Jun 12, 2024

Understanding the Professional Services Sector

The professional services industry is one of the largest and most diverse of modern economies.

Profile of the professional services industry. 

The professional services industry is one of the largest and most diverse of modern economies. No matter, if they are B2B or B2C businesses, the common attribute is that professional skills form the basis of what they offer to clients, and the qualifications needed are generally a barrier for aspiring newcomers. 

Experts estimate that this industry is worth up to 700 billion US dollars worldwide. It encompasses a wide range of businesses, from accountancy partnerships, executive search firms, education, training, and coaching providers, and legal and architectural specialists, to consultancies in various specialisms, marketing agencies, and the growing services arms of publicly listed companies. 


The industry can be categorized by skill set, size, ownership, and type of project: 

Skill set: the training and experience of the professional, as expertise is what the clients pay for. Looking for earnings everyone would be paid differently due to their field of expertise. 

Size: The firm’s size impacts its business growth, a crucial consideration for marketing strategy. Key categories include Sole practitioners, Boutique partnerships, international networks, and growing retail professional services. 

Sole practitioners start businesses around specific skills, like an accountant starting his or her own practice. Boutiques expand by adding fee earners to increase revenue and margins. International networks involve joining larger networks or selling to global firms. Retail professional services offer low-margin, high-volume services, often supplemented by product sales. Their marketing focuses on shop location, merchandising, client service, and reputation management. 

Ownership: Ownership structure shapes a firm’s culture and decision-making. Sole partners, typically the founders, dominate decision-making initially. As partnerships grow, management structures evolve, tackling decision-making challenges to maintain agility, often outpacing larger corporations. Many top professional service firms are owned by publicly traded companies, while others are publicly traded themselves. 

Marketing, sales, and account management differ between corporate firms and partnerships. Corporations deploy consistent standards globally due to centralized structures, while partnerships rely on complex networks.  

Projects: David Maister classified client work into three types: “Brains” projects involve highly skilled professionals, “Grey hair” projects leverage experience, and “Procedure” projects focus on familiar problems with junior staff. “Brains” projects emphasize individual expertise and thought leadership, while “Procedure” projects prioritize efficient proposal management and scalable services. 


A changing market. 

The volume and diversity of the professional services industry have grown markedly over the past half-century. The industry continuously introduces new concepts and growth areas, such as executive training evolving into a new service called `executive coaching`. The industry is showing signs of maturing. One of the reasons is the education of modern buyers, because in the past clients tended to look for help and assistance, while nowadays people are more willing to question and challenge the views of professionals. 


The fundamental drivers of revenue growth. 

The centre of revenue growth of a professional services firm is the reputation that flows from doing excellent work. The clients can only judge by certain clues such as referrals from people they trust, the nature of the employees they meet, or the impression created by the firm´s offices, website, or brochures. The supplier´s process invokes emotions of discomfort and distress, once the project is done, the client feels a sense of relief and will talk positively or negatively to others. If positive, then the reputation will generate repeat business from the same client or referrals to different clients. 

The quality of work and service to clients are two main drivers of future revenue growth as both create a strong reputation. 


A history of marketing. 

Marketing techniques that grow revenues are activities from account management and sales to press management and advertising, and a broad supply services (involving research, brand, design, and consulting firms). The professional services should take advantage of the well-established tools, techniques, processes, and perspectives that marketing has to offer. 

In the mid-twentieth century consumer goods companies needed to move their stock more effectively, they focused more on advertising and branded goods. Over the next few decades marketing became more significant in other industries like the computer industry, and then in the second part of the century marketing was applied to service businesses. 

There are many differences between product and service marketing, such as Intangibility or Inseparability, where the company must put great emphasis on motivating the staff to communicate the firm´s values. In service marketing, while pre-production research is conducted to tailor the service, customer experience plays a crucial role in generating word-of-mouth, impacting repeat purchases and referrals. Negative experiences have a greater impact due to the tendency for customers to share dissatisfaction more than satisfaction. 


Tags: B2B, B2C, Changing Market, marketing, professional sector, Professional Services, Revenue Growth, Services Industry