by

Kreindy Giladi
Assistant Professor of Accounting
Department of Economics
Brooklyn College of the City University of New York

Hershey H. Friedman
Professor of Business and Marketing
Brooklyn College of the City University of New York

The authors demonstrate how accounting firms can use direct marketing, database marketing, and relationship marketing to increase client satisfaction and increase their profits.

Direct marketing, relationship marketing, and database marketing are major buzz words in the fields of consumer marketing and business-to-business marketing. More than just catchphrases, these terms represent a new way of doing business: an approach to business that can result in increased client satisfaction and increased profits. The purpose of this article is to investigate how these ideas that have revolutionized marketing may be applied by accounting practitioners.

Direct marketing has been defined by the Direct Marketing Association as an "interactive system of marketing which uses one or more advertising media to effect a measurable response and/or transaction at any location" [Stone (1994), p. 5]. Direct marketing often involves the use of direct response advertising (typically there is a phone number and/or address in the advertisement) to generate a response (e.g., sale, inquiry, donation, membership). This response or transaction can take place by mail, via the web, or at any location. These responses are tracked and measured and this allows a firm to determine the return on their expenditure, i.e., the firm can easily perform a cost-benefit analysis. The generated responses are maintained and tracked in a computer database. Included in direct marketing are the following: direct mail; catalogs; telemarketing; advertising on the world wide web; direct response advertisements in newspapers, in magazines, on radio, on television, etc.

Database marketing is very closely related to direct marketing. Indeed, direct marketers rely on customer databases. Database marketing focuses on developing a database of customers or prospective customers. The database includes information such as the customer’s name, address, telephone number, source of inquiry or order, past purchases, pertinent demographic information, and other useful information. By knowing a great deal about a customer, a company can then attempt to sell them related products. For instance, several publishers of health magazines have discovered that they can add to their profits by maintaining a database of their subscribers and then trying to sell them health-related books. Subscribers that are concerned with weight loss are sent direct mail describing new diet books; subscribers concerned with home and natural remedies are sent brochures describing books dealing with these subjects, and so on. Furthermore, companies using database marketing can tailor promotions and messages to customers’ exact needs. The more a firm knows about its customers, the greater the likelihood of keeping those customer and selling them other products and services.

Relationship marketing refers to a philosophy that a company that wishes to succeed should develop a strong, lifetime (or at least a very long-term) relationship with their customers. Companies that follow this philosophy understand the importance of communicating with their customers on a regular basis. In order to have this kind of relationship customers have to feel good about doing business with the company. Also, a customer should find it easy to contact the company and feel welcome when communicating with it. The customer should feel that he is part of a big family and that the company is upset if the product or service fails to perform properly. Obviously, it is much easier to make customers feel that you care if you understand their needs. Clearly, using database marketing makes it easier to practice relationship marketing.

Direct marketing is a powerful tool that may be utilized by accounting practitioners. Accounting firms should utilize direct response advertising. Rather than general advertising which does not provide a measurable response, direct response advertisements encourage an immediate response by providing a telephone number and/or an address. Firms that run direct response advertisements can determine the effectiveness of their advertising by simply keeping track of the number of responses. Since the cost of the advertisement is known, the firm can compute the cost per inquiry and the cost of obtaining a new client. For example, suppose you run an advertisement in the financial section of the New York Times at a cost of $50,000. The advertisement is a direct response one and contains a telephone number. The advertisement might also include an extension, say x 1898, which is actually a code enabling the firm to know which particular advertisement the respondent saw. Alternatively, callers can be queried as to which advertisement they are responding. If the advertisement results in 100 inquiries and ultimately 25 on the inquirers are converted into clients, then the cost per inquiry is $500.00 ($50,000 / 100) and the cost per new client is $2,000.00 ($50,000 / 25). By computing these costs, a firm then has the ability to compare different vehicles within a medium and different media, e.g., which newspaper to use and whether to use newspapers or magazines. The same approach can be used with direct mail, telemarketing, and advertisements on the world wide web. It is also important to note that individuals making inquiries in response to the advertisement are asked questions about their needs (besides the obvious name, address, and telephone number) in order that our database of inquirers is complete. You want to track every inquiry from the first time an individual makes an inquiry until that individual becomes a client (hopefully).

The following might describe how you can transform your accounting firm into one that practices direct marketing and database marketing.

Step 1: You write or obtain several brochures that might be of great interest to potential clients, e.g., "How to Reduce Your Estate Taxes," "Should You Purchase Tax-Free Bonds?," etc. You run direct response advertisements in publications that are likely to be read by prospects. These advertisements should not only offer the free brochures, but should also describe the services your firm provides. Also, you might wish to include in the advertisement what is unique about your firm. The advertisements will include your telephone number and an "extension."

Step 2: Telephone lines are dedicated to this purpose so that they are answered within two or three rings. You have about 10 to 20 seconds to make a good impression on your clients. You might have to instruct personnel to answer the phone enthusiastically and affably. No one will want to have a relationship with a firm that puts you on hold for ten minutes (and then accidentally forgets to get back to you) or a firm whose phones are answered by individuals who sound indifferent or stupid. People calling in do not want to go through a long story and then be told that they will have to be transferred to someone else only to have to repeat the whole story all over again.

Anyone calling for the brochure is asked a few simple questions, including name, address, telephone number, and major accounting needs. This information is entered in a database along with the source of the inquiry, i.e., which advertisement and in which publication it appeared. The requested brochures should be sent out that very same evening. On the outside envelope it should state: "Here’s the information you requested." It is important to provide prospects with an impression (a true one) of a very efficient firm: one that responds promptly.

Step 3: About a week to ten days later, prospects are called and asked whether they received the requested brochure. They should be asked whether they have any questions. They should also be invited to come down to the firm for a free consultation.

Step 4: When the prospect comes to the firm, he or she must be treated with the greatest of respect and not made to wait. There are three basic approaches to selling: the "canned approach," the "selling formula approach," and the "need-satisfaction approach " [Kotler(1994), p. 706; McCarthy and Perreault, Jr.(1996), p. 469-470]. The "canned approach" to selling is used by many telemarketers. With this approach the salesperson does almost all of the talking in what is essentially a memorized sales pitch. This approach might be used by someone trying to sell you aluminum siding, but probably should not be used by an accounting firm. The second approach known as the "selling formula approach" starts with a prepared formulated sales pitch but tries to lead the customer into the discussion so that the salesperson can ascertain his/her needs. The salesperson does not do almost all of the talking as with a "canned" approach; the salesperson attempts to determine early on what the client or customer’s needs are. This approach should also not be used by an accounting firm. The third approach, known as the "need-satisfaction approach," is the one that should be employed by an accounting firm. With this approach, the customer does almost all of the talking since we are not interested in "pushing" our firm. The goal is to determine the client’s true needs and the job of the salesperson is to listen carefully. If the goal is a long-tem relationship, you have to learn how to listen and once it is clear what the client’s real needs are, then the salesperson can discuss what his or her accounting firm can do to best satisfy these needs.

Step 5: Accurate records should be kept in the database. Eventually, it will become important to analyze each advertising vehicle used on such measures cost per inquiry, cost per client, and profits generated. If different advertisements are used, we can compare them and determine which advertisement generates the most leads and clients. Remember, that leads are less valuable than actual clients, and that one very large client may be more valuable than several smaller ones. A publication or advertisement may produce a large number of leads but result in very few clients. The quality of the leads is more important than the quantity. The beauty of direct marketing is that it makes it very easy to measure the ultimate outcome of the advertisement.

Practicing direct marketing and database marketing is not enough. To succeed you have to follow a relationship marketing philosophy. Everyone in the firm should realize the importance of sincerely caring for a client. If a client calls, his or her concerns should be taken seriously. If the client leaves a message, someone should respond immediately. Calling back several days later does not make a good impression and is certainly not a way to practice relationship marketing. One of the authors knows a lawyer who will call clients and prospective clients back on the same day they called even if it means returning calls at 1 am. He claims that not only are clients not angry but they are impressed with the concern he shows. Showing that you care goes a long way towards preserving a good, long-term client relationship.

A marketing-oriented accounting firm understands that in order to become very successful, the goal of the organization must be to satisfy customer needs. Also, the firm must build long-term relationships with customers. It is much easier to keep existing customers happy than to attempt to get back customers who have left because of dissatisfaction. This paper demonstrates how a firm can attract new customers and retain them.

Kotler, Philip (1994). Marketing Management: Analysis, Planning, Implementation, and Control. Englewood Cliffs, New Jersey: Prentice Hall.

Perreault, Jr. William and E. Jerome McCarthy (1996). Basic Marketing: A Global-Managerial Approach. Chicago: Irwin.

Stone, Bob (1994), Successful Direct Marketing Methods. Lincolnwood, Illinios: NTC Business Books.