Wednesday, January 20, 2010

Client Loyalty

When I am talking with a brand new client, I always ask about the client turnover in their own practice. I do this because turnover is a good overall indicator of how well their practice fulfills its client’s expectations. If the client turnover appears excessive, or if my client wants to reduce their turnover rate, then our analysis turns to individual factors that can affect client loyalty.

An obvious driver can be pricing. Most of my clients adjust their pricing at the beginning of a new calendar year. Not surprisingly, one or more of their clients may find the increase excessive and seek a lower cost provider. Most readers know that client size isn’t necessarily a factor when it comes to price sensitivity. Large clients can be just as price conscious as smaller, and it isn’t unheard of for the CFO of a major contributor to your practice’s revenue to call up and put the pressure on for some fee relief or an invoice adjustment.

It can be argued, of course, that any client whose primary concern is cost is never going to be motivated to stay with you except by a very competitive price structure. I’ve always assumed a given percentage of any practice’s clients are price sensitive and may be lost when fees are adjusted upward. It is almost a cost of business issue; some clients are just bound to leave. Nevertheless, no accountant wants a good client to leave, and so the challenge is to enhance the sense of loyalty they feel to you.

You do have some control over what percentage of your clients are primarily driven by price. If your practice has been built upon impersonal, price driven marketing, which I describe as advertisements delivered via any medium that say, in effect, “Your 1040 taxes prepared for as little as $149,” your client base will be highly price sensitive.

If you lose some of these people when fees are adjusted upward, you will in all likelihood be able to amp up your ad campaign and replace them. I am familiar with some 1040-based practices, and have learned they anticipate having not-insignificant client turnover each year and if it occurs, they adjust their marketing effort accordingly and deal with it. Their practices earn them a good living and in some ways are less draining and stressful because their relative lack of client involvement means they aren’t fighting and dying as their clients careen between various ups and downs.

If instead, you market your practice based upon a promise of service coupled with a close working relationship with your clients, the opportunity for greater loyalty and reduced turnover is greater. By its very nature, this approach means your clients will be relatively larger and fewer, because each will take more marketing effort. It is the process of successfully signing up these prospects that is the basis for this blog.

Client service levels are a more subtle, yet the most impactful factor in client loyalty. Assuming your fees are consistent with other local accountants, the key differentiating factor in client loyalty is how they perceive the treatment they are receiving from you and your support staff. Do they feel respected, important, valued, etc.? And, to state the obvious, accuracy and meeting filing deadlines are crucial.

As advocated ad nauseum in prior posts, I believe experience has demonstrated repeatedly that you should have at least three, and preferably four “touches” with clients during the calendar year. They need to “feel the love” as current phraseology would put it. All your clients? Probably not. If you have 200+ client you are too busy for that. However, I think the top 20 – 30% of your revenue producers are worthy candidates. More, if you have an exclusively high end practice.

Every client I have ever worked with who has wished to increase client loyalty/reduce turnover has been successful when they initiated a plan to ensure these “touches” occur on a consistent basis. Lunches, birthday and various life event greetings, planning meetings, shared social events, etc. all offer potential occasions to make contact.

It’s just like a recipe: then add a marketing plan that doesn’t emphasize price. Stir in accurate and timely client services and your client loyalty will be off the chart with virtually no turnover.

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