Can you cross-sell consulting services?

It really is a billion dollar question.

One of the most important strategic choices a consulting firm has to make is whether to specialise or diversify.  Conventionally, the decision has been driven by size (small firms specialise, big firms diversify): the point at a firm crosses from the first to the second signals its transition from adolescence to maturity; the point when it crosses back again suggests that maturity has given way to senescence.  That thinking is increasing challenged by clients who want to combine deep expertise (usually associated with boutique firms) with international experience (usually associated with larger ones).  But it’s also been complicated by consultants’ own fears of being pigeon-holed by the people they work with, that if they’re known for doing good work on – say – leadership development, clients won’t be interested in their knowledge of technology.

Our recent research with clients suggests that cross-selling is both easier and harder than consultants think.

We were surprised how open-minded the clients we questioned were.  Most would be willing to consider using a firm in a new area, or recommend them to a colleague in a different part of their organisation.  But only if three conditions were met: the consultants have to do have done a good piece of work in the first place and they must be able to demonstrate they have expertise and experience in the new area.  Neither point is unsurprising: both relate to the client’s confidence in the ability of the consulting firm. The third condition is perhaps the most interesting: clients were only comfortable with cross-selling where a consulting firm kept its fee rates constant.  In other words, it’s fine for a high-end strategy firm to do technology work, but only if it charges similar prices for it – which of course determines what kind of technology work that is.  Similarly, a Big Four firm wanting to move into the strategy space will find itself confined to the type of strategy work associated with Big Four firm rates.  Changing price points confuses clients; it makes them concerned that they’ve been over-charged or that they won’t get the quality of input they’re looking for.  You can cross-sell or you can change your price point, but you can’t do both at the same time.

I hope no one will think me immodest if I say that that bald statement has enormous implications for consulting firms.  Yes, you can cross-sell consulting services; in fact it’s probably easier than you think.  But the choices you make about which services and how you position them are far harder.