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How Does Client Poaching Work?

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Jan 14th 2016
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Do you watch the CBS-TV series The Good Wife? The lawyers at two competing firms are constantly trying to steal each other's clients.

Accountants are tame by comparison. Once an accounting client comes on board, he or she typically stays forever, assuming that person doesn't get upset. New clients are often added by referrals.

But in many industries, enticing a competitor's clients to jump ship is part of their business model. Your clients may be dealing with this problem in their own businesses, yet rarely talk about it. So, how does it work?

The Good Wife, that TV program about Chicago law firms, is a good example. The primary job of an attorney in a jury trial is to create doubt and establish a reasonable alternative. Poaching clients follows the same model.

Cost. This is an issue faced by accountants. You've seen the TV ads promising to slash your bills. “We will charge you less.” The object is to gain market share, eliminate competitors, and eventually raise fees. It's a race to the bottom. Wireless phone companies are a good example.

No personal attention. Clients often stick with their CPA because they know their trusted advisor understands their unique situation. Competitors create doubt, suggest everything is plugged into a computer program, and there's no personalization.

Specialization. Your advisor/Realtor/attorney is a generalist. You have a medical practice. Our firm has a division working specifically with people like you. We understand your needs better than others.

Second-guessing. Financial advisors often ask to see a prospect's most recent account statements in the early stages of discussion. Although this tells a lot about trading habits and spending patterns, it also provides the advisor the chance to criticize the prospect's current advisor's judgment in hindsight. “He did what to you? I just can't believe it! How could he have missed that?”

Succession planning. Many accountants and other professionals are similar to a one-man band. They do everything. They keep all the records. Someone else suggests: “What if they get hit by a bus or killed by an exploding cappuccino maker?” Will someone else be able to pick up the pieces? Their firm, which is larger, isn't dependent on one person.

Prestige. People shop for price yet detest being considered mass-market customers. Everyone wants to feel important. Competitors in various industries play the vanity card when they suggest: “That firm uses a cookie-cutter approach. You are too big for them. You need a firm with a history of working with successful people like yourself.” Extensive advertising helps. You've seen the watch and car company ads.

Responsiveness. Are you getting good service? Are your calls returned promptly? A competitor might promise all client calls are returned within 60 minutes. Clients often feel taken for granted, especially if their advisor or other professional is focused on referrals. Is your advisor more interested in who you know versus knowing you? Create doubt by offering yourself as the alternative.

Scare tactics. Individuals and business owners live in fear of the IRS. Our criminal justice system works under the “innocent until proven guilty” rule. However, if you get on the radar of the tax authorities, they accuse you first. You must prove your innocence. Who will take your side and argue your case? Prove your innocence? You've heard the ads referencing “former IRS agents on our staff.”

Guilt by association. Criminals need more legal representation than most people. Although client confidentiality is a given, in open court, the attorneys' identities are public record. Doubt is created by mentioning the firm the prospect is currently using represents criminals (gasp!). You are also represented by that firm. People might think you have something to hide.

The Major Exceptions
If a client is happy at his or her current firm, there are few, if any, reasons to consider moving. One serious reason is breach of confidentiality. If doctors, attorneys, and accountants talk about the identities or personal details of clients, they have crossed a line. A second reason is not acting on the client's behalf. Many professionals are held to a fiduciary standard. Enriching themselves at the expense of their clients (i.e., stealing money) is another reason to head for the door.

Generally speaking, accountants don't poach clients to grow their business. Plenty of other professions use this strategy. But it's useful to understand how it's done.

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