Differentiation: A Key To Success - with Suzanne Lowe
Session Moderator: Suzanne Lowe is the president of Expertise Marketing, a business dedicated to providing marketing and management counsel to the leadership of service firms, especially those in professional services throughout the US and Canada.
Clients work with Expertise Marketing to identify, package and build their unique intellectual capital. Expertise Marketing helps them develop and implement ways to use their expertise to obtain or maintain a leadership position in the marketplace.
Ms. Lowe writes and speaks regularly on the topic of professional services and marketing strategy.
Today's topic is about how accounting firms are using differentiation strategies and tactics to establish, maintain or extend a competitive advantage in their marketplace. Our workshop is based on the firm's study, "Differentiation: How Are Professional Service Firms Using it to Compete?" This is its fourth annual survey reviewing strategic marketing issues that impact professional service firms. It was conducted in conjunction with the AAM (Association for Accounting Marketing) and AICPA (American Institute of Certified Public Accountants).
Suzanne Lowe: Welcome to AccountingWEB workshop, participants!
Our information is based on our just-published study. This is our firm's fourth annual survey reviewing strategic marketing issues that impact professional service firms. It was conducted in conjunction with the AAM (Association for Accounting Marketing) and AICPA (American Institute of Certified Public Accountants) and six other trade organizations serving professional service industries in the U.S. and Canada.
We have specific findings comparing the accounting "industry" to the other industries in the study. The other professions studied were Accounting, Architecture, Engineering & Construction (A/E/C), Environment & Energy, Executive Search, Consulting (Healthcare, Human Resources & Management), General Contractors, Information Technology, and Law.
For today's workshop, we'll review some of the key findings of the study, and we'll discuss the successful elements of differentiating strategically.
Any questions about our study before I plunge in to describe our findings?
David C. Wilson: What size firms are in the study?
Suzanne Lowe: Form solo practitioners to large global firms -- the "Big Five."
We had three overall key findings: First, accounting firms are implementing some form of differentiation in their marketing programs.
Second, There is little agreement on exactly WHAT differentiation means.
Third, and most critical, is that some of the approaches that many firms are pursuing are actually reported to be unsuccessful.
We found that many professional service firms don't link differentiation to their firm's strategies. Instead, they randomly experiment with a spectrum of (mostly tactical) differentiation approaches.
Let's discuss the essential elements of differentiating strategically - and then I'll showcase some of the findings of the study.
There are really two approaches to differentiation: "Minding the gap," and "mining the gap."
Minding the differentiation gap revolves around gaining a better understanding of your firm's business landscape. It can be broken down into three components: your firm's marketplace, clients, and competition.
First, you must gain a keen understanding of your market. This involves observing overall business trends and examining the activities of clients, partners, and suppliers. Marketplace questions that could be answered include: Why is there an apparent upswing in M&A activity? Which firms are experiencing client price sensitivity? and why? How is technology changing the way we -- and others -- do business?? The answers to these questions provide a perspective that can begin to point to differentiation opportunities.
Next, you must understand your clients and prospects in a strategic way. You must dig deeper than simply asking clients what they want. You should determine their need intensity -- their greatest "pain," even if it is unexpressed -- and begin to match this need with a spectrum of choices. You should also learn as much as possible about your clients purchasing behaviors, and determine the market-driven reasons behind those behaviors.
The "last but not least" step in minding the gap is to understand the competition. You should ask: "Who's entering our space?" and "What is our market share versus our competitors' share?" Increasingly, firms are crossing traditional industry lines to provide services, so competition may be coming from previously unexpected sources, including law firms and consulting firms. How are these competitors promoting themselves? What do they claim as their point(s) of differentiation? Pay particular attention to any innovative approaches the competition may be pursuing, such as risk sharing, alliances or totally new services.
Once you have determined where the differentiation gap is, it is time to "mine" it by identifying and/or building, and then promoting the firm's true differentiation. In mining the gap, consider the following five factors. A firm's differentiation should be valuable, difficult to copy, credible, compelling, and sustainable.
Valuable: It won't matter that your firm is different if clients do not value that difference. For example, let's review the study's findings about "hiring specialized individuals" as a differentiation approach. The respondent population confirmed that "hiring specialized individuals" was among the most successful differentiators. Why? Because clients perceive real value in the expertise that a professional service firm possesses.
Accounting firms in particular embraced this method strongly. The survey found that 67% of responding accounting firms plan to increase their hiring of specialized individuals next year, far outpacing all the other professional industries studied.
This approach is in stark contrast to a little-valued differentiation approach: reorganizing practices or lines of business. The study population reported that this approach was among the most highly used but least successful methods of differentiation.
Okay I have a question for you all: Why is reorganizing so unsuccessful as a differentiator?
Answer: Reorganizing mostly benefits a firm internally, and offers little if any value to a client.
The second item is "Difficult to copy": Respondents reported that the more difficult differentiation approaches are among the most successful. They are also the hardest to copy. In order to enjoy a true market advantage, pursue differentiation approaches that are difficult for your competitors to duplicate.
Suzanne Lowe: The study's accounting respondents appear to be incorporating this element of differentiation particularly well. For example, accounting firms are placing more emphasis on new service offerings (61%) than the study's other single "industries" and the overall respondent population.
Louis Grassi: Such as?
Suzanne Lowe: One firm has begun to offer money management services.
Louis Grassi: How unique is that?
Michelle Kaye: Exactly. We all offer additional services, other than accounting, auditing, etc.
Session Moderator: Suzanne, Lou Grassi just asked how unique offering money management services really is?
Suzanne Lowe: It may not be that unique to your firm, but it was to this firm's client base. For example, accounting firms are placing more emphasis on new service offerings (61%) than the study's other single "industries" and the overall respondent population.
Session Moderator: And Michelle Kaye said that many firms offer additional services.
Suzanne Lowe: Sorry I had a brief computer glitch.
Michelle Kaye: Other than different services, what else can accounting firms do that is difficult to copy?
Suzanne Lowe: You're right, accounting firms are beginning to offer new services, and in truth, many of them aren't that unique. That's where the success factor comes in.
Louis Grassi: So you are saying it’s not what additional services you are offering but rather how you get the message out?
Eric W. Bakerman: So how do we get the message out??
Suzanne Lowe: No, Not how you get the message out, but what is truly differentiated about your firm.
Louis Grassi: But how do people recognize this?
Michelle Kaye: But additional services no longer differentiate one firm from another.
Suzanne Lowe: Correct -- differentiation must be valuable to clients, difficult to copy, credible, compelling, and sustainable. THEN you can tell your clients about it.
David C. Wilson: Does your study indicate that firms are becoming more niche oriented?
Suzanne Lowe: No, and they SHOULD be. (This would be a strong differentiator. But they ARE becoming more focused on relationship management.
Katherine LeMire: Do you find that in today's CPA firm that people may feel completely innovative in their niches, etc. but may simply remain mainstream?
Suzanne Lowe: It seems that most are trying to stick to their knitting instead of being truly innovative. That fact is true for most of the study respondents. In fact, we found that the more risk a firm takes to be different (innovative), the more success they achieved.
Louis Grassi: How are people becoming more focused on client relationships? Can you be more specific?
Suzanne Lowe: Yes, in a study we did last year, on technology and marketing, we found that more firms are using customer relationship management software to close the intimacy gap with clients.
Paul Dunn: That's because the risk is in NOT being innovative. Clients are demanding much more and rightfully so. But it is surely not a software issue. It is first and foremost a mindset issue.
Kerri Kleinschmit: What kind of software?
Susan McMains: Would you care to share the name of the software? What can it provide?
Suzanne Lowe: But CRM is really not going to help a firm differentiate by itself. In fact, CRM software is very copy-able, so watch that you keep your expectations clear.
Let's talk about that offline. I can tell you that 23% of accounting firms used formal relationship management programs as a differentiator last year, and that this number will increase to 37% next year. So it's becoming a bigger deal.
I want to remember to mention that your differentiation approach must be sustainable.
Suzanne Lowe: Differentiation should be an organizational initiative that involves an iterative process of examination, commitment to evolve in a market-driven manner, and action. Don't differentiate and then just sit back with a sigh of relief! If you've truly linked your differentiation to your firm's business strategy, then you've committed to a long-term program of establishing and maintaining a competitive advantage.
For example, we found that accounting firms will place increased emphasis on training professionals to follow a proprietary methodology. As a way of being different! Of course, if a firm's methods aren't that UNIQUE, then they become easy to copy, and the firm's differentiation margin becomes smaller.
The bottom line is that only those accounting firms that strategically apply differentiation will reap its full rewards.
Would you guys like to hear about the relationship between success and the types of differentiation approaches that are being used?
Session Moderator: Certainly!
Kerri Kleinschmit: Yes
Susan Lanfray: Isn't this an evolutionary process, since market leaders/differentiators never have a permanent advantage. How long are firms able to sustain their differentiation?
Suzanne Lowe: The most successful differentiation approaches include: joint ventures and formal external alliances; hiring specialized people; plus adding new to a firm services that are within the accounting industry (like the example I cited earlier).
Interestingly, PR campaigns were deemed by the respondents to be successful, but I have concerns that everyone will feel that they can just "get the word' out and they will be different. This isn't so!
Differentiation can be achieved in various ways. To one firm, differentiation is a "new look." To another, it is a "portfolio of service offerings." The most important common denominator for differentiation is a sustainable uniqueness that has value to clients.
Paul Dunn: And it has to be valuable to the team members too.
Katherine LeMire: In small towns, communities, etc., you still find it important to advertise and/or market?
Suzanne Lowe: Yes, but there are aspects of advertising or promotion that are actually unsuccessful diff approaches. I'll give you guys some examples . . .
Jami Fultz: Before time runs out, will you please tell us how to get a copy of your study results?
Suzanne Lowe: Okay -- you should visit our web site, www.expertisemarketing.com, to order the study. There is a companion study as well, with cases (including one on how an accounting firm differentiated.
I'll close by saying that Differentiation is not a marketing add-on that you pull out when there's some budget money available. It is an activity that must be undertaken carefully and intentionally, and has the power to create and sustain a defensible competitive advantage. Accounting firms need to find ways to compete in an increasingly crowded and competitive marketplace. If the findings of the differentiation survey are any indication, many firms believe that differentiation may hold at least part of the key to long-term success.
Katherine LeMire: Thank you, Susan. You've been a great help. Can we contact you at the web site as well?
Suzanne Lowe: Yes, I have an email address at the web site. Plus I can talk better than I can type!
Only those accounting firms that strategically apply differentiation will reap its full rewards.
Session Moderator: Thank you, Suzanne! I've really enjoyed this hour. This information has been very helpful and, I believe, has cleared up the differentiation "haze" out there. We appreciate your time here. Have a fantastic and successful week!