ACCA_Positioning
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Define and build Providing professional services in a competitive environment? Incisive Edge’s Julia Payne offers some advice on laying the foundations necessary for growth The market for accountancy and other firms providing services is characterised by fierce competition for work with every firm searching for the Holy Grail of organic growth. With increasingly limited resources, where should you really be placing your efforts? How can you differentiate your firm from the masses? How do you gain a competitive advantage and build on that foundation to establish a firm position in a crowded marketplace? Your starting point is your competitive advantage. It has been well publicised that US businessman and philanthropist Warren Buffet only invests in companies that can display a ‘sustainable competitive advantage’. This often provides the platform for growth by focusing on what really makes you different. Use this three- step approach to identify yours: * Your service – where’s the difference? Your clients must perceive a consistent difference between your product or service and those of your competitors. This often relates to the price, the client’s perception of your product or their ability to access it. * Your expertise – where’s the gap? The difference must come from a capability or expertise gap. These gaps can include your ability to perform individual functions better than your competitors or in the positioning of your business. * Avoid trends. Your advantage must be sustainable and endure over time. Clients are actually more focused on your mainstay services. If you don’t satisfy the above criteria, it is likely that your advantage is not apparent to prospective clients. Ask yourself this question: What does your firm offer that is strong enough to excite your target market and cannot easily be imitated by your competitors? Until you find your advantage, you will be throwing potential clients and marketing budgets down the drain. Having established your core advantage, use the following steps to build the growth areas within your firm. 1 Make your service easy to buy How often does a new client come in for a first meeting and buy £50,000 worth of services? It simply doesn’t happen. Michael Porter, a professor at Harvard Business School, has said that real growth is based on creating economic value for clients. Clients want to get to know you and your firm and have an understanding of the level of expertise and service you offer. In addition, they want to eliminate their risk. To meet all these requirements, your service range should contain some lower margin, ‘productised’ entry-level services. When executed well, these will help to establish the relationship and build trust in the value you can add. Each time the client returns, their loyalty increases to the point where they are willing to pay higher fees for value-added service. Indeed, according to Fred Reichheld and Earl Sasser in the Harvard Business Review, ‘a 5% increase in customer loyalty can produce profit increases from 25% to 85% in service companies’. POSITIONING CAN AFFECT YOUR PRODUCT – THINK VOLVO, THINK SAFETY; IT CAN AFFECT PRICE – THINK WAITROSE’S ESSENTIALS AND SAINSBURY’S BASICS 44 AB YOUR SECTOR ENTERPRISE
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Transcript of ACCA_Positioning
Defi ne and buildProviding professional services in a competitive environment? Incisive Edge’s Julia Payne offers some advice on laying the foundations necessary for growth
The market for accountancy and other firms providing services is characterised by fierce competition for work with every firm searching for the Holy Grail of organic growth. With increasingly limited resources, where should you really be placing your efforts? How can you differentiate your firm from the masses? How do you gain a competitive advantage and build on that foundation to establish a firm position in a crowded marketplace?
Your starting point is your competitive advantage. It has been well publicised that US businessman and philanthropist Warren Buffet only invests in companies that can display a ‘sustainable competitive advantage’. This often provides the platform for growth by focusing on what really makes you different. Use this three-step approach to identify yours:
* Your service – where’s the difference? Your clients must perceive a consistent difference between your product or service and those of your competitors. This often relates to the price, the client’s perception of your product or their ability to access it.
* Your expertise – where’s the gap? The difference must come from a
capability or expertise gap. These gaps can include your ability to perform individual functions better than your competitors or in the positioning of your business.
* Avoid trends. Your advantage must be sustainable and endure over time. Clients are actually more focused on your mainstay services.
If you don’t satisfy the above criteria, it is likely that your advantage
is not apparent to prospective clients. Ask yourself this question: What does your firm offer that is strong enough to excite your target market and cannot easily be imitated by your competitors?
Until you find your advantage, you will be throwing potential clients and marketing budgets down the drain.
Having established your core advantage, use the following steps to build the growth areas within your firm.
1 Make your service easy to buy How often does a new client come in
for a first meeting and buy £50,000 worth of services? It simply doesn’t happen. Michael Porter, a professor at Harvard Business School, has said that real growth is based on creating economic value for clients. Clients want to get to know you and your firm and have an understanding of the level of expertise and service you offer. In addition, they want to eliminate their risk. To meet all these requirements,
your service range should contain some lower margin, ‘productised’ entry-level services. When executed well, these will help to establish the relationship and build trust in the value you can add. Each time the client returns, their loyalty increases to the point where they are willing to pay higher fees for value-added service. Indeed, according to Fred Reichheld and Earl Sasser in the Harvard Business Review, ‘a 5% increase in customer loyalty can produce profit increases from 25% to 85% in service companies’.
POSITIONING CAN AFFECT YOUR PRODUCT – THINKVOLVO, THINK SAFETY; IT CAN AFFECT PRICE – THINKWAITROSE’S ESSENTIALS AND SAINSBURY’S BASICS
44 AB YOUR SECTOR ENTERPRISE
Firms must take a fresh approach to new client acquisition and retention. It may require commitment to develop existing services or create new ones and to revisit pricing strategies. However, it is essential to resist the temptation to just add ‘me too’ competitor services.
2 Position your company Your clients need a very clear reason to use your firm. Quite simply, positioning is how you reach your target customer in a crowded marketplace. Positioning can affect your product – think Volvo, think safety; it can affect your price – think Waitrose’s Essentials and Sainsbury’s Basics ranges which transformed their Christmas revenues; and it can affect where your service is marketed – online or offline.
The important point is that your position needs to be consistent with the prior knowledge or experience of your client base and it must align with your firm’s vision. Positioning guru Jack Trout explains that to establish a successful position, you must focus on what your firm will be doing in the next three to five years, rather than attempting to position around what you are doing in 2010.
Positioning your firm will inform not only your sales and marketing strategies and budgetary decisions, but will also impact your brand and reputation. It will also play a key role in another element of your competitive advantage, your capabilities.
3 Your clients and capabilities In 2009, Harvard Business School held a two-day forum to discuss alternative business models for professional service firms; in essence, the evolution of the industry. At the heart of these discussions lay the relationship between clients and the trust they placed in individual experts.
Professor Amy Edmondson distilled the challenges for firms which want to grow into three areas: the ability to project a clear career track for new hires; offer career progression and performance measurement; and maintain a firm culture while balancing structure and flexibility.
Clients are no longer satisfied with being one of a number, they want to be number one. They want their professional advisers to have an in-depth understanding of their needs. The overall challenge for firms is how to meet client needs when the key
value-creating resources of technical expertise and client relationships are often proprietary to individuals within the firm.
Companies of all sizes are waking up to the fact that they need to do more with less. As we have seen from recent events, success is not always achieved by throwing money at a problem, but rather working with and harnessing the resources already to hand. For professional service firms, these resources can include their people, their reputation, their expertise, their brand and their client service. Firms need to think strategically about how these can be maximised. Just doing more of the same and hoping for a different outcome is not a strategy.
A defining vision for the future of the firm, coupled with a clear competitive advantage and position will not only distinguish you in the marketplace, but will provide the basis for attracting talent. Crucially, it will also provide your firm with a solid foundation for growth.
Julia Payne is co-founder of Incisive Edge (solutions), www.incisive-edge.com, a consultancy specialising in business growth for professional service firms and SMEs
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