Understanding Your Target Market: Applying the Latest Market Research on Professional Services Buyers
In order for a business to be competitive in today’s professional services industry, savvy marketers must build their strategy around a core understanding of their target market. This article will detail the buyer’s journey from prospect to client and beyond, referencing the latest market research on professional services buyers.
About the Research
At Hinge, we’ve helped hundreds of professional services firms understand their buyers and win more business. And when we’re not helping our clients, we’re busy researching the industry. In fact, we’ve studied over 20,000 buyers and sellers, giving us unparalleled insight into the professional services industry.
Our most recent study details the perspectives of over 1,400 buyers and over 3,000 sellers of professional services. We were able to compare results between buyers and sellers across five different groups of firms:
- Accounting & Financial Services
- Architecture, Engineering & Construction
- Government Contractors
- Software & Technology
This study conducted by the Hinge Research Institute provides insight into how professional services firms can win new business and grow faster by better understanding their buyers.
Prospects: The Buyer’s Journey
Long before a client signs a contract with your business, they go through a process of research and learning to evaluate alternative solutions to their primary need. Some paths are short, some take time. But they’re not all the same.
While the buyer’s journey may differ from industry to industry (and business to business), we’ve identified four stages common across professional services:
- Awareness of a business challenge
- Researching the issues
- Evaluating potential solutions
- Making a selection
Stage 1: Awareness of a Business Challenge
The results from the study show the top business challenges facing buyers today revolve around five key areas:
- Attracting and developing new business
- Recruiting and retaining top talent
- Budget pressures or other financial issues
- Maintaining operational efficiency
- Strategy and planning.
If a service provider is able to connect the dots between their service offering and the challenges their target market is trying to solve, relevancy has been established. But the degree of that relevance is important. Our findings suggest that buyers view their service providers are more relevant today than they did just five years ago, illustrated below.
However, buyers may not always know how to address the challenges they are faced with. In some cases, the business need is obvious and there is a widely known and accepted solution. In other cases, both the need and solution are unknown. The illustration below shows the different combinations of business challenges and potential solutions.
Q1- Known solutions to known needs are widely regarded as commodity services, and the firms offering these solutions are forced to compete heavily on price. This is the case in quadrant 1. For example, tax audits, software as a service (SaaS) and public bidding of engineering services are all examples of commoditized professional services.
Q2 – When there is an unknown need and a known solution (quadrant 2), buyers will ask questions like, “is this really a challenge facing my business?” To which you, the service provider, must teach buyers how to identify the need and how it can be addressed with a common solution. Doing this successfully will deliver more value than if you were to compete on price alone.
Q3 – Quadrant 3 is where buyers identify a known need, but do not know of a solution. Buyers will ask questions like, “what’s the best way to solve this challenge?” This gives you an opportunity to create more value than the scenarios in quadrants 1 and 2. You must educate buyers about your solution or approach and how it addresses the known need.
Q4 – Of course, the biggest marketing challenge lies in quadrant 4 where there is both an unknown need and and unknown solution. In these cases, there is a significant learning curve which may mean a difficult time generating, nurturing, and qualifying leads. However, if you can successfully educate buyers on both of these unknowns, you will deliver the most value of any quadrant.
Stage 2: Researching the Issue
Professionals are often tasked with learning more about the issues facing their business so the organization can make an informed decision. When these buyers want to learn more about a specific business challenge, they are nearly 3X more likely to do a general web search than asking a friend or a colleague for their perspective. Effectively, Google is the top referral source for a buyer’s first interaction with your brand…if they are able to find your website in the search results.
Our market research suggests that 87% of buyers will rule out a firm before even talking with them. This underscores just how important your website is to clearly communicate what your firm does and who you help. If buyers can’t connect the dots between the services offered on a website and the challenge they’re looking to solve, they will move on to an alternative solution.
Other than browsing a firm’s website, there are many other ways to gather information and “check out” potential solutions or service providers, including:
- Reading blogs or articles
- Asking friends or colleagues for referrals
- Looking at research reports
- Watching videos
- Looking on social media
- Attending webinars
- Downloading white papers, eBooks or how-to guides
There are various learning styles, so it’s important to understand how your audience educates themselves.
When buyers understand their business challenge enough to seek out help, search behavior has changed in the past five years. The balance between traditional and digital methods is beginning to shift.
In particular, the role of referrals is changing. Businesses have historically been able to grow and thrive relying solely on referrals from past clients. Those days are numbered. When asked how they would go about searching for a service provider, we found that 59% of buyers would ask for a referral — a 16% decrease since 2013.
On the other hand, buyers are more than 65% more likely to search for service providers on the web — up from 11% in 2013 to 18% in 2018.
These numbers suggest that seeking out service providers online could eclipse traditional referrals in professional services in the next five years. Generational shifts have a lot to do with this change in buyer behavior, too. Especially because millennials make up roughly 25% of the professional services workforce. As these professionals gain experience, they will take on the responsibility of finding and evaluating professional service providers.
Stage 3: Evaluate Solutions
This point of the buyer’s journey looks different depending on the industry. In the AEC or government contracting world, buyers are often reviewing proposals from a competitive bid. In other industries like consulting or technology, narrowing down a short list may not be as formal.
In any case, buyers all have criteria they use to evaluate service providers, and they will be influenced by the information they gathered while researching their business challenges.
Across professional services, buyers are most likely to look at past performance (35%) and team expertise (33%) as their top selection criteria.
If your website, thought leadership and educational content is successful in demonstrating your past performance and expertise, you’ll capture the attention of more prospects and have an advantage when they reach out.
Stage 4: Making a Selection
Once buyers have narrowed down their short list of potential vendors, there will be criteria they use to make a decision. We like to think of this as what ‘tips the scale’ in favor of the winning firm.
While expertise remains the top factor at this point of the journey, firms must also be aware of who they are going up against in order to effectively differentiate. Buyers and sellers differ in who they view as competing firms. On average, there is only a 30% overlap in identified competitors, illustrated below.
The remaining 70% of these identified competitors fall into two categories:
- Phantom competitors: Competitors identified by service providers, but not buyers. These firms may appear to be directly competing with your business, but your target market does not view them as such.
- Unrealized competitors: Competitors identified by buyers, but not the service provider. These firms may not seem like direct competition, but are solving the primary need of your target market.
By focusing less on phantom competitors and more on the unrealized ones, service providers can begin to understand the range of solutions their target market sees as viable. This insight can then influence marketing messages to better position the business in the marketplace.
Clients: Experiencing Your Brand
The buyer’s journey doesn’t end after signing a contract. They will continue to interact with your brand throughout the duration of the project. By capturing this perspective, service providers that do market research are able to answer questions like:
- What’s the real value or benefit clients receive from working with you?
- How well do you deliver on client promises?
- What’s the probability a client will work with you again in the future?
- How likely is a client to recommend you to a friend or colleague?
- Have your clients made a referral for your business?
Firm Competency & Performance
If you think back to the need-solution matrix referenced earlier in this article, services firms can deliver different degrees of value. Our research shows perceived value of professional services is on the rise. In 2013, 51% of buyers saw their service provider as highly valuable (ratings of 9 or 10). In 2018, that number jumped to 69% — a 33% increase, illustrated below.
So what does this mean?
When asked to describe the value they received, buyers identified quality of work, specialized skills/expertise, and added perspective/better decision making. It’s clear that a firm’s subject matter expertise not only wins them more business, but following through on that expertise can deliver exceptional value for target clients.
Another dimension to keep in mind is how well your brand delivers on promises or expectations outlined pre-sale. Although not independent from “value,” the ability to set realistic expectations and then deliver on those expectations is another important attribute of a professional services brand.
Our market data shows that nearly two-thirds of buyers viewed their service provider as having delivered very well on promises. These high scores bode well for the professional services industry, but it also suggests that “exceptional delivery” would not be a good differentiator.
Expanding the Relationship
Over the past five years, maintaining client loyalty has become a bigger challenge. The probability that buyers will stay with their service provider in a window of 2-3 years has declined by nearly 20%, illustrated below.
While the service providers themselves play a part in retaining clients, there are a number of external factors that play a role as well. For instance, an increasingly competitive marketplace gives clients more alternative solutions to choose from.
Another external factor is the emergence of new, disruptive technology. Firms that have a technological advantage may appeal to certain target market segments. The process automation and ability to leverage and analyze big data are two common examples of disruptive technology in the professional services industry.
However, not all hope is lost. If firms are able to prove their value and relevance to addressing top client challenges, they are more likely to retain clients and win repeat business.
Professional services firms have historically relied heavily on referrals to generate new business. And while the willingness of clients to recommend their service provider is up slightly over the past few years, the rate of clients actually making a referral has declined by 6.5%.
With fewer buyers asking for referrals and fewer clients making referrals, relying on this historically successful marketing strategy has become somewhat risky. To sustain business development efforts and to accelerate growth, service providers will have to turn to other channels to generate leads.
At Hinge, we define a firm’s brand strength as the product of its reputation and visibility. Ranging from 0 to 100, Hinge’s Brand Strength Index is a tool we use to benchmark our clients’ brands against industry standards.
Brand strength across professional services has been eroding. The average brand strength of professional services firms dropped from 60.1 in 2013 to 54.3 today — nearly a 10% decrease, illustrated below.
In both our research and experience with the clients we work with, brands built on a foundation of specialized expertise are in a better position to maintain their brand strength. We find that most firms have a solid reputation, but lack visibility.
What does this mean for your business?
If professional services firms are able to understand their target market and improve specific brand attributes, they are undoubtedly able to grow faster and win more business.
Of course, your situation may be entirely unique. In which case you may want to think about researching your own clients. If you’re interested in learning more, here are some ways Hinge can help:
- Download our free research guide to get started with research
- Subscribe to Hinge University for in-depth how-to guides, video courses and more
- Check our research services and work with Hinge
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