19 April 2010 8 Comments

Vertical Differentiation

You can’t turn a corner these days without bumping into a marketing consultant banging on about the importance of a Unique Selling Proposition (USP) and differentiation.

I’ve written on the topic before – and in my view, for most service businesses it’s actually far more important to focus on creating compelling client value than it is to worry about being unique or differentiating yourself.

However, it’s a topic I keep coming back to and thinking about. For while clients buy based on the value you can bring, they may well initially notice you, and remember you based on your uniqueness or differentiation.

So there’s a challenge here: being different helps you get noticed and get remembered. But if you’re different in a way that doesn’t add value to a client then you won’t get hired.

Now you can try to find ways of being unique and different that are also valuable to clients – but it’s difficult. Competition being what it is, if something is valuable to clients, other people will notice and create and provide that service too. Unless you’re very, very smart or a great reader of early trends – the chances are if you spot something that no other professional in your field is doing – it’s because clients don’t value it.

But there is another way to think about differentiation.

Too often, when we think about differentiating ourselves we think of what I call “horizontal differentiation”. We want to be viewed as doing something different to our competitors. As not occupying the same space in our niche.

But think of some of the most successful professional service firms. Do they really do something different to their competitors?

Is McKinsey the only firm that does Strategy? No.

Do Skadden, Arps, Slate, Meagher & Flom* or other top law firms really do law differently? No.

Do AECOM design different buildings from the rest of the profession? Again, no.

What sets these firms apart is not that they are differentiated horizontally. They don’t really do anything different to the other firms in their niche.

They do things better.

They’re “vertically differentiated”. Clients perceive them to be in the same horizontal space as their competitors – but above them.

That’s the perfect positioning for a professional service firm. Delivering the same services as their competitors (because they’re the services clients need). But delivering them better.

How do you differentiate vertically?

Well to some degree, the perception of superiority comes from delivering great results.

But all professional firms have a truckload of testimonials and happy clients. It’s difficult to differentiate on that.

What allows these firms to stand head and shoulders above their competitors is perceived authority.

Being a consultant, McKinsey is the firm I know best (in my career, I’ve had to come in after McKinsey projects and pick up the pieces on more than one occasion – yet their reputation is immaculate).

I’ve asked McKinsey clients about why they perceive them as being better than their competitors. And I consistently get two answers.

It’s the quality and depth of their thought leadership – and the insights their partners share when they meet with them.

Clearly these two are related. Face to face insights come from personal experience – but also from the thought leadership the firm produces. Thought leadership is usually grounded in the personal experience of the team.

But perceived authority isn’t the exclusive domain of global giants. At a local level, there are consultants, accountants, lawyers, many professionals who are viewed as authorities in their field.

They’re the ones who “really know their stuff”. Who get invited to speak at events, and who are the first to get the call when there’s a tricky or out-of-the-ordinary issue.

They get the best work, and they charge the highest prices.

So next time you’re thinking about differentiation: think about up rather than sideways.

____

* I could have named a different law firm – but blimey, I love that name!

Filed Under: Marketing Professional Services Tagged With: , ,
4 June 2008 11 Comments

Do I really need a USP?

It’s accepted wisdom in marketing and sales nowadays that every business needs a strong Unique Selling Point (USP). “Differentiate or Die” has become the clarion call of consultants across the globe, urging their clients to (pay them to) develop clever positioning statements showing how unique and different they are to their competitors.

But does it work? Is a powerful, differentiated USP really critical for the success of every business?

Not in my experience.

The concept of a USP dates back to the 1940′s and originated with consumer goods companies battling for advertising share-of-mind. And indeed today, for many consumer oriented products a strong USP is key to creating brand awareness.

But for many businesses – particularly service businesses and companies who serve a local customer base, the concept of a USP is not so important.

Think about it from the customer’s perspective: when you’re looking to hire an accountant, or you need a taxi, or you want a plumber to fix a leak – are you looking for someone who is unique and clearly differentiated from his competitors? Or are you instead looking for someone who you can trust to do a really good job at a fair price?

Differentiation is great to mark yourself out from the crowd – but in a great many businesses you already stand out from the crowd. In my own consulting practice for example, I very rarely face direct competitors. My biggest competitor – as I pointed out in the post Beating Your #1 Competitor – is the status quo – the client doing nothing. And to beat that, I don’t need a USP. I need to demonstrate compelling value to the client, not uniqueness.

Or take the taxi firm. What will make a potential customer call one taxi firm over another? Usually two factors: availability and perceived reliability. Most successful taxi businesses didn’t become successes because they somehow offered something different or unique – they offered what every firm offers – available, reliable transport. The reason they get chosen is that they (are perceived) to be able to do it better than their competitors.

How about an accountant? Do you really want an accountant that does your books in a unique and different way? Probably not. Probably you want someone who does them well at a good price. The role of marketing for the accountant is not to communicate uniqueness, but to ensure the potential customer trusts that the accountant will do a good job.

I work with a lot of professional service firms – lawyers, accountants and consultants. And when we work together on clarifying their vision and goals I always introduce the concept from David Maister’s classic book Managing the Professional Services Firm that all professional services firms have essentially the same mission: “To deliver outstanding client service, to provide fulfilling careers and professional satisfaction for our people, and to achieve financial success so we can reward ourselves and grow”. The challenge for marketing and sales in professional services is not to create some clever, unique proposition – it is to take this standard proposition of offering outstanding client service and to prove to clients that it’s true.

To be continued…….

Ian

Filed Under: Business Development Strategy Tagged With: , ,