Tuesday, February 21, 2006

Tough Clients? Read this...

Got this bit from Johnnie Moore's blog. Ross Dawson (www.rossdawsonblog.com) talks about the sophistication of professional services clients...which of course are the sophisticated consumers we're trying to buy the crap we market...

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MegaTrend One: Client Sophistication

What do you prefer? A sophisticated client, or an unsophisticated one? It’s an interesting issue to debate with professionals. Some say they like unsophisticated clients, because, as they usually express a little more euphemistically, they can take advantage of them (for a little while, anyway). Others prefer sophisticated clients, as they know what to expect, they know how to work effectively with professionals, the professionals can learn from their clients (as they must to keep ahead!), and usually the opportunities are far larger.

Irrespective of what professionals want, the reality is that professional services clients are becoming increasingly sophisticated. The rubes off the street that you can awe into silence and charge like a wounded bull without protest are rather thin on the ground these days.
The drive to greater client sophistication has in turn been created by other broad shifts in the business environment. The most powerful is the ever-increasing pressure on corporations to reduce costs. Whenever business conditions turn down, the edict goes out to cut expenses. In order to cut supplier costs, companies need to understand what they’re buying. In 1992 DuPont established its “DuPont Legal Model”, which consolidated its legal suppliers from 350 to 35, and established clear processes for how its law firms would work for the corporation. This program established a precedent that has been copied by many other companies, and is highly innovative in how aligns the objectives of the company and its service providers. However the initiative was initially driven by the then-chairman’s drive to cut $1 billion from DuPont’s costs.

Across every professional sector, clients have consistently been hiring the best professionals from their suppliers so they know how to deal with them. Consultants, lawyers, investment bankers, accountants, advertising creatives, and consulting engineers all find themselves across the table from their former peers, who know all the tricks of the trade. Specialist firms are frequently brought in to assist clients in getting the best from their professionals.

The downside of increasing client sophistication is that you can’t fleece your clients, and you can’t survive your whole career on what you learned in college. The upside is that sophisticated clients help you to develop your own capabilities, they understand what rewards they need to provide to get the best, and they know how to work with you so you can do your best. Investment bank ABN Amro runs a training program for its fund manager clients that gets them to play the roles of banker and fund manager in order to teach them trading techniques, how to use their high-value research, and even how to use ABN Amro’s proprietary trading models. The advantage for ABN Amro is that their clients understand better how their bankers work, and in turn what it takes to get great service from them.

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