The strategic value of customers in professional service firms: A proposed framework for a comprehensive client value assessment

Simon Witt

Studenteropgave: Kandidatafhandlinger

Abstrakt

Throughout this paper, I have sought to establish a framework that will allow Professional Service Firms to comprehensively assess the total strategic value of clients and projects, i.e. characteristics that provide not only a financial advantage but also help the firm to sustainable long-term success. Professional Service Firms are faced with several strategic challenges, some employeeoriented (internal) and some market-oriented (external). As such, Professional Service Firms are faced with not only a considerable dependency on their employees, but also low entry barriers, the need to mitigate ex-ante buyer uncertainty and increasing competition in the market. Due to a direct, two-way relationship between employee motivation and firm performance, succumbing to either of these challenges can result in a downwards-spiraling effect, where decreasing margins lead to lower employee motivation, which in turn leads to inferior service quality, which then results in lower prices and margins. In order to address the employee dependency through increased motivation and retention, as well as building capabilities, is it important that Professional Service Firms focus on projects that are challenging and innovative. This will satisfy the restless and ambitious nature of professionals and, in case of innovative solutions, also further more efficient deliveries of future similar projects. Whereas improved motivation and retention creates increased performance, quantifying the value hereof is not possible at this point. The value of an innovative solution can however be quantified through an assessment of savings on future similar projects. To address the market-related challenges, a firm should focus on clients and projects that represent reference and advocacy potential, i.e. clients/projects that can provide not only additional business through indirect sales activities, but also positively shape the firm’s reputation, so as to counter the low entry barriers and enable differentiation, which will shield it from the increasing price competition. While the value of the additional business can be quantified, the value of increased reputation – while considerable from a strategic perspective – is not quantifiable at this point. Overall, the framework for assessing the total value of a client builds on traditional profitability frameworks, and consists of a quantitative and qualitative component

UddannelserCand.merc.fsm Finance and Strategic Management, (Kandidatuddannelse) Afsluttende afhandling
SprogEngelsk
Udgivelsesdato2010
Antal sider95