Passive' to 'Promoter' and from 'Detractor' to 'Passive'. These moves will also have a positive impact on a firm's revenue.

Further Research with 'Promoters'

The NPS is based on the potential referral value of Clients. To determine a Client's actual referral behaviour requires additional research into how the Client makes referrals. In today's highly active social and other networks, it is worth establishing which networks are favoured by your Clients, as these are the most likely ones used for referrals. These networks can then be used as channels for marketing and business development activity. Once we have a strong relationship with a loyal Client, we should be able to extract this additional information.

CLIENT FOCUS PROGRAMMES AT MILLS & REEVE

Client care is an important feature of the development of law firm Mills & Reeve (M&R), led by Nicola Duke, Head of Client Care, who is responsible for two programmes: the first relating to outstanding Client service delivery and the second to key Client relationship management.

The Outstanding Client Service Programme relates to how the firm delivers advice. Rather than just offering options, the firm recommends an appropriate course of action; this approach again is a source of differentiation. For measurement, the Net Promoter Score is used firm wide in Client surveys along with the balanced scorecard for objective setting. In the early stages of this programme some partners found it difficult to distinguish their responsibilities for service delivery on particular matters from the responsibilities of the Client partner for the overall relationship. The firm's partner remuneration system encourages cross-selling to, and sharing of, Clients. Client service teams meet regularly across the UK via video conferencing and conference calls. There are opportunities to share best practice across the firm. Some sectors also have Client panels, leading to new service development; an example of this is a subscription-based procurement portal providing direct access to relevant documents.

For the Key Client Programme, external consultants were appointed to interview the firm's top 30 Clients and tasked with providing a detailed report on the strength of relationship between Client and M&R. The combination of this research and Client feedback has enabled M&R to differentiate itself in its markets. Initially there was some resistance from Client partners to setting up or laying the groundwork for interviews. Excuses were sometimes given such as 'They are just about to go out to tender so we should do the interview later' -yet this is the very moment when Client feedback would be most useful!

Key Clients are selected not only on the basis of turnover and profit but also their longer-term strategic importance in the context of the firm's sector strength and plans. The firm is conscious however that the type of relationship required by Clients varies within its different sectors; so, for example, the relationship with a corporate Client will be biased towards transactional activity whereas the relationship with a public sector Client will usually follow a competitive tender for a fixed period of between three and five years. M&R is careful to establish how Clients want their work to be managed and delivered. Some Clients have given feedback that they are receiving a '5 star' service but only have the budget for a'3 star' service. In such cases, M&R redesigns and re-engineers its offering accordingly to maintain margins.

The NPS is becoming one of the most important Client satisfaction metrics; it can be used across the firm with any department that interacts with Clients. To many firms it is the dominant measure of the Client experience.

 
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