The Marketplace MasterTM is a monthly email publication on professional service marketing from Expertise Marketing, LLC. Are you looking forwards and backwards? This month we continue our discussion of market research with a closer look at trend analysis and forecasting for professional service firms. If you’re a new subscriber to this newsletter, you might want to take a look at last month’s issue Why Aren’t More Professional Service Firms Researching Client Perceptions? Suzanne Lowe Author, Marketplace Masters: How Professional Service Firms Compete to Win President, Expertise Marketing, LLC Master Your Marketplace by Looking Forwards and Backwards "I always avoid prophesying beforehand because it is much better to prophesy after the event has already taken place." Winston Churchill Winston Churchill aside, it’s always a better idea for service firms to know what’s going to happen in their marketplaces before it happens. Then again, looking backwards can be a good idea, too. Firms can use trend analysis and forecasting to make sense of the past and envision the future. Forward-thinking professional service firms (PSFs) are beginning to analyze their external environment in order to arm themselves with the information they need to make informed, strategic marketplace decisions and compete more effectively. But for many PSFs, the competitive benefits are unclear and the techniques appear difficult. Looking Backwards with Trend Analysis Trends are started by things that have already happened. Rooted in the past and seen happening now, trends push business buyers toward their future purchasing choices. You can think of trends as predictors of your clients’ near– or longer-term purchasing behavior.

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Through our research, we found that only 34 percent of PSFs were using trend analyses. Of those, many were actually using it to look at their own internal performance—such as discerning the patterns of their proposal hit rates, or identifying which industries have historically been the most profitable for them. It’s relatively easy to analyze these trends, because the information is internal and thus more readily available.

What are these firms missing by not doing more to look outside and detect economic or business environment trends? Is it a concern about “analysis paralysis?” A reluctance to accept methods that aren’t widely used yet in your firm’s professional sector? Or is it plain old competitive myopia? Examining external information can, in fact, help firms understand how shifts in their clients’ industries might affect their own business.

Suppose you have several clients in an industry that is undergoing massive consolidations and mergers. Wouldn’t your firm want competitively-advantaged perspectives about this well in advance, so you can start a relationship management program that will allow your firm to be included on the short list of preferred vendors?

Trends analysis would have helped PSFs blindsided by offshoring, too. It could have shown that a recession would naturally encourage clients to look overseas for cheap labor.

As PSFs emerge from the recent recession, it appears that trends analysis is on the upswing in a variety of sectors. An architectural firm told us, “[We conduct a] quarterly assessment of economic conditions and market analysis to ensure we are tracking the right opportunities.” A management consulting firm told us that trend analysis “gives us a sense of where things are headed and facilitates our postulating on the critical elements needed to service the growth areas.”

Looking Forward with Forecasting

Forecasts are intelligent guesses about the future. Forecasting is not a new discipline. A number of professional service sectors already rely on their trade associations, industry watchdog groups, the government and/or for-profit organizations to help them assess broad future business opportunities.
But, like trend analysis, a firm’s conducting forecasting on its own behalf is underutilized – we found only 33 percent of PSFs forecast potential future economic and business scenarios. It’s also most often used for internal purposes such as studying cash flow and sales pipelines. When it does happen, it’s usually in support of a costly new venture or is limited to a firm’s participation in industry watchdog group research.

Neglecting to do marketplace-focused forecasting has affected entire professional sectors. Who can forget Y2K? Forecasting could have shown information technology firms that the glut of Y2K buying would be followed by other growing client needs, such as business intelligence. Savvy firms could have begun building capabilities in that area to feed the firm’s revenues after Y2K buying ended. Without an embrace of forecasting, firms might overlook competitively advantaged future opportunities.

Solid Footing in a Shifting Marketplace

Trends analysis and forecasting are most potent when utilized together. We talked to Jerry Yudelson, Portland, Oregon-based Associate Principal of Interface Engineering about the trends analysis and forecasting techniques he’s used and how they’ve helped the firm.

The market for green buildings has been increasing at a strong pace since the Leadership in Energy and Environmental Design (LEED) Green Building Rating System was introduced in 2000 by the U.S. Green Building Council. In order to gauge how much we should be investing to “get a piece” of this emerging growth market, I used forecasting to determine how much of the green building trend is “over” and how much is yet to happen (we determined it’s still in the early stages), and which of our target markets would be likely adopters of green buildings (office buildings and colleges and universities).

I conducted this forecast using the Diffusion of Innovation Theory (posited by Everett Rogers at MIT) in order to explain the current growth and to predict the future growth of the green-building trend. I found some good forecasting software to help me run the numbers. We forecasted a ten-fold increase in demand from 2003 to 2010, which supported our recommendations that the firm must accelerate its pursuit of work in the green building area. As a result, we’ve allocated a substantial portion of our 2005 budget to pursuing business with likely green-building buyers, including the publication of a new book and a PR program that will position us as a leader in this growing market.

Making Astute Decisions

In a booming economy with little competition, a firm can find it hard to justify an investment in market research. But savvy PSFs no longer allow their firms to be vulnerable to the vagaries of the marketplace. They will employ trends analysis and forecasting to help them make astute decisions to capture new competitive opportunities.

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