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Segmenting a business market for a professional service
Segmenting a Business Market for a P r o f e s s i o n a l Service Susan A, Lynn This article uses benefit segmentation to analyze the structure of an industrial market for professional services-the market for CPA services among business firms. Data were collected from a random sample of U.S. business firms, stratified to include a broad cross section of the market for CPA services. Benefit segments were described by linking CPA selection criteria importance ratings with client firm characteristics such as business firm size. Examples of ways in which information about market structure can be used in marketing professional services are presented. The results provide evidence about the applicability of prior industrial marketing research and multilevel industrial market segmentation models to a professional services market.
Increased competition in markets for professional services has resulted in professionals such as CPAs and attorneys becoming more interested in planned marketing programs [3, 14]. A crucial first step in developing a marketing program is an analysis of the structure of the market for a professional firm's services [19, 21]. This analysis should include the Address correspondence to Professor Susan A. Lynn, School of Business, Department of Accounting and Business Legal Studies, George Mason University, 4400 University Drive, Fairfax, VA 22030.
Industrial Marketing Management 15, 13-21 (1986) © Elsevier Science Publishing Co., Inc., 1986 52 Vanderbilt Ave., New York, New York 10017
identification of segments in the market for a firm's services and the selection of target markets. Information about market structure can help the professional firm function more efficiently by selecting as target markets groups of clients who have service needs that match the unique strengths and skills of the firm. Market segmentation has been described as one of the most "fundamental" and " d o m i n a n t " concepts in modern marketing [22]. Researchers [4, 23] have proposed comprehensive industrial market segmentation models that suggest that segmentation variables be applied in a multilevel approach to segment industrial markets, beginning with demographic variables such as customer size. In addition, research [9] has suggested that benefit segmentation (identification of the benefits desired by different segments of customers) is the "most fundamental" approach to segmenting a market [4]. However, professional firms face difficulty in implementing market segmentation because little empirical research exists on the segmentation of markets for industrial services, on the validation of the comprehensive segmentation models mentioned above, or on the use of benefit segmentation in industrial markets. The purpose of this research is to contribute to research in these areas by analyzing the
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structure of an industrial market for professional services--the market for C P A services among business firms. Although this research is industry specific, the approaches used here to analyze the market for C P A services would be applicable in most professional service markets. This research analyzes differences in C P A selection criteria importance ratings among groups of business firms in the market for C P A services. The groups are defined using various business firm characteristics such as business firm size. The differences in importance ratings are used to identify and describe benefit segments in the market for CPA services. Examples are then presented of ways in which information about the structure of the market for C P A services can be used in marketing C P A services. The next sections: (1) discuss the appropriateness of using market segmentation in the market for C P A services; (2) evaluate segmentation strategies currently practiced by C P A firms; and (3) explain the advantages to CPA firms of using segmentation models developed by marketing researchers.
APPROPRIATENESS OF SEGMENTING THE MARKET FOR CPA SERVICES Market segmentation is an especially appropriate marketing strategy in the market for C P A services because of characteristics of C P A firms, their services, and their markets. Market segmentation is a preferred strategy when the market for a firm's product is mature [12]. The market for C P A services has the characteristics of a mature market [ 1 0 ] market stabilization and increasing competitive efforts focused on differentiating sellers and their products. Beginning in the 1970s, competition in the market for C P A services increased because of the stabilization of the market for accounting and auditing services and rising C P A firm expenses and because business firms became more willing to change auditors [14]. Client firms became more willing to "shop for C P A services," sought bids from more C P A
SUSAN A. LYNN, DBA, CPA, is an Assistant Professor of Accounting at George Mason University, Fairfax, Virginia. She was formerly with Arthur Andersen & Co. in Baltimore, Maryland.
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firms when they did consider changing CPAs, and became more fee conscious in evaluating C P A firm bids. Market segmentation is also a preferred strategy when the characteristics of a product make it difficult for a seller to convince the market of the superiority of its version of the product [16]. Research [5] suggests that clients may have difficulty perceiving major quality differences among C P A firms with respect to basic C P A services, especially auditing services. Differences in the quality of auditing services provided by various C P A firms are either not directly observable by clients or are too costly for clients to evaluate directly. This difficulty has resulted in the development of alternative mechanisms that aid clients in differentiating among C P A firms. These include price differences, professional reputation, advertising, and institutional arrangements such as the SEC practice and private companies divisions of the American Institute of CPAs. Market segmentation can also be an especially effective strategy if an industrial seller practices it while competitors of the seller do not [11]. As discussed below, available evidence indicates that many C P A firms currently are using only minimal market segmentation approaches and are not practicing the complete range of segmentation strategies suggested in marketing research.
SEGMENTATION STRATEGIES CURRENTLY USED BY CPA FIRMS Currently C P A firms do use some strategies in marketing and in organizing the operation of their professional practices that result in the segmentation of the market for C P A services. The market for C P A services and the public accounting profession have been described as segmented by C P A firm size into tiers of C P A firms (national and international firms, local and regional firms, and individual practitioners) [1]. Most C P A firms have separate divisions (or assigned partners and staff) for auditing, tax, management advisory, and small client services [2]. By organizing their practices in this manner, C P A firms have segmented their market by the generic types of services which they provide. Many C P A firms have developed audit practices that are concentrated in a small group of industries [6]. This has segmented the
market for auditing services into various industry submarkets or "specializations." However, like other industrial sellers [4, 23], CPA firms usually use market segmentation ex post to explain the results of past marketing efforts rather than ex ante to plan future marketing efforts. ADVANTAGES OF USING ALTERNATE SEGMENTATION STRATEGIES CPA firms currently segment their market using variables that represent characteristics of client firms (e.g., industry) or of the CPA services which they purchase (e.g., audit services). However, benefit segmentation is a preferred approach for segmenting industrial markets [4, 23]. This involves grouping business firms using the similarity of the decision criteria which they use to select a CPA firm. Defining market segments using purchase decision criteria is a preferred approach because it specifically considers the C P A service needs of different client groups and can provide a better understanding of the causal factors operating in a CPA selection decision [9]. For this reason, this approach to defining segments has a greater number of practical implications for organizing CPA firm marketing activities and for designing CPA services to best meet client needs. Marketing researchers [4, 11, 23] also suggest that many markets can be most effectively segmented using a succession of variables rather than any single variable. As mentioned earlier, multilevel industrial market segmentation models [4, 23] suggest that customers in industrial markets may be grouped in different ways using a variety of segmentation variables. Wind and Cardozo [23] have proposed that industrial markets be segmented in a two-tier approach, first using macrosegmentation variables (characteristics of the buying organization and the buying situation) and then using microsegmentation variables (characteristics of organizational buying centers). More recently, Bonoma and Shapiro [4] have proposed that additional levels of analyses be used between macro- and microsegmentation. Because the market for CPA services has been generally segmented on an ad hoc basis, segmentation variables have been used singly rather than in combination, resulting in the definition of segments which are often too heterogeneous to be useful in planning marketing programs.
STUDY DESIGN This study used a mail questionnaire to obtain information about segments in the market for CPA services from a nationwide sample of CEOs, CFOs, and Controllers in 566 business firms. The survey sample was selected using a stratified random sampiing procedure from the 1980 Dun & Bradstreet Million Dollar Directory. Usable responses were received from 321 firms. The survey sample was stratified to include: (1) publicly owned and nonpublicly owned business firms; (2) large and small business firms; (3) business firms which used CPA firms of various sizes; and (4) business firms which had been associated with their CPA firms for various lengths of time. Stratifying the sample helped increase the heterogeneity of the business firms in the sample and the probability of discovering segments in the market for CPA services, if they existed. Because of characteristics of the market for CPA services, a simple random sample (an unstratified sample) might not have included a sufficiently heterogeneous group of business firms. In addition, research [4, 7, 15] suggests that several stratification variables (CPA firm size, business firm size, and length of CPA and business firm association) may be related to differences in industrial purchasing behavior. The business executives surveyed were asked to rate the importance of 38 variables used to select CPA firms using a seven-point nonforced scale (7 = very important; 1 = very unimportant; 0 = no opinion). The 38 CPA selection criteria rated by respondents are listed in Table 1. Respondents were also asked to give information about various characteristics of their firms. These characteristics are listed in Table 2. The CPA selection criteria importance ratings of survey respondents were classified into 12 CPA selection criteria scales representing the importance of basic dimensions underlying the CPA selection process. (The scale development procedure involved factor analysis and reliability estimates and was similar to that used by Spekman [17].) The variables included in each CPA selection criteria scale are listed in Table 1. The importance ratings of the scales were then analyzed to identify groups of business firms which considered each scale more or less important in selecting a CPA firm. (Analysis of variance--F tests--was the statistical test used to identify these 15
TABLE 1 CPA Selection Criteria Scales m Scale Name
Referral sources
CPA firm's proposal and fee
CPA firm's adherence to professional standards
Scale Name Variables Included in Scale
Recommendations by: Business executives outside client firm Bankers Underwriters Lawyers Financial analysts Other clients of CPA firm C P A firm's completion of its assignment within original fee quoted to client Amount of C P A firm's fee Quality of the C P A firm's formal written proposal to client Quality of the CPA firm's oral offer presentation to client CPA firm's adherence to professional standards Quality control procedures practiced by CPA firm Results of C P A firm's most recent peer review Litigation proceedings in which C P A firm has been involved
CPA firm's size and national presitge
National prestige of CPA firm Size of CPA firm Location and number of CPA firm's offices
Local reputation of CPA firm
General reputation of CPA firm in client's business community Background of CPA firm's personnel Recommendations by client firm's executives Prior experience of client with CPA firm
Accessibility of CPA firm's partners to client's executives
Personal rapport between CPA firm's partners and client's executives Availability of CPA firm's partners for personal consultation with client's executives
Geographical proximity
CPA firm approached client
CPA firm's performance of auditing and tax services
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Geographical proximity of CPA firm's offices to client's offices CPA firm approached client and indicated an interest in being client's auditor Expertise in auditing Expertise in tax services Experience of CPA firm's personnel CPA firm's completion of its assignment on schedule
Variables Included in Scale
CPA firm's ability in management advisory services
Expertise in management advisory services Experience in accounting systems design and analysis Experience in forecasting and longrange planning Experience in evaluating EDP systems Ability to give client advice on general business matters
CPA firm's ability in accounting services
Expertise in accounting services Ability to give client advice on internal accounting matters
CPA firm's industry specializations
Experience with firms in client's business or industry Experience with government regulatory requirements
"This table lists the variables (CPA selection criteria) included in each CPA selection criteria scale. These variables were rated by survey respondents using a seven point scale (7 - very important; 1 = very unimportant; 0 = no opinion). The variables were classified into scales using factor analysis and reliability estimates [17].
groups.) The results of this analysis are presented in Table 3. These results provide evidence about the structure of the market for C P A services. They are discussed below along with the implications of these results for marketing C P A services. The groups of business firms in Table 3 that differ in the way they rate the importance of C P A selection criteria scales represent benefit segments in the market for C P A services. The characteristics of the groups in Table 3 may be used to identify segments of business firms that are likely to consider each C P A selection criteria scale (i.e., each benefit) more important (or less important) in selecting a C P A firm. TABLE 2 Business Firm Characteristics Used in Identifying Benefit Segments in the Market for CPA Services 1. Business firm size in annual sales volume dollars 2. Business firm size in net worth dollars 3. Size of CPA firm used by business firm 4. Size of business firm's annual audit fee 5. Length of time business firm has been associated with its C P A firm 6. Number of bids from different C P A firms considered by business firm in its last C P A selection decision 7. Existence of business firm's audit committee
TABLE 3 Benefit Segments in the Market for CPA Services a
CPA Selection Criteria Scale
Characteristics of Business Firms Which Rates Each Scale As More Important Less Important
Referral sources
Have audit committees
Do not have audit committees
CPA firm's proposal and fee
Associated with CPA firms for 3 years or less Considered two or more bids in last CPA selection decision Have audit committees
Associated with CPA firms for 4 years or more Considered one bid in last CPA selection decision Do not have audit committees
CPA firm's adherence to professional standards
Sales volume of $5,000,000 or less Have audit committees
Sales volume of $6,000,000 to $23,000,000 Do not have audit committees
CPA firm's size and national prestige
Sales volume of $24,000,000 or more Net worth more than $1,000,000 Use national CPA firmsb Have audit fees of $50,000 or more Associated with CPA firms for 3 years or less Considered two or more bids in last CPA decision Have audit committees
Sales volume of $23,000,000 or less Net worth of $500,000 to $1,000,000 Use nonnational CPA firms b Have audit fees less than $50,000 Associated with CPA firms for 4 to 10 years Considered one bid in last CPA selection decision Do not have audit committees
Local reputation of CPA firm
Use nonnational CPA firmsb
Use national CPA firms b
Accessibility of CPA firm's partners to client's executives
Net worth of $500,000 to $1,000,000 Use nonnational CPA firmsb
Net worth more than $1,000,000 Use national CPA firms b
Geographical proximity
Use national CPA firmsb Associated with CPA firms for 3 years or less
Use nonnational CPA firms b Associated with CPA firms for 4 years or more
CPA firm approached client
Use nonnational CPA firms b Associated with CPA firms for 4 - 1 0 years
Use national CPA firms b Associated with CPA firms for 11 years or more
CPA firm's performance of auditing and tax services
No significant differences C
CPA firm's ability in management advisory services
No significant differences c
CPA firm's ability in accounting services
Sales volume of $5,000,000 or less Net worth of $500,000 to $1,000,000 Use nonnational CPA firmsb Have audit fees less than $20,000
Sales volume of $6,000,000 or more Net worth more than $1,000,000 Use national CPA firms ° Have audit fees of $20,000 or more
CPA firm's industry specializations
Sales volume of $5,000,000 or less Net worth of $500,000 to $1,000,000 Associated with CPA firms for 3 years or less Have audit committees
Sales volume of $6,000,000 to $23,000,000 Net worth more than $1,000,000 Associated with CPA firms for 4 years or more Do not have audit committees
~This table presents the 12 classes of CPA selection criteria rated by the respondent business executives and the characteristics of groups of business firms that differed significantly in their ratings of the importance of each CPA selection criteria scale. Analysis of variance was the statistical test used in determining whether or not differences in importance ratings across groups of business firms were statistically significant. The differences in Table 3 are statistically significant at a probability level of 0.10. bNational CPA firms are defined as the 15 largest CPA firms in the United States; nonnational CPA firms as all other CPA firms in the United States. 'The analysis of variance tests indicated that groups of business firms did not differ in their ratings of the importance of this scale at a probability level of 0.10.
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SUPPLIER CRITERIA The results in Table 3 indicate that the following C P A selection criteria scales were most discriminating in identifying benefit segments in the market for C P A services: (1) C P A firm's size and national prestige; (2) C P A firm's industry specializations; (3) C P A firm's ability in accounting services; and (4) C P A firm's proposal and fee. This approach to identifying segments follows Kotler's [11] suggestion that attributes with respect to which all buyers in a market have h o m o g e n e o u s preferences cannot be used to segment a market. For this reason, the listing above includes those C P A selection criteria scales that were associated with the largest number of statistically significant segment differences rather than those criteria which had the highest absolute importance ratings. Industrial marketing research [4, 8] has suggested that supplier characteristics such as size and reputation are discriminating variables in segmenting industrial markets. The results in Table 3 support the use of these variables in segmenting a professional services market. Clients show a high degree of brand consciousness in selecting a C P A firm. The C P A firm's size and national prestige is the benefit sought by clients which is most discriminating in identifying segments in the market for C P A services. Prior research [1,5] has suggested that clients use C P A firm size and image to differentiate among C P A firms because they have difficulty perceiving major quality differences among C P A firms with respect to C P A services. This is also evident in that C P A selection criteria scales involving the C P A firm's abilities in auditing, tax, and management advisory services (the basic products of C P A firms) were not related to any statistically significant segment differences in Table 3. The difficulty that client firms experience in judging the quality of C P A services provided by different C P A firms is also evident in the discriminating ability of two additional scales in identifying segments in the market for C P A services. These are the C P A firm's proposal and fee and the C P A firm's adherence to professional standards. Price has been shown to be an important purchase decision criterion in those purchasing situations where the buyer's uncertainty about the purchase results from lack of purchase related information [8]. This type of purchase risk perception may exist among buyers of C P A services. Industrial buyers may often not have enough informa18
tion to judge the quality of the industrial services which they purchase because what the service represents is often ill-defined [19, 21]. Because clients may believe that they are unable to judge the quality of C P A services, they may use the amount of the C P A firm's fee as a surrogate for C P A firm quality. Similarly, clients may rely on the C P A firm's adherence to standards established by the accounting profession to help ensure that they receive quality service from their CPAs and to reduce their uncertainty in selecting a C P A firm. IDENTIFYING BENEFIT SEGMENTS The results in Table 3 indicate that the following business firm characteristics were most discriminating in identifying benefit segments in the market for CPA services: (1) business firm size in both sales volume and net worth dollars; (2) the length of time that the business firm had been associated with its C P A firm; and (3) whether or not the business firm had an audit committee. The buyer characteristic associated with the largest number of segment differences in the market for CPA services is business firm size. This result supports research ]4, 7] which has suggested that buying firm size is related to many aspects of the industrial buying process. Client firm size appears to serve as a "perceptual screen" [18] which affects the use of organizational purchase decision criterion in the market for C P A services. Business executives involved in selecting a C P A firm may eliminate from consideration C P A firms that do not have characteristics which the executives perceive as important for a C P A firm to serve adequately business firms of different sizes. As an example, two C P A selection criteria scales related to the C P A firm's abilities and expertise were discriminating in identifying segments in the market for C P A services. These were the C P A firm's expertise in accounting services and industry specializations. These scales were more important to smaller client firms. In comparison with larger businesses, smaller businesses may often not have adequate in-house accounting capabilities or personnel familiar with specialized industry accounting procedures. For this reason, a small business may seek a C P A firm with expertise in areas that complement the business's own internal capabilities. The length of time that the business firm has been
associated with its C P A firm was also a discriminating variable in identifying benefit segments in the market for CPA services. This result supports the use of the B U Y C L A S S variable [15] in a professional services market. In the past, C P A firm turnover has been generally low [13] and many C P A selection decisions have been straight rebuy situations. However, because changing C P A firms has become more acceptable and more frequent [13], today more C P A selection decisions may be modified rebuy situations. Table 3 indicates that businesses in the modified rebuy segment in the market for C P A services (i.e., businesses which had been associated with their C P A firms for 3 years or less) sought different benefits in selecting a C P A firm than did businesses in the straight rebuy segment (i.e., businesses which had not recently changed C P A firms). The discriminating ability of the variable, whether or not a business firm has an audit committee, supports the applicability of the buying center concept [20] in defining segments in a professional services market. Until recently, the most influential CPA buying center members were often members of top management, especially individuals in the financial function [13]. Recently, concern about the impact on auditor selection of the possible lack of independence between client m a n a g e m e n t and the auditing firm has resulted in increased involvement of the audit committee in auditor selection. The significant differences in C P A selection criteria scale importance (benefits sought) between businesses with audit committees and businesses without audit committees provide evidence that the change in the membership of buying centers for C P A services in businesses with audit committees may change the C P A selection process in these firms.
DEVELOPING CPA MARKETING STRATEGIES Information about benefit segments in the market for C P A services and the identifying characteristics of these segments can be useful to C P A firms in implementing market segmentation in their marketing programs. Knowledge of the C P A service needs of segments in the market for C P A services can help a CPA firm to select as target markets, segments which have service needs which match the unique strengths and skills of the firm. This approach can allow the C P A firm to develop a unique image that differenti-
ates the firm from its competitors and to position itself in those segments of the market where it has the greatest competitive advantages [19, 21]. The market structure analysis in Table 3 can be used by C P A firms in marketing current service offerings to new clients or in expanding service offerings to current clients. A C P A firm may use information about the characteristics of C P A firms that are considered important by different segments to identify groups of businesses which are most likely to be receptive to the firm's current offerings. As an example, a C P A firm that believes that its strongest service quality is its expertise in accounting services may want to promote itself to additional groups of businesses that consider the C P A firm's ability in accounting services important. The analysis in Table 3 suggests that these firms are likely to have the following characteristics: sales volume less than or equal to $5,000,000; net worth of $500,000 to $1,000,000; and audit fees less than $20,000. These business firms are also likely to use nonnational C P A firms. After selecting as target segments those groups of businesses that consider the firm's current strengths important, a C P A firm may want to add or strengthen its offerings of other C P A firm characteristics that are also important to these target segments. For example, Table 3 suggests that businesses with the characteristics listed above which are likely to consider a C P A firm's ability in accounting services important are also likely to consider the following C P A firm characteristics important: C P A firm's adherence to professional standards; C P A firm's industry specializations; and accessibility of the C P A firm's partners to client's executives. A C P A firm that has selected as a target segment businesses which prefer C P A firms which specialize in providing quality accounting services may thus also want to emphasize that the firm has strengths in other C P A firm characteristics which this segment of business firms considers important. C P A firms can also use the market structure analysis in Table 3 to identify variables that might be used in a multilevel or nested approach [4] to segment the market for C P A services. An example of this type of analysis is presented in Table 4. Table 4 presents the benefits desired by segments in the market for C P A services defined using: (1) size of the client firm; (2) size of the C P A firm currently used by the client; and (3) whether or not the client firm has an audit committee. 19
TABLE 4 An Example of a Multilevel Approach to Segmenting the Market for CPA Services a Identifying Characteristics of Businesses in Each Segment Benefit Desired from CPA Services
Smaller Businesses b
Larger Businesses b
Clients of Nonnational CPA firms c
Clients of National C P A firms"
Clients with Audit Committees
Ability in accounting service Industry specializations Accessibility of C P A firm's partners Size and prestige Local reputation of C P A firm C P A firm approached client Geographical proximity to client References of C P A firm A d h e r e n c e to professional standards Proposal and fee aThis table presents an example of a multilevel approach [4] to segmenting the market for C P A services. The table can be used by a C P A firm in analyzing the benefits desired by different segments and in choosing its target markets. The identifying characteristics of segments of businesses that desire each C P A service benefit were obtained from the analysis in Table 3. bSmaller businesses are defined as firms with net worth of $500,000 to $1,000,000; larger businesses as firms with net worth of more than
$1,00o,000. CNational C P A firms are defined as the 15 largest C P A firms in the United States; nonnational C P A firms as all other C P A firms in the United States.
Using several variables to define segments can help a C P A firm design a package of services to meet the specific needs of different segments. As an example, a C P A firm might begin such an analysis by selecting smaller business firms as a target market. Table 4 indicates that a C P A firm should emphasize the following characteristics in marketing to the small business firm market: C P A firm's ability in accounting services and industry specializations; and the accessibility of the C P A firm's partners to the client's executives. A nested approach to segmentation might then involve analysis of the size of the C P A firms currently used by target business firms. Table 4 indicates that in addition to emphasizing the above characteristics, in marketing to smaller business firms which currently use smaller (nonnational) C P A firms, a C P A firm will also want to emphasize the quality of its local reputation and may want to consider a more aggressive, direct approach in marketing. Alternately, after a C P A firm has defined target segments using business firm size, the firm may then want to determine how many businesses in its target segments have audit committees. The analysis in Table 4 can suggest C P A service benefits which are likely to be important to businesses with audit committees. This analysis suggests that C P A firms that are marketing their services to prospective clients with 20
audit committees should evaluate the quality of their written and oral client proposals. These proposals should emphasize the C P A firm's adherence to professional standards and industry specializations. C P A firms should also emphasize the quality of their "references" (referral sources) in marketing to business firms with audit committees.
CONCLUSIONS This research used benefit segmentation to analyze the structure of the market for C P A services. The results provided a description of this market using purchase decision criteria (CPA selection criteria scales) and various business firm characteristics. The survey results used to provide this description were obtained from a random sample of U.S. business firms, stratified to include a broad cross section of the market for C P A services. The results suggest benefit segmentation can be used effectively to describe the structure of an industrial market for professional services. This analysis provides information that professional firms such as CPAs can use in developing marketing programs using market segmentation. In addition to providing a description of basic dimensions underlying the CPA
selection process, the results also provide evidence about the applicability of prior industrial marketing research to a professional services market. Future research into the structure of the market for CPA services should concentrate on obtaining data about the applicability of additional segmentation variables in a professional services market. These might include additional demographic variables such as client firm industry and geographical location as well as variables representing purchase situational factors such as the composition of buying centers for CPA services. Future research might also include additional CPA selection criteria in order to discover the existence of additional benefit segments in this market and to compare benefit segments in the market for CPA services with those in other professional service markets.
7. Frank, R. E., Massy, W. F., and Wind, Y., Market Segmentation. Prentice-Hall, Inc., Englewood Cliffs, NJ, 1972. 8. Hakansson, H. and Wootz, B., Supplier Selection in an Industrial Environment--An Experimental Study, Journal of Marketing Research 12, 46-51 (1975). 9. Haley, R. I., Benefit Segmentation: A Decision-Oriented Research Tool, Journal of Marketing 32, 303-315 (1968). 10. Kollat, D. T., Blackwell, R. D., and Robeson, J. F., Strategic Marketing. Holt, Rinehardt and Winston, New York, 1972. 11. Kotler, P., Marketing Management: Analysis, Planning and Control, 4th ed., Prentice-Hall, Inc., Englewood Cliffs, NJ, 1980. 12. Kotrba, R. W. The Strategy Selection Chart, Journal of Marketing 30, 22-25 (1966). 13. Macchiaverna, P. R., Corporations and Their Outside Auditors: A Changing Relationship. The Conference Board, New York, 1981. 14. Mette, W. R., Jr., Competition in Public Accounting: Issues and Impact, Georgia Journal of Accounting 1, 18-29 (1980). 15. Robinson, P. J., Faris, C. W., and Wind, Y., Industrial Buying and Creative Marketing. Allyn and Bacon, Inc., Boston, 1967. 16. Smith, W. R., Product Differentiation and Market Segmentation as Alternative Marketing Strategies, Journal of Marketing 21, 3 - 8 (1956).
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1. Arnett, H. E., and Danos, P., CPA Firm Viability. University of Michigan, Ann Arbor, MI, 1979.
18. Spekman, R. E., Segmenting Buyers in Different Types of Organizations, Industrial Marketing Management 10, 43-48 (1981).
2. Bloom, P. N. and Loeb, S. E., If Public Accountants are Allowed to Advertise, MSU Business Topics 25, 57-64 (1977).
19. Webb, S. G., Marketing & Strategic Planningfor ProfessionalService Firms. American Management Association, New York, 1982.
3. The Blue Chip Lawyers Discover Marketing, Business Week 89, 93-94 (April 25, 1983).
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4. Bonoma, T. V. and Shapiro, B. P., Segmenting the Industrial Market. D. C. Heath and Co., Lexington, MA, 1983. 5. DeAngelo, L. E., The Auditor-Client Contractual Relationship: An Economic Analysis. UMI Research Press, Ann Arbor, MI, 198l. 6. Eichenseher, J. W. and Danos, P., The Analysis of Industry-Specific Auditor Concentration: Towards an Explanatory Model, The Accounting Review 56, 479-492 (1981).
21. Wheatley, E. W., Marketing Professional Services. Prentice-Hall, Inc., Englewood Cliffs, NJ, 1983. 22. Wind, Y., Issues and Advances in Segmentation Research, Journal of Marketing Research 15, 317-337 (1978). 23. Wind, Y. and Cardozo, R., Industrial Market Segmentation, Industrial Marketing Management 5, 154-160 (1974).
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Increased competition in markets for professional services has resulted in professionals such as CPAs and attorneys becoming more interested in planned marketing programs [3, 14]. A crucial first step in developing a marketing program is an analysis of the structure of the market for a professional firm's services [19, 21]. This analysis should include the Address correspondence to Professor Susan A. Lynn, School of Business, Department of Accounting and Business Legal Studies, George Mason University, 4400 University Drive, Fairfax, VA 22030.
Industrial Marketing Management 15, 13-21 (1986) © Elsevier Science Publishing Co., Inc., 1986 52 Vanderbilt Ave., New York, New York 10017
identification of segments in the market for a firm's services and the selection of target markets. Information about market structure can help the professional firm function more efficiently by selecting as target markets groups of clients who have service needs that match the unique strengths and skills of the firm. Market segmentation has been described as one of the most "fundamental" and " d o m i n a n t " concepts in modern marketing [22]. Researchers [4, 23] have proposed comprehensive industrial market segmentation models that suggest that segmentation variables be applied in a multilevel approach to segment industrial markets, beginning with demographic variables such as customer size. In addition, research [9] has suggested that benefit segmentation (identification of the benefits desired by different segments of customers) is the "most fundamental" approach to segmenting a market [4]. However, professional firms face difficulty in implementing market segmentation because little empirical research exists on the segmentation of markets for industrial services, on the validation of the comprehensive segmentation models mentioned above, or on the use of benefit segmentation in industrial markets. The purpose of this research is to contribute to research in these areas by analyzing the
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structure of an industrial market for professional services--the market for C P A services among business firms. Although this research is industry specific, the approaches used here to analyze the market for C P A services would be applicable in most professional service markets. This research analyzes differences in C P A selection criteria importance ratings among groups of business firms in the market for C P A services. The groups are defined using various business firm characteristics such as business firm size. The differences in importance ratings are used to identify and describe benefit segments in the market for CPA services. Examples are then presented of ways in which information about the structure of the market for C P A services can be used in marketing C P A services. The next sections: (1) discuss the appropriateness of using market segmentation in the market for C P A services; (2) evaluate segmentation strategies currently practiced by C P A firms; and (3) explain the advantages to CPA firms of using segmentation models developed by marketing researchers.
APPROPRIATENESS OF SEGMENTING THE MARKET FOR CPA SERVICES Market segmentation is an especially appropriate marketing strategy in the market for C P A services because of characteristics of C P A firms, their services, and their markets. Market segmentation is a preferred strategy when the market for a firm's product is mature [12]. The market for C P A services has the characteristics of a mature market [ 1 0 ] market stabilization and increasing competitive efforts focused on differentiating sellers and their products. Beginning in the 1970s, competition in the market for C P A services increased because of the stabilization of the market for accounting and auditing services and rising C P A firm expenses and because business firms became more willing to change auditors [14]. Client firms became more willing to "shop for C P A services," sought bids from more C P A
SUSAN A. LYNN, DBA, CPA, is an Assistant Professor of Accounting at George Mason University, Fairfax, Virginia. She was formerly with Arthur Andersen & Co. in Baltimore, Maryland.
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firms when they did consider changing CPAs, and became more fee conscious in evaluating C P A firm bids. Market segmentation is also a preferred strategy when the characteristics of a product make it difficult for a seller to convince the market of the superiority of its version of the product [16]. Research [5] suggests that clients may have difficulty perceiving major quality differences among C P A firms with respect to basic C P A services, especially auditing services. Differences in the quality of auditing services provided by various C P A firms are either not directly observable by clients or are too costly for clients to evaluate directly. This difficulty has resulted in the development of alternative mechanisms that aid clients in differentiating among C P A firms. These include price differences, professional reputation, advertising, and institutional arrangements such as the SEC practice and private companies divisions of the American Institute of CPAs. Market segmentation can also be an especially effective strategy if an industrial seller practices it while competitors of the seller do not [11]. As discussed below, available evidence indicates that many C P A firms currently are using only minimal market segmentation approaches and are not practicing the complete range of segmentation strategies suggested in marketing research.
SEGMENTATION STRATEGIES CURRENTLY USED BY CPA FIRMS Currently C P A firms do use some strategies in marketing and in organizing the operation of their professional practices that result in the segmentation of the market for C P A services. The market for C P A services and the public accounting profession have been described as segmented by C P A firm size into tiers of C P A firms (national and international firms, local and regional firms, and individual practitioners) [1]. Most C P A firms have separate divisions (or assigned partners and staff) for auditing, tax, management advisory, and small client services [2]. By organizing their practices in this manner, C P A firms have segmented their market by the generic types of services which they provide. Many C P A firms have developed audit practices that are concentrated in a small group of industries [6]. This has segmented the
market for auditing services into various industry submarkets or "specializations." However, like other industrial sellers [4, 23], CPA firms usually use market segmentation ex post to explain the results of past marketing efforts rather than ex ante to plan future marketing efforts. ADVANTAGES OF USING ALTERNATE SEGMENTATION STRATEGIES CPA firms currently segment their market using variables that represent characteristics of client firms (e.g., industry) or of the CPA services which they purchase (e.g., audit services). However, benefit segmentation is a preferred approach for segmenting industrial markets [4, 23]. This involves grouping business firms using the similarity of the decision criteria which they use to select a CPA firm. Defining market segments using purchase decision criteria is a preferred approach because it specifically considers the C P A service needs of different client groups and can provide a better understanding of the causal factors operating in a CPA selection decision [9]. For this reason, this approach to defining segments has a greater number of practical implications for organizing CPA firm marketing activities and for designing CPA services to best meet client needs. Marketing researchers [4, 11, 23] also suggest that many markets can be most effectively segmented using a succession of variables rather than any single variable. As mentioned earlier, multilevel industrial market segmentation models [4, 23] suggest that customers in industrial markets may be grouped in different ways using a variety of segmentation variables. Wind and Cardozo [23] have proposed that industrial markets be segmented in a two-tier approach, first using macrosegmentation variables (characteristics of the buying organization and the buying situation) and then using microsegmentation variables (characteristics of organizational buying centers). More recently, Bonoma and Shapiro [4] have proposed that additional levels of analyses be used between macro- and microsegmentation. Because the market for CPA services has been generally segmented on an ad hoc basis, segmentation variables have been used singly rather than in combination, resulting in the definition of segments which are often too heterogeneous to be useful in planning marketing programs.
STUDY DESIGN This study used a mail questionnaire to obtain information about segments in the market for CPA services from a nationwide sample of CEOs, CFOs, and Controllers in 566 business firms. The survey sample was selected using a stratified random sampiing procedure from the 1980 Dun & Bradstreet Million Dollar Directory. Usable responses were received from 321 firms. The survey sample was stratified to include: (1) publicly owned and nonpublicly owned business firms; (2) large and small business firms; (3) business firms which used CPA firms of various sizes; and (4) business firms which had been associated with their CPA firms for various lengths of time. Stratifying the sample helped increase the heterogeneity of the business firms in the sample and the probability of discovering segments in the market for CPA services, if they existed. Because of characteristics of the market for CPA services, a simple random sample (an unstratified sample) might not have included a sufficiently heterogeneous group of business firms. In addition, research [4, 7, 15] suggests that several stratification variables (CPA firm size, business firm size, and length of CPA and business firm association) may be related to differences in industrial purchasing behavior. The business executives surveyed were asked to rate the importance of 38 variables used to select CPA firms using a seven-point nonforced scale (7 = very important; 1 = very unimportant; 0 = no opinion). The 38 CPA selection criteria rated by respondents are listed in Table 1. Respondents were also asked to give information about various characteristics of their firms. These characteristics are listed in Table 2. The CPA selection criteria importance ratings of survey respondents were classified into 12 CPA selection criteria scales representing the importance of basic dimensions underlying the CPA selection process. (The scale development procedure involved factor analysis and reliability estimates and was similar to that used by Spekman [17].) The variables included in each CPA selection criteria scale are listed in Table 1. The importance ratings of the scales were then analyzed to identify groups of business firms which considered each scale more or less important in selecting a CPA firm. (Analysis of variance--F tests--was the statistical test used to identify these 15
TABLE 1 CPA Selection Criteria Scales m Scale Name
Referral sources
CPA firm's proposal and fee
CPA firm's adherence to professional standards
Scale Name Variables Included in Scale
Recommendations by: Business executives outside client firm Bankers Underwriters Lawyers Financial analysts Other clients of CPA firm C P A firm's completion of its assignment within original fee quoted to client Amount of C P A firm's fee Quality of the C P A firm's formal written proposal to client Quality of the CPA firm's oral offer presentation to client CPA firm's adherence to professional standards Quality control procedures practiced by CPA firm Results of C P A firm's most recent peer review Litigation proceedings in which C P A firm has been involved
CPA firm's size and national presitge
National prestige of CPA firm Size of CPA firm Location and number of CPA firm's offices
Local reputation of CPA firm
General reputation of CPA firm in client's business community Background of CPA firm's personnel Recommendations by client firm's executives Prior experience of client with CPA firm
Accessibility of CPA firm's partners to client's executives
Personal rapport between CPA firm's partners and client's executives Availability of CPA firm's partners for personal consultation with client's executives
Geographical proximity
CPA firm approached client
CPA firm's performance of auditing and tax services
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Geographical proximity of CPA firm's offices to client's offices CPA firm approached client and indicated an interest in being client's auditor Expertise in auditing Expertise in tax services Experience of CPA firm's personnel CPA firm's completion of its assignment on schedule
Variables Included in Scale
CPA firm's ability in management advisory services
Expertise in management advisory services Experience in accounting systems design and analysis Experience in forecasting and longrange planning Experience in evaluating EDP systems Ability to give client advice on general business matters
CPA firm's ability in accounting services
Expertise in accounting services Ability to give client advice on internal accounting matters
CPA firm's industry specializations
Experience with firms in client's business or industry Experience with government regulatory requirements
"This table lists the variables (CPA selection criteria) included in each CPA selection criteria scale. These variables were rated by survey respondents using a seven point scale (7 - very important; 1 = very unimportant; 0 = no opinion). The variables were classified into scales using factor analysis and reliability estimates [17].
groups.) The results of this analysis are presented in Table 3. These results provide evidence about the structure of the market for C P A services. They are discussed below along with the implications of these results for marketing C P A services. The groups of business firms in Table 3 that differ in the way they rate the importance of C P A selection criteria scales represent benefit segments in the market for C P A services. The characteristics of the groups in Table 3 may be used to identify segments of business firms that are likely to consider each C P A selection criteria scale (i.e., each benefit) more important (or less important) in selecting a C P A firm. TABLE 2 Business Firm Characteristics Used in Identifying Benefit Segments in the Market for CPA Services 1. Business firm size in annual sales volume dollars 2. Business firm size in net worth dollars 3. Size of CPA firm used by business firm 4. Size of business firm's annual audit fee 5. Length of time business firm has been associated with its C P A firm 6. Number of bids from different C P A firms considered by business firm in its last C P A selection decision 7. Existence of business firm's audit committee
TABLE 3 Benefit Segments in the Market for CPA Services a
CPA Selection Criteria Scale
Characteristics of Business Firms Which Rates Each Scale As More Important Less Important
Referral sources
Have audit committees
Do not have audit committees
CPA firm's proposal and fee
Associated with CPA firms for 3 years or less Considered two or more bids in last CPA selection decision Have audit committees
Associated with CPA firms for 4 years or more Considered one bid in last CPA selection decision Do not have audit committees
CPA firm's adherence to professional standards
Sales volume of $5,000,000 or less Have audit committees
Sales volume of $6,000,000 to $23,000,000 Do not have audit committees
CPA firm's size and national prestige
Sales volume of $24,000,000 or more Net worth more than $1,000,000 Use national CPA firmsb Have audit fees of $50,000 or more Associated with CPA firms for 3 years or less Considered two or more bids in last CPA decision Have audit committees
Sales volume of $23,000,000 or less Net worth of $500,000 to $1,000,000 Use nonnational CPA firms b Have audit fees less than $50,000 Associated with CPA firms for 4 to 10 years Considered one bid in last CPA selection decision Do not have audit committees
Local reputation of CPA firm
Use nonnational CPA firmsb
Use national CPA firms b
Accessibility of CPA firm's partners to client's executives
Net worth of $500,000 to $1,000,000 Use nonnational CPA firmsb
Net worth more than $1,000,000 Use national CPA firms b
Geographical proximity
Use national CPA firmsb Associated with CPA firms for 3 years or less
Use nonnational CPA firms b Associated with CPA firms for 4 years or more
CPA firm approached client
Use nonnational CPA firms b Associated with CPA firms for 4 - 1 0 years
Use national CPA firms b Associated with CPA firms for 11 years or more
CPA firm's performance of auditing and tax services
No significant differences C
CPA firm's ability in management advisory services
No significant differences c
CPA firm's ability in accounting services
Sales volume of $5,000,000 or less Net worth of $500,000 to $1,000,000 Use nonnational CPA firmsb Have audit fees less than $20,000
Sales volume of $6,000,000 or more Net worth more than $1,000,000 Use national CPA firms ° Have audit fees of $20,000 or more
CPA firm's industry specializations
Sales volume of $5,000,000 or less Net worth of $500,000 to $1,000,000 Associated with CPA firms for 3 years or less Have audit committees
Sales volume of $6,000,000 to $23,000,000 Net worth more than $1,000,000 Associated with CPA firms for 4 years or more Do not have audit committees
~This table presents the 12 classes of CPA selection criteria rated by the respondent business executives and the characteristics of groups of business firms that differed significantly in their ratings of the importance of each CPA selection criteria scale. Analysis of variance was the statistical test used in determining whether or not differences in importance ratings across groups of business firms were statistically significant. The differences in Table 3 are statistically significant at a probability level of 0.10. bNational CPA firms are defined as the 15 largest CPA firms in the United States; nonnational CPA firms as all other CPA firms in the United States. 'The analysis of variance tests indicated that groups of business firms did not differ in their ratings of the importance of this scale at a probability level of 0.10.
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SUPPLIER CRITERIA The results in Table 3 indicate that the following C P A selection criteria scales were most discriminating in identifying benefit segments in the market for C P A services: (1) C P A firm's size and national prestige; (2) C P A firm's industry specializations; (3) C P A firm's ability in accounting services; and (4) C P A firm's proposal and fee. This approach to identifying segments follows Kotler's [11] suggestion that attributes with respect to which all buyers in a market have h o m o g e n e o u s preferences cannot be used to segment a market. For this reason, the listing above includes those C P A selection criteria scales that were associated with the largest number of statistically significant segment differences rather than those criteria which had the highest absolute importance ratings. Industrial marketing research [4, 8] has suggested that supplier characteristics such as size and reputation are discriminating variables in segmenting industrial markets. The results in Table 3 support the use of these variables in segmenting a professional services market. Clients show a high degree of brand consciousness in selecting a C P A firm. The C P A firm's size and national prestige is the benefit sought by clients which is most discriminating in identifying segments in the market for C P A services. Prior research [1,5] has suggested that clients use C P A firm size and image to differentiate among C P A firms because they have difficulty perceiving major quality differences among C P A firms with respect to C P A services. This is also evident in that C P A selection criteria scales involving the C P A firm's abilities in auditing, tax, and management advisory services (the basic products of C P A firms) were not related to any statistically significant segment differences in Table 3. The difficulty that client firms experience in judging the quality of C P A services provided by different C P A firms is also evident in the discriminating ability of two additional scales in identifying segments in the market for C P A services. These are the C P A firm's proposal and fee and the C P A firm's adherence to professional standards. Price has been shown to be an important purchase decision criterion in those purchasing situations where the buyer's uncertainty about the purchase results from lack of purchase related information [8]. This type of purchase risk perception may exist among buyers of C P A services. Industrial buyers may often not have enough informa18
tion to judge the quality of the industrial services which they purchase because what the service represents is often ill-defined [19, 21]. Because clients may believe that they are unable to judge the quality of C P A services, they may use the amount of the C P A firm's fee as a surrogate for C P A firm quality. Similarly, clients may rely on the C P A firm's adherence to standards established by the accounting profession to help ensure that they receive quality service from their CPAs and to reduce their uncertainty in selecting a C P A firm. IDENTIFYING BENEFIT SEGMENTS The results in Table 3 indicate that the following business firm characteristics were most discriminating in identifying benefit segments in the market for CPA services: (1) business firm size in both sales volume and net worth dollars; (2) the length of time that the business firm had been associated with its C P A firm; and (3) whether or not the business firm had an audit committee. The buyer characteristic associated with the largest number of segment differences in the market for CPA services is business firm size. This result supports research ]4, 7] which has suggested that buying firm size is related to many aspects of the industrial buying process. Client firm size appears to serve as a "perceptual screen" [18] which affects the use of organizational purchase decision criterion in the market for C P A services. Business executives involved in selecting a C P A firm may eliminate from consideration C P A firms that do not have characteristics which the executives perceive as important for a C P A firm to serve adequately business firms of different sizes. As an example, two C P A selection criteria scales related to the C P A firm's abilities and expertise were discriminating in identifying segments in the market for C P A services. These were the C P A firm's expertise in accounting services and industry specializations. These scales were more important to smaller client firms. In comparison with larger businesses, smaller businesses may often not have adequate in-house accounting capabilities or personnel familiar with specialized industry accounting procedures. For this reason, a small business may seek a C P A firm with expertise in areas that complement the business's own internal capabilities. The length of time that the business firm has been
associated with its C P A firm was also a discriminating variable in identifying benefit segments in the market for CPA services. This result supports the use of the B U Y C L A S S variable [15] in a professional services market. In the past, C P A firm turnover has been generally low [13] and many C P A selection decisions have been straight rebuy situations. However, because changing C P A firms has become more acceptable and more frequent [13], today more C P A selection decisions may be modified rebuy situations. Table 3 indicates that businesses in the modified rebuy segment in the market for C P A services (i.e., businesses which had been associated with their C P A firms for 3 years or less) sought different benefits in selecting a C P A firm than did businesses in the straight rebuy segment (i.e., businesses which had not recently changed C P A firms). The discriminating ability of the variable, whether or not a business firm has an audit committee, supports the applicability of the buying center concept [20] in defining segments in a professional services market. Until recently, the most influential CPA buying center members were often members of top management, especially individuals in the financial function [13]. Recently, concern about the impact on auditor selection of the possible lack of independence between client m a n a g e m e n t and the auditing firm has resulted in increased involvement of the audit committee in auditor selection. The significant differences in C P A selection criteria scale importance (benefits sought) between businesses with audit committees and businesses without audit committees provide evidence that the change in the membership of buying centers for C P A services in businesses with audit committees may change the C P A selection process in these firms.
DEVELOPING CPA MARKETING STRATEGIES Information about benefit segments in the market for C P A services and the identifying characteristics of these segments can be useful to C P A firms in implementing market segmentation in their marketing programs. Knowledge of the C P A service needs of segments in the market for C P A services can help a CPA firm to select as target markets, segments which have service needs which match the unique strengths and skills of the firm. This approach can allow the C P A firm to develop a unique image that differenti-
ates the firm from its competitors and to position itself in those segments of the market where it has the greatest competitive advantages [19, 21]. The market structure analysis in Table 3 can be used by C P A firms in marketing current service offerings to new clients or in expanding service offerings to current clients. A C P A firm may use information about the characteristics of C P A firms that are considered important by different segments to identify groups of businesses which are most likely to be receptive to the firm's current offerings. As an example, a C P A firm that believes that its strongest service quality is its expertise in accounting services may want to promote itself to additional groups of businesses that consider the C P A firm's ability in accounting services important. The analysis in Table 3 suggests that these firms are likely to have the following characteristics: sales volume less than or equal to $5,000,000; net worth of $500,000 to $1,000,000; and audit fees less than $20,000. These business firms are also likely to use nonnational C P A firms. After selecting as target segments those groups of businesses that consider the firm's current strengths important, a C P A firm may want to add or strengthen its offerings of other C P A firm characteristics that are also important to these target segments. For example, Table 3 suggests that businesses with the characteristics listed above which are likely to consider a C P A firm's ability in accounting services important are also likely to consider the following C P A firm characteristics important: C P A firm's adherence to professional standards; C P A firm's industry specializations; and accessibility of the C P A firm's partners to client's executives. A C P A firm that has selected as a target segment businesses which prefer C P A firms which specialize in providing quality accounting services may thus also want to emphasize that the firm has strengths in other C P A firm characteristics which this segment of business firms considers important. C P A firms can also use the market structure analysis in Table 3 to identify variables that might be used in a multilevel or nested approach [4] to segment the market for C P A services. An example of this type of analysis is presented in Table 4. Table 4 presents the benefits desired by segments in the market for C P A services defined using: (1) size of the client firm; (2) size of the C P A firm currently used by the client; and (3) whether or not the client firm has an audit committee. 19
TABLE 4 An Example of a Multilevel Approach to Segmenting the Market for CPA Services a Identifying Characteristics of Businesses in Each Segment Benefit Desired from CPA Services
Smaller Businesses b
Larger Businesses b
Clients of Nonnational CPA firms c
Clients of National C P A firms"
Clients with Audit Committees
Ability in accounting service Industry specializations Accessibility of C P A firm's partners Size and prestige Local reputation of C P A firm C P A firm approached client Geographical proximity to client References of C P A firm A d h e r e n c e to professional standards Proposal and fee aThis table presents an example of a multilevel approach [4] to segmenting the market for C P A services. The table can be used by a C P A firm in analyzing the benefits desired by different segments and in choosing its target markets. The identifying characteristics of segments of businesses that desire each C P A service benefit were obtained from the analysis in Table 3. bSmaller businesses are defined as firms with net worth of $500,000 to $1,000,000; larger businesses as firms with net worth of more than
$1,00o,000. CNational C P A firms are defined as the 15 largest C P A firms in the United States; nonnational C P A firms as all other C P A firms in the United States.
Using several variables to define segments can help a C P A firm design a package of services to meet the specific needs of different segments. As an example, a C P A firm might begin such an analysis by selecting smaller business firms as a target market. Table 4 indicates that a C P A firm should emphasize the following characteristics in marketing to the small business firm market: C P A firm's ability in accounting services and industry specializations; and the accessibility of the C P A firm's partners to the client's executives. A nested approach to segmentation might then involve analysis of the size of the C P A firms currently used by target business firms. Table 4 indicates that in addition to emphasizing the above characteristics, in marketing to smaller business firms which currently use smaller (nonnational) C P A firms, a C P A firm will also want to emphasize the quality of its local reputation and may want to consider a more aggressive, direct approach in marketing. Alternately, after a C P A firm has defined target segments using business firm size, the firm may then want to determine how many businesses in its target segments have audit committees. The analysis in Table 4 can suggest C P A service benefits which are likely to be important to businesses with audit committees. This analysis suggests that C P A firms that are marketing their services to prospective clients with 20
audit committees should evaluate the quality of their written and oral client proposals. These proposals should emphasize the C P A firm's adherence to professional standards and industry specializations. C P A firms should also emphasize the quality of their "references" (referral sources) in marketing to business firms with audit committees.
CONCLUSIONS This research used benefit segmentation to analyze the structure of the market for C P A services. The results provided a description of this market using purchase decision criteria (CPA selection criteria scales) and various business firm characteristics. The survey results used to provide this description were obtained from a random sample of U.S. business firms, stratified to include a broad cross section of the market for C P A services. The results suggest benefit segmentation can be used effectively to describe the structure of an industrial market for professional services. This analysis provides information that professional firms such as CPAs can use in developing marketing programs using market segmentation. In addition to providing a description of basic dimensions underlying the CPA
selection process, the results also provide evidence about the applicability of prior industrial marketing research to a professional services market. Future research into the structure of the market for CPA services should concentrate on obtaining data about the applicability of additional segmentation variables in a professional services market. These might include additional demographic variables such as client firm industry and geographical location as well as variables representing purchase situational factors such as the composition of buying centers for CPA services. Future research might also include additional CPA selection criteria in order to discover the existence of additional benefit segments in this market and to compare benefit segments in the market for CPA services with those in other professional service markets.
7. Frank, R. E., Massy, W. F., and Wind, Y., Market Segmentation. Prentice-Hall, Inc., Englewood Cliffs, NJ, 1972. 8. Hakansson, H. and Wootz, B., Supplier Selection in an Industrial Environment--An Experimental Study, Journal of Marketing Research 12, 46-51 (1975). 9. Haley, R. I., Benefit Segmentation: A Decision-Oriented Research Tool, Journal of Marketing 32, 303-315 (1968). 10. Kollat, D. T., Blackwell, R. D., and Robeson, J. F., Strategic Marketing. Holt, Rinehardt and Winston, New York, 1972. 11. Kotler, P., Marketing Management: Analysis, Planning and Control, 4th ed., Prentice-Hall, Inc., Englewood Cliffs, NJ, 1980. 12. Kotrba, R. W. The Strategy Selection Chart, Journal of Marketing 30, 22-25 (1966). 13. Macchiaverna, P. R., Corporations and Their Outside Auditors: A Changing Relationship. The Conference Board, New York, 1981. 14. Mette, W. R., Jr., Competition in Public Accounting: Issues and Impact, Georgia Journal of Accounting 1, 18-29 (1980). 15. Robinson, P. J., Faris, C. W., and Wind, Y., Industrial Buying and Creative Marketing. Allyn and Bacon, Inc., Boston, 1967. 16. Smith, W. R., Product Differentiation and Market Segmentation as Alternative Marketing Strategies, Journal of Marketing 21, 3 - 8 (1956).
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