{"id":18038,"date":"2024-06-25T08:30:34","date_gmt":"2024-06-25T12:30:34","guid":{"rendered":"https:\/\/hingemarketing.com\/?p=18038"},"modified":"2024-06-25T09:05:43","modified_gmt":"2024-06-25T13:05:43","slug":"expertise-as-a-differentiation-strategy","status":"publish","type":"post","link":"https:\/\/hingemarketing.com\/blog\/story\/expertise-as-a-differentiation-strategy","title":{"rendered":"Mastering Differentiation Strategy for Professional Services Firms"},"content":{"rendered":"

Have you been competing for work that you are more than qualified to perform than the competition, only to lose the deal because you were underbid by that competition? Or maybe you have been the one underbidding, which leaves you little room for margins or growth.<\/p>\n

If you find yourself repeatedly competing on price alone, it’s time to develop a stronger differentiation strategy.<\/p>\n

Differentiation Strategy Defined<\/h2>\n

A differentiation strategy<\/strong> is the way in which you make your firm stand out from otherwise similar competitors in the marketplace. Usually, it involves highlighting a meaningful difference between you and your competitors. And that difference must be valued by your potential clients. A strong differentiator will provide a competitive advantage for your firm.<\/p>\n

Michael Porter, the famous strategist, maintains that there are only two ways to gain a sustainable advantage over your competition. One way is to compete on price, highlighting the similarities you share with your chief competition:<\/p>\n

\u201cWe\u2019re just as good as our competition, but we cost less.\u201d<\/cite><\/p>\n

Unfortunately, unless you have a sustainable cost advantage, you can\u2019t keep up this strategy for long. All it takes is someone willing to undercut your lowest price. The lowest-cost strategy also exposes you to commoditization and a much wider range of competitors, including do-it-yourself options, off-shoring and automation.<\/p>\n

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Download the Differentiation Guide for Professional Services<\/a><\/p>\n<\/div>\n

Porter\u2019s other way \u2014 and usually a better way \u2014 is to set your firm apart. Be different. Separate yourself from competitors in a way that is meaningful and relevant to potential clients.
\nDetermining how to do this is a differentiation strategy.<\/p>\n

Now, a point of differentiation may be broad-based and set you apart from the rest of the industry, or it may be more narrow, appealing to a niche market. This second approach is often referred to as a focused or concentrated strategy<\/strong>.<\/p>\n

Differentiation Strategy Examples<\/h2>\n

One way to set your firm apart would be to adopt a business model that\u2019s different from your competitors. Let\u2019s say that hourly billing is widespread in your industry. Offering a pay-for-results billing model, instead, would be a clear differentiator.<\/p>\n

Of course, developing a broad-based differentiation strategy\u2014one that\u2019s substantially different from your competition\u2014isn\u2019t always easy. And even if you were able to pull it off, what\u2019s to keep a competitor from emulating your approach?<\/p>\n

This is why many firms choose to compete with a focused strategy. In a focused strategy you narrow your appeal to a niche audience.<\/p>\n

For example, an accounting firm that works exclusively with chain restaurants has a differentiator that is very compelling to that niche market segment. However, other segments, such as automobile dealers, would find no value in working with the restaurant specialists.<\/p>\n

At first, this strategy may seem to leave lots of potential business on the table. And in fact, does. And that is the point. The universe of competitors that serve all audiences is huge, so it is hard to attract attention to your firm amidst all the noise. And when you do get an opportunity to bid on a project, you will often feel compelled to compete on price because there is little that distinguishes you from your rivals in the eyes of the buyer.<\/p>\n

When you are differentiated, however, the situation changes. While your pool of competitors will shrink, you become very interesting to your buyers and you will attract many more qualified leads within your area of expertise. But that\u2019s far from the only advantage of differentiation. We explore some of these benefits next.<\/p>\n

5 Advantages of Differentiation<\/h2>\n
    \n
  1. \n

    You do not have to compete on price alone.<\/span><\/h4>\n<\/li>\n<\/ol>\n

    Once you have distinguished yourself from a sea of look-alike competitors the prospective client cannot reduce their choice to the dimension of cost alone.<\/p>\n

      \n
    1. \n

      You are more appealing to your target audience.<\/h4>\n<\/li>\n<\/ol>\n

      Since you are different, and presumably better than a generalist, you make a more appealing choice. This makes it easier to generate interest and close sales.<\/p>\n

        \n
      1. \n

        There is no direct substitute.<\/h4>\n<\/li>\n<\/ol>\n

        Well-differentiated firms are unique, which means a buyer can\u2019t directly compare you to other service providers. This forces the prospect to focus on the incremental value of your difference. This adds value that other options do not have.<\/p>\n

          \n
        1. \n

          You increase loyalty.<\/h4>\n<\/li>\n<\/ol>\n

          Greater value and a lack of comparable substitutes result in greater loyalty to your firm. There is no good reason to switch (assuming you are delivering on your promise)\u2014and no comparable alternative to switch to.<\/p>\n

            \n
          1. \n

            You can command greater fees.<\/h4>\n<\/li>\n<\/ol>\n

            If your point of differentiation delivers additional value and is not available elsewhere you are in a position to command higher fees. This is especially true if your differentiator is around specialized expertise.<\/p>\n

            Whether your strategy is broad or very focused it must always start by identifying your firm\u2019s differentiators. Let\u2019s start with a definition.<\/p>\n

            \n

            Download the Differentiation Guide for Professional Services<\/a><\/p>\n<\/div>\n

            What is a Differentiator?<\/h2>\n

            A differentiator<\/strong> is a characteristic that makes your business meaningfully different from your competitors and more valuable in the eyes of your target audience. Differentiators are the building blocks of a differentiation strategy.<\/p>\n

            But simply calling something a differentiator doesn\u2019t make it one.<\/p>\n

            First it must pass three tests.<\/p>\n

            Three Tests for a Successful Differentiator<\/h2>\n

            How do you know you have a good differentiator? We recommend you put each one to the test. If it can pass these three critical checks, it may be worth developing into a broader differentiation strategy<\/a>:<\/p>\n

            1)\u00a0Is it true?<\/h4>\n

            Differentiators can\u2019t be imaginary. Apart from the ethical hazard of making stuff up, it is simply too easy for people to see through exaggerated claims. Whatever you claim as a differentiator, your firm has to live up to it each day.<\/p>\n

            For example, many firms say they have superior client service, but they do nothing special to actually deliver on this claim. No special policies. No special training. Nothing to ensure it actually happens. The bottom line is they are no different than a slew of competitors that make the same claims.<\/p>\n

            2)\u00a0Is it relevant?<\/h4>\n

            If your point of distinction doesn\u2019t matter to your prospects, it won\u2019t bring you more business. In the end, what is most important is what plays into your target prospects\u2019 selection criteria and decision-making process. Any irrelevant differentiators are wasted effort.<\/p>\n

            We once had a lobbying client that believed their strongest differentiator was their firm\u2019s lack of conflicts of interest. Their competitors certainly could not make the same claim. But, when we dug a bit deeper, we discovered that their clients and prospects didn\u2019t consider impartiality to be a strong vetting criteria. In fact, they assumed that most lobbying firms already had this in place. So much for a strong brand differentiator.<\/p>\n

            3)\u00a0Is it provable?<\/h4>\n

            This is often the most challenging test for a differentiator. You may have identified a true and relevant point of distinction, but it is useless without proof. Even if a differentiating statement is true, if you can\u2019t substantiate it with evidence buyers won\u2019t believe it. Amidst all the marketplace noise, they have become inured to empty claims. They simply ignore them.<\/p>\n

            Here\u2019s a popular differentiator candidate we hear from many clients: \u201cWe have great (or the best) people.\u201d It is a trap! Why? Well, have you ever heard a firm claim they have average people?
            \nDidn\u2019t think so.<\/p>\n

            But there are exceptions. One of our clients provides specialized software development services \u2014 and they hire only PhD-level programmers. They actually can support a \u201cgreat people\u201d differentiator with evidence.<\/p>\n\"Three\n

            \"Click<\/a>