Marketing Profs

If only clients would stand still. How much easier our lives as marketing professionals would be if client needs were consistent year after year and their marketplaces were never buffeted with changes from the economy or competition.

It sounds ridiculous to expect this from clients and their markets, but in reality there are plenty of professional firms that operate as if their clients are standing still. Many, despite, CMOs' admonitions, turn a blind eye to the myriad changes that are taking place in their own marketplaces. As a result, they're always playing catch-up with their competitors, never taking advantage of opportunities to branch out into emerging—and profitable—markets.

It's understandable that firms focus on short-term results when it has served them well in the past. Take a look at almost any professional sector—accounting, architecture, engineering, law, management or IT consultants, and more—and you'll find examples of a time when life was good. Engagements were huge. Hourly fees were hefty. Clients accepted whoever was assigned to their project. Maybe, even, "talent wars" drove double-digit revenue growth. But focus on long-term growth was lacking.

Temperature Shifts in the Marketplace

Take the management consulting industry, for example. Whether they're doing too much—too blindly—or too little, consulting firms are facing a wake-up call. Once the recent recession ended, too many management and IT consultants heaved a premature sigh of relief that things could get back to the way it was in the high times. What many either don't realize or fail to act on is the fact that the marketplace has shifted.

Even now there are disturbing grumblings about the U.S. economy, with uncomfortably wild Wall Street stock swings and government reports that the service sector is slowing down. Like the proverbial frog in the pot of cold water set on a hot stove, many professional service firms will slowly cook without ever realizing what's happening.

What shifts have already happened? One of the biggest is a competitor that professionals always hoped wouldn't appear: the client. Clients are increasingly using their own internal resources rather than hiring outside help. Arguably, this phenomenon varies by sector, but it's happening nonetheless. Using the management consulting example, these days it's less expensive to own talent than to rent it for $250,000 a year—in fact, clients might hire two internal people for that price.

How did clients become the hot water that boils their professional frogs? Some clients pose a competitive threat because they suffer from "service fatigue." After a time, consuming those stand-still services, clients' expectations get raised beyond what is possible to deliver. A sure sign of fatigue is when they start staffing up to handle the work internally. (Boiling water, indeed!)

And clients are also more discerning about who is assigned to their teams. Wet-behind-the-ears MBAs, lawyers, or engineers charged at big-firm rates are no longer acceptable. Clients are increasingly interviewing potential project team members and rejecting those who will gain more value from the job than they'll deliver. Despite this trend, the recruiting teams at many professional service firms are plowing ahead. After all, for private firms, their partner compensation models depend on an influx of new frog-princes!

Smaller engagements are another signal of pots that are heating up. Some firms are staying put and accepting what's available. Others are jumping to cooler water. IBM, a savvy competitor, announced in 2005 a significantly strengthened companywide focus on providing technology and consulting services for small and medium-sized companies. Only time will tell whether IBM's leap into this pot will help the firm achieve a longer-term competitive advantage.