High growth consulting firms are specialised and invest in marketing

19 September 2017 Consultancy.uk

High growth consulting firms, which see average yearly growth of at least 20%, are most likely found in the technology consulting and management consulting segments. The factors that tended to make the difference between them and the rest of the market were specialisation across strategy and client offerings, and heavier investment in marketing.

The new '2017 High Growth Study' has revealed what makes the difference between stagnation and high growth in the consulting industry. According to the paper by Hinge Marketing, which surveyed over 500 firms with combined annual revenue of $87 billion, High-Growth firms had a median annual growth rate of 34.3%. Technology and consulting firms in the sample had the highest median growth rates, while legal and accounting/financial services firms had the lowest, as digital disruption continues to drive client needs, and businesses look to benefit from placing new technology at the heart of their business model to save costs and fend off new competitors.

Median Annual Growth by IndustryHigh-Growth firms have a better financial track record than their slower competitors. They bring in more revenue per full-time employee, seeing twice as much profit per employee (20%) than No-Growth firms (10%).

When examined more closely, the researchers found two main reasons behind this huge variation. So how are high grows getting their success? According to Hinge’s study, successful firms expand their offerings firmly into the booming strategy segment, as many of the world’s largest consulting firms are currently doing, while they invest more in marketing.

In order to glean this information and explore further, Hinge asked firms to rate their level of specialisation on a scale of 0–10 (10 being most niche and specialized) in five areas of focus. These were “Offering highly specialised services”, “Solving particular client challenges”, “Helping particular roles in client organisations”, “Industry specialisation”, and “Geographic or regional specialisation.” High-Growth firms were 22% more likely to be highly specialised in at least one of these areas.

Profitability by Growth

Specialisation is no stranger to High-Growth firms either. They are 22% more likely to be highly specialised in fact, particularly in solving unique challenges, offering tailored services, and helping certain roles within client organisations directly. The proportion of firms that gave a rating of 9 or 10 — indicating extreme specialization to these areas of focus – showed that interestingly, No-Growth firms were slightly more likely to focus on industry specialisation.

In contrast, High-Growth firms were more focused on offering a particular service or solving a particular challenge. This may suggest that industry specialisation alone will not promote growth, and that additional case-by-case specialisation may be needed.

Firm Specialization

As a result of this ramped up specialisation, High-Growth firms tend to offer fewer services than their counterparts. After uncovering High-Growth firms’ tendencies to focus on solving particular challenges and offering specialised services, researchers then asked participants to identify the number of services their firm offers on their website or marketing materials. We found High-Growth firms offered 40% fewer services than No-Growth firms.

More often than not, the chosen firm has stronger differentiators – characteristics that set a firm apart, giving it a competitive advantage in a crowded marketplace. Participants were asked to identify what makes their firm different from competitors. There were three notable indicators of higher performance that stood out. High-Growth firms were nearly three times more likely to reference their use of technology, while they were twice as likely to use their marketing/business development approach as differentiators.

Conversely, they were nearly three times less likely to reference the history of their firm as a differentiator – suggesting that they were less reliant on reputation than the slow or No-Growth firms who may well rest on their laurels a degree more, rather than further focusing on innovation and specialisation.

Remarkable Different Differentiators

The use of technology as a differentiator is growing rapidly, meanwhile. 64% more High-Growth firms identified their use of technology as a differentiator this year as compared to last. This was the largest increase among all High-Growth firm differentiators. Alongside this, High-Growth firms had a higher propensity for the use of marketing/business development approaches as differentiators. The top 10 marketing techniques that High-Growth firms reported as having the most significant marketing impact show a stark contrast with responses of No-Growers. Most notably, 33% of High-Growth firms favoured Partnership Marketing, something that a rock-bottom 0% of No-Growth firms used. Clearly, the amount of success a firm has correlates with the level of marketing it employs, with High-Growth firms  enjoying significantly more impact from this marketing mix than No-Growth firms.

High-Growth firms employ a higher ratio of marketing employees compared to No-Growth firms. For every 30 full-time employees, a High-Growth firm employs two marketing employees, a 15:1 ratio. For No-Growth firms the ratio is 48:1.

Top 10 Techniques with Greatest Marketing Impact

The divide in investing in Marketing Techniques Marketing budgets may be comparatively small, but High-Growth firms are putting more effort into the techniques in their marketing mix. Participants also provided a rating (0–10, with 10 being the most) indicating the amount of effort invested in each technique their firm used. Effort ratings take into account both time and money invested in a technique. Figure 14 shows the proportion of firms that gave an effort rating of 9 or 10.

Surprisingly, email marketing ranked as the top priority for High-Growth firms by far, contrasting 28.6% of respondents to 11.5% from No-Growth firms. However, beyond this, stark contrasts were also seen in the way downloadable educational content was perceived – with 22.7% of High-Growth firms vastly outnumbering another 0% of No-Growth companies, while Website presence was the only category judged to be more of a priority by No-Growth firms than their opposite numbers.

Advertising, marketing and design services have become an increasingly attractive prospect for the consulting industry in recent years. However, while firms have appreciated the opportunity to tap into a new market by offering clients enhanced design solutions, Hinge’s research suggests that a minority of firms are exploring these solutions to boost their own growth. Studies such as this may well push more firms into taking a more serious look at the potential for marketing at their own firm, however.

Related: The fastest growing management consulting firms of Europe.

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