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ASIA PACIFIC JOURNAL OF MANAGEMENT

VOL. 8, NO. 2:185-199

INFORMATION SOURCES USED TO SELECT DIFFERENT TYPES OF MANAGEMENT CONSULTANCY SERVICES Philip L Dawes, Grahame R Dowling, and Paul G Patterson*

Understanding how professional services are purchased is vital to the success of the f r m s that provide such services. Although recent research has provided some insights into how consumers purchase professional services, little is known about how organisations buy these services. Our study, using data collected from 253 Australian organisations, describes an important part of the organisational buying process, namely pre-purchase information search. More specifically, we examine the influence of a range of information sources on the choice of a management consultant in the following areas: strategic and economic planning; marketing; human resource management; information technology; production planning and logistics. The results show that information sources related to an organisation's "internal network" (ie, discussions inside the company, and past dealings with a consulting firm) were by far the most influential information sources in choosing a consultant. Further, the least influential sources we,re "impersonal advertising" (ie, advertising in the business press, corporate brochures and professional directories). Only minor differences in the influence of the information sources were found across the various O'pes of consulting assignment.

1. INTRODUCTION In many of the major business centres of the world there has been an explosion in the use of management consultants. Firms are not only seeking advice in traditional areas such as corporate strategy and organisational change but are now using the services of consultants in many other areas such as marketing, human resource management, public relations, and telecommunications (Hely,1989; Payne, 1987). For example, in the United States alone it is estimated that companies spend $10 billion dollars annually buying corporate strategy advice from external consultants and that this market is growing at a rate of more than 20% per annum. In areas relating to information technology, the market for external advice may be bigger and expanding at an even faster rate. The growth in the demand for consulting services in the United States is mirrored in Australia and Europe and it is predicted that the next big market in consulting will be Asia (Fisher, 1989). A major result of this expanding demand is that the number of consulting firms is growing and the market for management consulting services is becoming more competitive. This has led to many consultants becoming more aware of the benefits of adopting a * Senior Lecturers, University of Woltongong, Australian Graduate School of Management, University of New South Wales, and University of Wollongong respectively. (The authors' names are in alphabetical order.) 185

Selecting Management Consultancy Services marketing orientation in order to understand better their clients' needs and to increase their capabilities to compete in the marketplace (Myers, 1988). The purpose of our paper is to provide management consultants with a better understanding of the information search phase of the buying process that occurs when organisations commission such services. The analysis of the information search process is examined across five types of consulting assignments (strategic and economic planning, marketing, information technology, human resource management, production planning and logistics). Furthermore, we present a descriptive analysis of the ad hoc buying groups (or buying centres) formed to search for information and conduct other purchase-related activities concerning the selection of a management consultant. The insights gained from this study should enable the providers of consulting services to develop more effective marketing and communication strategies. 2. BACKGROUND The services sector now represents a major proportion of gross national product (GNP) of all Western economies and provides the bulk of new employment (Bateson, 1989). It is also becoming a recognised subset of the marketing discipline (Zeithaml, Parasuraman, and Berry, 1985). Although there has been a rapid growth of research in services marketing in general, only a few studies have examined business-to-business (or industrial) professional services (eg, management consulting, architectural, engineering and accounting services) or the practices used to market such services (Jackson and Cooper, 1988). It has been argued that this lack of research is due mainly to two underlying conceptual problems (Morris and Fuller, 1989). First, the extent to which business services need to be marketed differently from industrial products has not been well established. Second, and more importantly, the literature makes no clear distinction between business and consumer services. As a consequence, little is known about the particular problems concerning the marketing of business professional services. This is somewhat surprising, since the use of professional services is a major activity for many organisations (Stock and Zinszer, 1987). The small amount of empirical research that has been conducted in the business professional services area has examined pricing methods (Morris and Fuller, 1989), the nature of the referral process (Wheiler, 1987), and the structure of the buying centre formed to carry out the purchase decision (Lynn, 1987). THE NATURE OF SERVICES It is now generally accepted that the key distinguishing characteristics of services which separate them from tangible goods are: intangibility, inseparability of consumption and production, heterogeneity (high variability of performance) and perishability (Zeithaml, Parasurarnan, and Berry, 1985). However, the fundamental difference between goods and services universally cited by many authors is intangibility (Bateson, 1979; Lovelock, 1981). Because services are experiences or performances, rather than a tangible object, they cannot be evaluated in advance of purchase in the same manner that goods can. Thus it is difficult for the buyer to evaluate a service prior to purchase. It is precisely because of this lack of search qualities that there are higher levels of perceived risk when purchasing 186

APJM a service (Bateson, 1989). In other words, services are very low in search qualities (Darby and Kami, 1973; Bateson, 1989). Bateson (1989) models the purchase of services as a two-stage process: (1) the prepurchase choice stage; and (2) the post-purchase evaluation and consumption stage. Furthermore, he partitions the pre-purchase stage into three components: generation of customer awareness and interest; information search; and evaluation of alternative suppliers. This paper focuses on the information search and evaluation phases of the pre-purchase stage for management consulting services. INFORMATION SEARCH Buyers can obtain information about services from both personal sources (eg, colleagues and industry experts) and impersonal, company-controlled information sources (eg, mass media and product brochures). Prior research regarding the purchase of both consumer services (Freiden and Goldsmith, 1989) and business services (Stock and Zinszer, 1987) suggests that buyers rely most on personal sources of information. It is because the service purchase decision is often a risky decision that buyers attempt to reduce this perceived risk by seeking out information from personal sources (eg, friends, industry colleagues and past users) which are generally perceived as being more credible and less biased than impersonal, seller-controlledsources. Although research in the business services area is limited, a study by Stock and Zinszer (1987) supports the view that organisational buyers rely more on personal than on impersonal sources when commissioning a professional service. In addition, they found that the four most important information sources were all personal. A study of both suppliers and users of marketing research services found support for the view that personal sources of information and the building of social networks were critical success factors for providers of marketing research services (Parasuraman and Zeithaml, 1983). In summary, while few studies have examined the external information search phase for business professional services, the limited research to date indicates that personal sources of information, including word-of-mouth between colleagues in the same industry and between company co-workers, and information as a result of past dealings with consultants, play a key role in reducing perceived risk in the buyer's selection decision. However, the reliance on personal sources may also be due to the fact that very few service providers use impersonal sources of information such as advertising to promote their services (Myers, 1988). Thus, prospective buyers may have very little option but to rely almost entirely on personal sources (Wheiler, 1987). ORGANISATIONAL DECISION-MAKING - BUYING CENTRE STRUCTURE To be successful, marketing strategy must address the variation in information needs of those individuals involved in the purchasing decision as it progresses through the prepurchase (including information search) - consumption - post-purchase phases (Reeder, Brierty, and Reeder, 1987). Therefore, a major task confronting the management consultant is to identify those individuals who are involved in the purchase decision. Collectively, these individuals are referred to as the "buying centre". Buying centres can be viewed in 187

Selecting Management Consuhancy Services terms of the following three structural dimensions: size - the total number of persons involved in the buying centre; lateral involvement - the total number of functional areas represented in the buying centre; and, vertical involvement - the number of management levels in the buying centre (Johnston and Bonoma, 1981). Prior theory in organisational buyer behaviour suggests that these buying centre structure variables will affect organisational buying decision activities such as information search (Ghingotd and Wilson, 1985). This seems reasonable, since these three structure variables (size, lateral and vertical involvement) relate to patterns of buying centre communication and information transmission with respect to a particular decision. Furthermore, organisational theory suggests that vertical involvement in particular is important in explaining information search (Daft, 1986). Managers at different levels in an organisation's hierarchy rely on different information sources, and therefore buying centres with greater vertical involvement are likely to use a wider variety of information sources when making service purchase decisions. In certain circumstances, a buying centre may consist of a single individual (usually a purchasing agent) but normally it consists of several individuals. Past research suggests that buying centres for professional services are smaller in size than those formed to purchase industrial products. For example, Lynn (1987) found that buying centres for CPA services had an average of 3.5 members, while Spekman and Stern (1979) found that the average size of buying centres for the purchase of a variety of commodity products was 6.2 members. With respect to lateral involvement and vertical involvement, Johnston and Bonoma (1981) found that there was greater lateral and vertical involvement in the purchasing of capital equipment than there was in the purchasing of industrial services (eg, plant janitorial services, refuse removal services). The median number of functional areas (or lateral involvement) for capital equipment and industrial services was four and three respectively. The median number of management levels (vertical involvement) for those purchases was three and two respectively. 3. THE STUDY A central purpose of our study was to extend the research on professional services marketing to the business-to-business area. We focus on information search, since this construct is a major component of the comprehensive theories of organisational buying behaviour. As pointed out by Zeithaml, Parasuraman, and Berry (p 44, 1985), "A research priority in services marketing is an empirical study that transcends specific industries..." Our study attempts to do this in the context of business professional services by analysing management consulting across a range of industries, viz, strategic and economic planning, marketing, information technology, human resource management, production planning and logistics. This enhances the generality of the findings at the same time as helping to fill a void in the literature. Management consulting services were selected because: (1) they are important purchases for many ~ e s of organisations, (2) they represent a major and rapidly expanding part of the business-to-business services industry, and (3) little research has examined this important part of the professional services literature. In addition, we conduct a descriptive

188

APJM analysis of the composition of the buying centres formed to conduct this external information search. Specifically, four research issues are addressed: (I) How many and which specific sources are consulted by organisational buyers of management consulting services? (2) Which information sources are most influential on the eventual choice of a supplier? (3) Does the level of information search vary across different types of consulting services? and (4) Is there any variation in buying centre structure (lateral involvement, vertical involvement, and size) across the different types of consulting services? IMPLEMENTING THE STUDY The study had two main data collection phases. First, personal in-depth interviews were conducted with convenience samples of users (n = 7) and providers of consulting services (n = 5). The main outcome of this phase was an understanding of the breadth of information sources used in the selection decision and their perceived influence. Second, pre-tested questionnaires and a covering letter were mailed to a non-probability sample of 738 organisations. Respondents were asked about their most recent experience (within the last 15 months) in commissioning a management consultant. The sampling frame was generated from a number of sources including the membership list of the Australian Marketing Institute and client lists from several large and medium-sized management consulting firms. After one follow-up reminder letter and the incentive of receiving an executive summary of the results, 337 usable responses were received (46% response rate). However, 84 respondents reported not having commissioned a consultant in the previous 15 months and, therefore, only 253 questionnaires were used in the data analysis. The covering letter directed the questionnaire to a person in the organisation who had been actively involved in the consultant selection decision. It explained to potential respondents that the research was of an academic rather than a commercial nature. The respondents are seen as "key informants" reporting their information search activities as key members of the organisation's buying centre. If the key informants are inexperienced or not centrally involved in the buying decision, their responses may not be a reliable indicator of the activities of the buying group. An indirect evaluation of credentials shows that they were experienced in making this type of decision (50% had commissioned nine or more consultants in their career) and mostly occupied senior positions (directors/CEO 17%, senior management 48%, middle management 30%, department member 5%). In addition, 81% of them were involved in at least four of the six stages of the overall buying process (viz, problem identification, decision to involve an external consultant, identification of possible consultants, information search, evaluation of consultants, and final selection). 4. STUDY FINDINGS Respondents were presented with a list of 16 information sources which had been derived from the literature and from in-depth interviews with both clients and consulting firms. For each of these potential sources of information, the respondent had to first indicate whether or not the source was consulted for their most recent consultant selection decision. Frequency distributions and descriptive statistics showing the number of sources

189

Selecting Management Consultancy Services used across different types of assignment are presented in Table 1. (Table 2 lists the information sources.) The average number of sources used was 4.6 with 83% of respondents reporting the use of between one and six information sources. This is significantly higher than the number of sources recently reported for a range of consumer professional services (medical, legal, dental and veterinary) where 90% of consumers used only one to three sources (Freiden and Goldsmith, 1989). The large number of information sources used highlights the complexity of the buying process for business professional services.

TABLE 1 NUMBER OF INFORMATION SOURCES USED BY TYPE OF CONSULTING ASSIGNMENT Type of Consulting Assignment

Number of Sources 1-3 4-6 7-9 10-12 13-16

SE %

M %

IT %

HRM %

PPL %

TOTAL %

23 63 12 2

26 58 t2 3

21 56 20 3

50 27 13 10

41 45 12 2

30 53 13 3

1

1 100% (52)

100% (88)

100% (30)

100% (34)

100% (49)

100% (253)

Average Number of Sources Used

4.4

4.8

4.6

5.3

4.1

4.6

Std Deviation

2.2

2.3

2.8

2.2

2.5

2.4

n

=

Note SE M IT HRM PPL

= = = = =

Strategic and Economic Planning Marketing Information Technology Human Resource Management Production Planning and Logistics

INFLUENCE OF VARIOUS INFORMATION SOURCES Respondents were not only asked to indicate which individual information sources they had actually used, but they were also asked to rate the influence of that individual source on the eventual choice of the management consultant. A seven-point rating scale was used (with 1 = low influence and 7 = high influence), ff a particular source was not used, then a zero was inputed for the purpose of calculating an overall influence score for that source. The use of an influence measure differs from the practice of previous industrial marketing researchers, who have employed a measure of either the importance of the information sources (eg, Moriarty and Spekman, 1984) or the usefulness of these sources (Kelly and Hensel, 1973). It has been argued that actual use and the perceived influence of 190

APJM various information sources on the decision provide better measures of informationseeking behaviour than either importance or usefulness measures alone (Midgley, 1983). To isolate any patterns of information search, the influence scores of the 16 information sources were factor analysed. This statistical technique analyses the interrelationship among the various information sources and allows the underlying dimensions or factors in the data to be identified. Each factor is a combination of information sources which reflect how respondents used the information available to help select a consultant. Table 2 reports the five factors which summarise the patterns of information search. (A summary of the statistical decision rules used to generate this output is also included at the bottom of Table 2.) TABLE 2 F A C T O R ANALYSIS O F T H E I N F L U E N C E OF I N F O R M A T I O N SOURCES USED T O S E L E C T A C O N S U L T A N T

Fi

Facto~ Fz F3 F4

F5

1. Consultants' Brochures

.42

.I1

.18

.05

.22

2. Trade Directories

.59

.25

.09

.01

.17

3. Professional Associations

.5l

.37

.31

.12

.13

4. Articles by Consultants in Magazines and Journals

.60

.29

.40

.09

.03

5. Articles about Consultant in Business Press

.69

28

.07

.09

.15

6. Advertisements in Business Press

.54

.24

.29

.06

.19

7. Written Consulting Proposal

.31

.65

.16

.04

.28

8. Formal Presentation

.39

.58

.01

.03

.20

9. References Supplied by Consultant

.37

.51

.09

.04

.15

10. Meeting at Consultant's Office

.12

.13

.5-5-i .30

.17

11. Consultant Giving Public Speech or Seminar

.35

.05

.58! .I1

.20

12. Discussions with Colleagues Inside own Company

.18

.37

.08

.59

.07

13. Past Dealings with Consulting Firm

.00

.14

.02 1.83

.08

14. Discussions with Colleagues outside your Company

.37

.17

.06

.13

.70

15. Referral from Another Consultant

.01

.10

.23

.07

.67

16. Referral from a Satisfied Customer

.18

.07

.t5

.25

.44

Information Sources

Statistical Summary The eigenvatues greater than unity convention and examination of the scree plot were used to extract five factors which accounted for 52% of the variance. An orthogonal and an oblique rotation led to a similar interpretation of the factors. 191

Selecting Management Consultancy Services Based on the pattern of factor loadings in Table 2, the five factors are named and their average influence scores are shown in Table 3. There is a common theme across the factors. Each factor reflects a discrete stage in the consultant buying process. For example, the first factor (F t - impersonal advertising) can be associated with the awareness/interest stage in the industrial buying process (Webster, 1984). F 3 (personal advertising), and F 5 (external referral network) are all information sources utilised in the early evaluation stages of the buying process. Fz, which includes the consultant's formal presentation and/or a written proposal, has a major influence in the shortlisting and final evaluation stages. F 4 (internal nework) is typically used at the final selection stage. TABLE 3 AVERAGE INFLUENCE SCORES FOR EACH FACTOR Influence on Final Selection Factors from Table 2

a

Factor Name

Rank

Average• Score

Standard Deviation

Stage in Buying Process

FI

Impersonal Advertising

0.29 b

0.60

Awareness/Interest

Fz

Consultant's Statement of Capabilities

2.53 b

1.99

Final Evaluation/ Shortlisting

F3

Personal Advertising

3

1.19

1.41

Early Evaluation

F4

Internal Network

1

3.75 b

2.12

Final Selection

Fs

Extemal Referral Network

4

1.13

1.48

Early Evaluation

Scale endpoints were labelled 1 = low influence and 7 = high influence. A zero score was inputed if a source was not used. Paired t-tests showed statistically significant differences (p < 0.00) between the average scores of: (i) F 1 and all other factors; (ii) F4 and all other factors; (iii) F z and F 3 and F~. There was no statistically significant difference between the average scores of F 3 and F~.

Table 3 shows that F4, the internal network factor, is by far the most influential information source on the final choice of a consultant (average influence score = 3.75). The two sources o f information representing this factor, viz, discussions with colleagues inside your own company, and discussions concerning the firm's past dealings with the consultant, were sources used by 71% and 68% of respondents respectively (Table 4). These information sources are both informal and personal. Two recent studies (Beltramini, 1989; Wheiler, t987) which investigated the use of a range o f professional services (medical, legal, accounting, banking) both came to conclusions similar to those reached in our study. That is, personal informal networks are more influential than formal information sources. Discussions concerning past dealings with a consultant refer to a potential "in-seller advantage" for this type of buying decision and emphasise the importance of having a t92

APJM TABLE INFLUENCE INFORMATION

4

AND PERCENTAGE OF FIRMS USING VARIOUS SOURCES BY TYPE OF CONSULTING ASSIGNMENT Average Influence Scores

Information Source

Factor I Impersonal Advertising Consultants' Brochures

(% of firms using source)

average

=

% using = Trade Directories Professional Associations Articles by Consultants in Magazines/Journals Articles about Consultants in Business Press Advertisement in Business Press Factor 2 Consultant's Statement of Capabilities Written Consulting Proposal Formal Presentation References Supplied by Consultant Factor 3 Personal Advertising Meeting at Consultant's Office Consultant Giving Public Speech or Seminar

SE

M

IT

HRM

PPL

TOTAL

0.7 (2t%) 0.1 (4) 0.3 (t0) O.4 (8) 0.3 (8) 0.3 (6)

0.4 (15%) 0.2 (8) O.6 (15) O.2 (6) 0.2 (6) 0.1 (3)

1.0 (35%) (7) 0.4 (12) O.2 (9) 0.4 (9) -

0.5 (20%) 0.1 (3) 0.5 (10) O.3 (10) 0.3 (7) 0.2 (7)

0.5 (27%) 0.1 (2) 0.2 (4) 0.3 (12) 0.1 (4) -

0.6 (22%) 0.1 (5) 0.4 (11) O.3 (8) 0.2 (6) 0.1 (3)

3.2 (60) 2.0 (39) l.& (25)

4.3 (77) 2.9 (51) 1.1' (26)

4.3 (82) 2.8 (53) 2.5b (53)

3.4 (63) 2.8 (50) 1.9 (40)

2.7 (61) 2.0 (37) I.4 (33)

3.7 (70) 2.5 (46) 1.4 (32)

2.3 ~2) 0.9 (15)

2.2 ~3) 0.4 (8)

1.5 (35) 0.2 (6)

1.2 (30) 0.5 (13)

1.2 (27) 0.3 (8)

1.8 (37) 0.5 (10)

3.4 (65) 3.8 (69)

4.0 (78) 4.~ (77)

4.1 (82) 2.~ (50)

2.8 (63) 3.9 (67)

3.2 (61) 3.6 (65)

3.6 (71) 3.9 (68)

2.1 ~2) 0.3 (6) 1,1 (23)

1.6 (36) 0.2 (7) 1.3 (26)

3.0 (67) 0.3 (6) 1.5 (27)

2.0 (47) 1.2 (23)

2.7 (55) 0.7 (14) 0.4 (6)

2.1 (47) 0.3 (7) 1.1 (21)

(52)

(88)

(30)

(34)

(49)

(253)

Factor 4 Internal Network

Discussions with Colleagues in own Company Past Dealings with Consulting Firm Factor 5 External Referral Network Discussions with Colleagues outside own Company Referral from Another Consultant Referral from a Satisfied Client

n

--

a, b Difference between these assignments significant at (p < 0.05) using Scheffe's multiple range test. Notes (1) SE = Strategic and Economic Planning M = Marketing IT = Information Technology (2)

HRM = Human Resource Management PPL = Production Planning and Logistics

Scale endpoints of 1 = low influence, 7 = high influence. A zero was inputed if a source was not used. 193

Selecting Management Consultancy Services satisfied client at the completion of a consulting assignment. If clients used a particular consultant before, then they were likely to consider fewer new consultants for a particular assignment. Our results show that clients who had not previously worked with any of the consultants being considered included on average 2.2 new consultants in their consideration sets. This compares with 1.2 new consultants for those clients who had previously worked with a particular consultant currently under consideration. These differences were statistically significant (p < 0.05). This phenomenon is common in many business-tobusiness marketing situations and reaffirms the old saying t h a t . . . "it is easier to get an old client to repeat purchase than to get a new client to make an initial purchase". The next most influential set of information sources was F,. (which represents the consultant's statement of capabilities) and comprises three sources: the written consultation proposal; formal presentation to the client; and references supplied by the consultant. These information sources were used by 70%, 46%, and 32% of respondents respectively (Table 4). These sources typically have most impact at the shortlisting and final evaluation stages of the consultant selection process. A surprising finding however is that these formal information sources were not utilised by more firms. For example, only 46% of clients asked for a formal verbal presentation. This means that consultants were only permitted to make a formal face-to-face sales presentation to less than half of their clients. Table 3 shows that factors F 3 (personal advertising) and F5 (external referral network) had a similar influence on the final consultant choice. The information sources which comprise these factors were used by an average of only 23% of firms in our study. It appears that these sources are utilised mainly at an early stage in the evaluation process to determine whether or not various consulting firms should be considered. The least influential set of information sources was F~ (impersonal advertising), which had a negligible influence on the final choice of a consulting firm (average influence score = 0.29). There appear to be two reasons for this finding. First, many consultancies do not advertise or encourage their consultants to write articles for the business press. Second, because an average of only 9% of respondents reported using these sources in their information search process, it is unlikely that the overall influence of this type of advertising would be great. This finding of tow overall influence for the impersonal advertising types (F 1) of information source has been reported elsewhere. For example, Webster (1984) concluded that mass media and other sources of advertising are useful in creating awareness for business products and services but typically have little influence in the final selection.

INFLUENCE SCORES BY TYPE OF CONSULTING ASSIGNMENT Table 4 shows the average influence scores for each information source and the proportion of firms using it, classified by type of consulting assignment. In the vast majority of instances, the minor variations in influence scores across assignment types are no more than would have been expected to have occurred by chance. In other words, with a few exceptions, the influence of various information sources does not vary according to the type of consulting assignment. This is an important finding, since it allows the larger multidisciplinary consultancies (Arthur Andersen, Price Waterhouse) to adopt a uniform 194

APJM

marketing communication approach to clients, rather than having to use specific information sources to target specific types of consulting assignments. However there are two notable, significant differences (p < 0.05). The main differences revolve around two information sources in the information technology area, namely references supplied by the consultant, and past dealings with the consulting firm. Referring to Table 4, past dealings with a consulting firm have much less influence in the final choice of a consultant in the information technology consulting area than for other types of assignments (average influence score 2.6 versus for example, 4.6 for marketing assignments). This in part reflects the fact that many firms have not had much previous experience with this type of consultancy because information technology projects tend to be major, one-off assignments of relatively long duration. Hence, previous dealings in this industry tend to have little or no influence on the current consultant selection decision. By contrast, references supplied by a consultant (average score = 2.5) for information technology assignments have more impact on the consultant selection decision than for all other types of assignment. TABLE 5 BUYING C E N T R E S T R U C T U R E BY T Y P E OF C O N S U L T I N G A S S I G N M E N T Type of Consulting Assignment SE

M

IT

HRM

PPL

TOTAL

Size

average = std dev =

3.31 1.46

3.10 1.07

3.14 1.37

2.97 1.15

3.34 1.74

3.17 1.35

Lateral Involvement

average = std dev =

3.02 ~ 1.41

2.2P 0.82

2.36 1.33

2.73 0.95

2.52 1.23

2.53 1.13

Vertical Involvement

average = std dev=

2.38 0.85

2.40 0.76

2.39 1.14

2.39 0.68

2.29 0.52

2.38 0.84

a, b Differences across assignment types significant at p < 0.05 using Scheffe's multiple range test. Note

SE M IT HRM PPL

= = = = =

Strategic and Economic Planning Marketing Information Technology Human Resource Management Production Planning and Logistics

ANALYSIS OF BUYING CENTRE STRUCTURE Table 5 shows that there are no statistically significant differences (p < 0.05) in the size of buying centres or the vertical involvement (number of management levels) across assignment types. However, for lateral involvement (number of departments) a significant difference was found (p < 0.00). Table 5 shows that more departments were involved in strategic and economic planning assignments (on average 3.02 departments) than for any 195

Selecting Management Consultancy Services other type of assignment. Lateral involvement is least when selecting marketing and information technology consultants (average sizes 2.21 and 2.36 respectively). This result can probably be attributed to the fact that strategic and economic planning projects are likely to have an impact on more areas of an organisation than other assignments such as marketing. It might also be expected that the outcome of strategic and economic planning projects would be more important to the organisation and hence more departments are likely to be involved in the consultant selection decision.

5. ,SUMMARY There have been few empirical studies of pre-purchase information search behaviour for business professional services. The findings of this study therefore enhance our understanding of this crucial stage of the organisational purchasing process and indicate that the majority of client firms use up to six different sources of information in the evaluation and selection process. This reflects a more extensive pattern of search than that reported by consumer services studies and suggests that important differences do exist between the two categories of professional services. A factor analysis revealed five underlying dimensions among the 16 information sources which influence the final consultant selection decision. Each of these factors was related to a discrete stage in the typical consultant buying process. Analysis of the average influence scores for these five factors clearly showed the "internal network" (discussions with colleagues inside the company and experience of past dealings with a consulting firm) to be the most influential type of information used to choose a consultant. The impersonal advertising factor (including trade directories, corporate brochures, articles by consultants, advertising in the business press, etc) had the least influence on the selection decision. The 16 potential sources of information that a consultant might use, did not, by and large, vary across types of consulting assignments. The only significant differences occurred in the information technology area where past dealings with a consulting firm were less used and references supplied by a consultant were more frequently used. The size of the buying centre and vertical involvement did not vary across assignment types. However for lateral involvement there were significant differences, namely that strategic and economic planning assignments typically involve more departments. This is probably due to the importance of these consulting assignments to the firm.

6. MANAGERIAL IMPLICATIONS Several implications for marketing business professional services are suggested from our findings. First, the vast majority of client f'tmas were found to use multiple sources of information when evaluating and choosing a management consultant. Consulting firms should therefore not restrict the scope of their promotional activities to the use of one or two promotional tools but rather should employ a wide array of such tools (both personal and impersonal) in their marketing programmes. These promotional activities should be

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APJM designed to complement the informal, word-of-mouth communication from previous clients and other consultants. Contact could, for example, be maintained with clients by way of periodic newsletters, lunches, cocktail parties, seminars and so forth to keep them abreast of the consultancy's range of services, new personnel, and to generally maintain and nurture some form of ongoing relationship. Of the five factors representing the 16 individual information sources, past experience with consulting firms and discussions with colleagues within the same company were most influential in the final choice of a consulting firm. This is not surprising because the intangible nature of professional services makes it difficult to evaluate them prior to purchase (and even after provision of the service for that matter). Hence, high levels of perceived risk and uncertainty are frequently associated with the selection of a consulting firm. Personal information sources have a high degree of credibility and hence help reduce this perceived risk. Therefore, it is of paramount importance that consulting firms produce a satisfied client at the end of an assignment. Client satisfaction and its consequent word-of-mouth communication throughout the client firm have a direct influence on a consultancy's chances of selection in subsequent assignments. This communication also has an indirect effect on a consultant's reputation as reflected in the "external referral network" (Fs). Here, referrals and discussions with colleagues outside the client organisation provide an additional assessment of the consultant's capabilities. The message is clear: in the long run it is in the interests of the consultant to have a satisfied client even if it is not his intention to do further work for this client. Low key ongoing contact should be maintained with the client well after completion of the assignment, if only to keep a high profile and encourage positive word-of-mouth messages. While various forms of impersonal advertising had the lowest overall influence score, they can still represent an important part of the consultant's overall promotional mix, especially image-advertising in professional directories, corporate brochures, and references to articles by consultants in the business press and journals. This form of advertising does not leave the impression that the consultant is touting for business, but rather simply reminds existing and past clients of the consultant's work, and creates awareness of the consultant's service to potential new clients. It was shown in Table 4 that in most instances, the influence of different sources of information did not vary according to types of consulting assignment being undertaken. This finding provides a useful guide for consulting firms in helping them allocate their limited promotional resources. It also highlights the fact that the larger, multidisciptinary consulting firms (Price Waterhouse, KMPG Peat Marwick, Arthur Andersen, etc) may adopt with some assurance a uniform marketing communications strategy across all types of assignment, rather than targeting specific information sources according to the assignment type. Finally, our results showed that for strategic and economic planning assignments more departments were involved in the consultant selection decision than for other assignment types. Therefore, consultancies should understand the need to "reach" and influence representatives from more departments for these assignment types.

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