On Bananas (or Why Professional Services isn’t as Different as You Think)
When Byron Sharp published How Brands Grow all the way back in 2010 (although I, like many others, didn’t pick it up until much later), he challenged much marketing orthodoxy.
Perhaps the most contentious assertion was that big brands are big largely (pardon the pun) because they have more customers. Growth, Sharp noted, came from market penetration and customer acquisition, not customer retention and loyalty.
In the book he shared a number of ‘law-like’ patterns, all backed by empirical evidence. I won’t list every one here, but three of the most critical (for this article at least) are:
Natural monopoly law: Brands with more market share attract a greater proportion of light category buyers.
Double jeopardy law: Brands with less market share have far fewer buyers, and these buyers are slightly less loyal.
Law of buyer moderation: In subsequent time periods heavy buyers buy less often than in the base period that was used to categories them as heavy buyers. Also, light buyers buy more often, and some non-buyers become buyers. This regression to the mean phenomenon occurs even when there has been no real change in buyer behaviour.
These laws are underpinned by something called the NBD-Dirichlet (NBD being an abbreviation of Negative Binomial Distribution).
The Dirichlet is a mathematical model of how often people buy the category and which brands they buy. It is, Sharp writes “one of marketing’s few true scientific theories”.
Wiemer Sjniders, another advocate of evidence-based marketing, describes the NBD in slightly fruitier terms: when you plot a brand’s customer base on a graph, it looks like a banana.
Two of the classic, publicly available examples are Dove and Coke.
Here’s Dove:
And here’s Coke:
I probably drink a can of Coke once a week. But looking at the chart above you see how unusual that is; over the time period monitored, 30% of cola drinkers didn’t drink Coke at all, while 18% bought it just once.
Just let that sink in for a moment.
Both Coke and Dove are extremely well known brands (Coke is arguably one of the most famous brands in the world, while Dove continued to grow impressively over the six year period studied), yet the majority of their customers are light, occasional buyers.
As Snijders says, these pictures demonstrate a universal customer truth — a lot do a little, and a little do a lot.
The immediate criticism to How Brands Grow from the B2B world was, predictably, that these patterns may hold true in B2C, but it’s different in B2B.
The publication of How Brands Grow Part 2 in 2016 , covering industrials and services (as well as emerging markets and luxury brands), and then How B2B Brands Grow, published in conjunction with the LinkedIn B2B Institute in 2021, conclusively put those arguments to bed.
But, the legal and accounting world still protested; that may be true in traditional B2B services, but it’s different in professional services.
Professional services is high value, serious and involved. There’s more risk. More emotional investment. It’s rational. We have clients, not customers. People take more time to make decisions.
It’s just different.
Is it?
Look again at the Dove and Coke charts, then study the charts below.
Here’s a £15m law firm providing B2B and B2C services (i.e. legal services to businesses and individuals). The chart shows the annual revenues from their top 100 clients:
You can see there are a few clients with large revenues, and lots of clients with smaller revenues. And bear in mind this is just the top 100 clients; there will be an even longer tail of hundreds more clients — possibly thousands — that are even smaller.
Here’s a £150m B2B only firm:
And a £50m B2B only firm:
And here’s a £40m firm, again only B2B:
What’s the first thing you notice about these graphs? They all look suspiciously banana-shaped.
Getting data out of law firm systems is notoriously difficult, and I’m not going to try and claim that we’re looking at the exact Dove and Coke-equivalent charts.
However, it’s clear that all of the firms above follow a similar pattern to each other and it’s the pattern that Snijders noted before — a lot do a little and a little do a lot.
For a better comparison with Dove and Coke, look at the chart below. It’s for an £8m law firm providing both B2B and B2C services:
96.5% of all of their instructions over the course of a year came from clients who only instructed them once or twice. Or, in the language of How Brands Grow, almost all of their clients are light buyers.
And let’s return to the first example, the £15m firm providing both B2B and B2C services. The chart below shows their top 100 clients again, but this time looking at how many times those clients instructed the firm over a 12 month period:
A third of their top 100 clients didn’t actually instruct them at all — the revenue came from work that was started and carried on from the previous year. More than half of their top 100 clients instructed them twice or less.
Imagine what those percentages would be in the context of their entire client base. Lots and lots (and lots) of light, occasional buyers.
Still think professional services is different?
The response from most law firms (and other professional services firms) to the graphs above is to try and move clients from the right to the left; to try and sell more to those same clients and turn small clients into big clients.
Their mistake is to think that the distribution of their clients is somehow unusual, when in fact the banana shape and long tail of small, light buyer clients is perfectly normal.
As Byron Sharp and Wiemer Snijders constantly remind us, the NBD has been proven time and time again, in multiple sectors across decades.
There’s little point trying to change something that is, by and large, inevitable.
So what does this all mean?
Well, it’s clear from the examples above that the patterns seen in the wider B2C and B2B world also appear in legal services.
The NBD is alive and well in the law; the distribution of a law firm’s client base looks suspiciously like a banana.
And if the NBD is true, then maybe the ‘law like’ patterns that Byron Sharp told us about in How Brands Grow also hold in legal services (and, we can likely surmise, in wider professional services as well).
Let’s look at them again in professional services speak:
Natural monopoly law: Bigger firms have a greater proportion of one-off clients who instruct them only once.
Double jeopardy law: Smaller firms have far fewer clients, and these clients instruct them slightly less frequently.
Law of buyer moderation: Clients who spend a lot in one period (e.g. a financial year) may spend less the following period, and vice versa. Some clients won’t instruct you at all in the next period, and some new clients will instruct you who haven’t instructed you before.
We can also infer that one of How Brands Grow’s core messages about growth also applies in professional services; winning new clients is more important than retaining and cross-selling to existing clients.
Put simply, growth is about getting more people to buy what you do, not getting people to buy more of what you do.
There is, of course, one more variable to factor in when we consider the natural monopoly and double jeopardy laws in professional services; as well as how many clients you have who only instruct you occasionally, what’s the value of each instruction?
Having 1,000 clients who only instruct you once a year but each spend £50,000, will net you a lot more than if those thousand clients only spend £5,000 each.
In large part, this is about strategy and brand. Which segments of the market are you targeting? Can you realistically position yourself there, based on your current brand perception? Are you willing to do what it would take to change that perception if you needed to?
However, we also need to remember that there isn’t ‘one’ market for legal services, accounting, tax or consulting etc. In reality, there are lots of smaller markets within which firms compete.
For example, the top 200 UK law firms don’t all compete with each other (although they will compete with more firms than they think they do).
There are law firms that target only the biggest transactions and disputes for FTSE 100 companies, which other firms simply wouldn’t be considered for.
In the same way, there are accounting firms that could never win BP’s audit work. Investment banks that could never have advised on Kraft’s merger with Heinz. Tax advisers that could never hope to manage Elon Musk’s financial affairs.
Look within each of these mini-markets and I would strongly suspect that the principles of natural monopoly and double jeopardy will be alive and well.
Bigger firms will be bigger principally because they have more clients, and smaller firms will have fewer clients who instruct them slightly less frequently.
Towards the end of How Brands Grow, Byron Sharp lists seven rules for building brands.
Given that the NBD appears to be alive and well in professional services, and that the laws of natural monopoly, double jeopardy and buyer moderation also seem to hold true, we can surmise that those rules about how to grow and build your brand also hold true.
The seven rules are:
- Reach all buyers
- Be easy to buy
- Get noticed
- Build and refresh memory structures
- Create and use distinctive brand assets
- Be consistent, yet fresh
- Stay competitive
This article is already long enough without explaining all seven rules in detail, but I do want to talk about the first — reach all buyers. This is what Sharp says:
“Reach all buyers of the brand’s service / product category, both with physical distribution and marketing communications. All these people are potential buyers of the brand. Examine marketing options in terms of their ability to cost effectively reach as many customers as possible.”
Personally, I’m a proponent of the two-speed approach.
Spend a portion of your marketing comms budget targeting specific segments of the market, and a portion of your budget targeting the whole market.
Les Binet and Peter Field’s research suggests that the optimum split in B2C is 60:40 in favour of the whole market, and 50:50 for B2B.
While this is a useful guide, in reality the ratio should be informed by your research into the size of each segment, it’s potential value and your current share, and the size of the market overall — and what it costs to reach people.
These two types of marketing communications work in different ways and over different timescales, so need to be measured differently.
The best way to think about the former — shorter-term, tightly targeted, prompting action — is in terms of capturing current demand; the latter — longer-term, broad reach, building salience — is about driving future demand.
It’s this second kind that is critical for long-term growth.
All of this will be anathema to many professional services firms, where key account management and cross-selling to existing clients has been the default growth strategy for decades.
However, reaching all buyers and generating new demand isn’t to say that you shouldn’t try to maximise the work you get from each client. Of course you should. But you need to be realistic about the maximum that you can extract.
To start, all clients have a finite amount they’re able to spend with you. And often, that spend is influenced by factors outside of their control; it may go up or down depending on whether or not they’re acquiring another business, carrying out a restructure of their workforce, or being sued by a customer for breach of contract. Remember that law of buyer moderation?
Also, even when clients do have a regular, recurring volume of business-as-usual work each year (which will remain relatively static), few clients work only with one firm. They may operate a formal panel of firms, or informally instruct different firms depending on the job.
All this is to say that increasing a client’s annual spend with you from £10,000 to £15,000, £500,000 to £600,000, or £1m to £1.3m, could be very (very) difficult.
And while the increase in percentage terms may look impressive on a micro, individual client basis, looking at the entire firm on a macro basis, those increases alone — without any new client acquisition — won’t do very much to your overall growth.
And this leads on to my final, practical recommendation.
Separate marketing from business development.
Most commercial organisations have a marketing function, and then a sales function.
Most professional services firms have one function, which they call marketing and business development. Consequently, everything becomes blurred and the principles that underpin growth get lost.
By separating the two, the BD team can work with the partners (who are the sales force in most professional services firms) to develop existing clients, look for cross-selling opportunities and build new client relationships.
The marketing team should take the lead on, well, the marketing stuff.
Each year they run the research, sit down with the board and look at the segmentation map, see what the numbers look like, and agree who they’re going to target this year and what the objectives are. Then they run the campaigns necessary to meet them.
This would also get round the usual budget issues.
The money that the partners need for wining and dining clients and prospects, attending conferences and networking events, and travelling wherever it is they need to go, sits in one neat budget — or, ideally, directly in each team’s P&L.
Meaning that the partners and teams responsible for actually spending it can be accountable for it.
The budget for the campaigns needed to deliver the objectives set with the board, along with any other expenditure necessary to build the firm’s brand, can then sit with the Marketing Director.
They can be properly accountable to it because they’re the only ones spending it.
There is, of course, a simple way to test all this for your own firm.
Just ask your finance team to tell you what percentage of your total client instructed you how many times over the last 12 months. Better still, also get them to measure it over the last three years.
Then put them on graph like the Dove and Coke examples, and see what it looks like.
If it looks like a banana, well, it’s time to pick up that copy of How Brands Grow.
