Last month we explored one of the three key components of business strategy - the importance of price play. This month we turn to the second: product/service differentiation.
One could argue that all business strategies are about differentiation, even those that focus on price. A cursory glance at any TV advert shows the dominance of price as a key incentive. However, for the purpose of this article let's assume differentiation is expressed in qualitative terms which customers value over and above price.
Lessons learnt from history tell us that if you have something different from your competitors then you have a unique market position. Indeed, Thomas Edison would have found it easy to demonstrate the advantages his new-fangled incandescent light had over the traditional gas lamps that dominated the late 1800s.
Today's companies operating in the same market put lots of managerial time and effort into their differentiation strategy, particularly when the product or service they offer is largely homogenised. With this in mind, let's consider your advisory business:
- Does it really do anything different from other similar business?
- Does it have a unique advisory process?
- Does it have a particular way of managing clients?
- Does it have a service proposition that can be proven superior to the competition?
A very useful way to gain some client insight is to undertake some research with a cross segment of your client base. It is important to garner feedback from your clients about why they turned to you for advice in the first place and why, in their view, you are different to other advisory businesses. By adopting this approach, not only will you get an understanding of what your customers value, but you will also get a strong indication of whether you have a differentiation within your proposition that can be used to market your business to greater effect.
A good example of a business which has undertaken this process is a close friend of mine who runs a very successful financial advice business in the Midlands. He and his colleagues made a conscious decision to try to differentiate their business from those that operated similarly in the local area, and they decided to use their fully chartered status as a differentiator. They did this by deciding to be the first IFA firm in their area. Once they had undertaken and passed the exams, they reconstructed their proposition and marketing approach around this key differentiator.
As a result they have since yielded a higher calibre of client and a steadier stream of professional connections. In essence, in their view it has given them a commercial edge and they are now turning that edge to their competitive advantage.
Yet where do you turn if you don't believe you have a sustainable, unique value driver to market to customers? The answer is that you can still consider differentiation as a strategic cornerstone for your business.
Let us take the example of car manufacturers: Whilst car makes and models might be largely homogeneous, these businesses still seek to differentiate themselves by marketing what they stand for and conveying a sense of the intended customer experience, whether its the ecologic friendliness of the Toyota Hybrid engines, the sheer driving pleasure of the BMW or the good old strap line of "if only everything in life was as reliable as a Volkswagen". The fact remains that all cars do the same thing but they create a market segment based on perceived differentiation as opposed to actual differentiation.
If you can apply the principle of being different to your business, then you will have a strong foundation for your company and a powerful marketing tool at your disposal.
Next month we'll look at customer relationships as a strategy. Until then good luck with any exams you're taking and I hope business remains strong in these difficult times.
Richard Howells is intermediary sales director at Zurich UK Life
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