Managers have always sought to be number one or two in their industry. This is the Holy Grail for maximizing profit. Recent measures in service industries such as software and banking have shown that customer loyalty is more important than ever.
Companies that produce products strive to be market leaders. To achieve this, product companies launch and manage a range of differentiated products with features most appealing to specific target audiences at a reasonable price.
According to the widely accepted PIMS study (Profit Impact Marketing Strategies), profit increases as market share increases. Market share is a strategic goal for product companies and sometimes professional service providers.
A product company can find itself in a jackpot situation if they can
Discover an unmet need for a product within the company’s development capability.
Make the product as unique or as different as possible from other products.
Launch the product using a marketing and branding campaign supported by market research. This will help shape the product’s ” personality ” and appeal to capture market share as quickly and aggressively as possible.
Create a product that is hard to copy and hard to copy quickly to maintain its position on the market.
This is the product promotion model taught and promoted by most business schools. When presented with a business plan or new product, business professionals are trained to ask questions like these:
What is the size of the market?
What makes your offer unique?
What will you do to communicate your market differentiation?
What are the barriers to entry?
What can you do to prevent your competitors from copying you, making your product a commodity and thus eliminating any differentiation on the market, reducing your prices, and decreasing your profits?
The business models and questions above do not typically cover professional services firms.
Suppose we apply what we have learned and what we know from respected business leaders about branding, market research, new service launches, and differentiation to our service businesses. In that case, it can be an Achilles’ heel.
How can we be hurt by following (seemingly solid) business principles?
Imagine the following scenario: A business consultant trained in “classical business and Marketing strategy “tries to assist a potential entrepreneur with starting a successful business.
This is how the conversation could develop:
Consultant: Hello. I look forward to talking with you about your new business idea. What type of business do you want to start?
Entrepreneur: Nice to meet you, too. I am a lawyer, accountant, consultant, or engineer. This story applies to all. I have worked for well-known firms for over 20 years and would like to start my firm with some partners. I am going to open my own law office in Boston.
Consultant: Great. I will ask you some questions to help you assess your business’s viability and future and assist you in developing your marketing strategy. Ready?
Entrepreneur: I am new to marketing professional services and look forward to learning more. Fire away.
Consultant: How big is the market?
Entrepreneur I don’t know, do not plan to learn, and will probably never find out because it isn’t essential. It’s sufficient to say that there is enough business to start and grow a company.
Consultant: Do you know how much market share your company plans to capture?
Entrepreneur, I have no idea, but it’s likely to be less than 1% for a few years.
Consultant: Excellent. Do other companies serve this market?
Entrepreneur Yes. They serve the majority of entrepreneurs quite well.
Consultant: What will make your services unique and different?
Entrepreneurs: They will not. I will offer the same core professional service as other firms. I will focus on my specialties and those of the partners who will start with me: intellectual property, mergers & acquisitions, insurance law, and other related areas.
Consultant, I understand. What type of market research will you do to position yourself and your professional services against the competition in the best way possible?
Entrepreneur: No market research. We won’t look at market opinions to determine what people “want” from a company. We don’t want insincerity to come across if we pretend to be someone else. In any case, what we do daily will speak louder than anything we say. We will be ourselves and communicate this in our marketing materials and brand message and commit to consistently living up to service promises.
Consultant, You won’t use market research to develop your professional services branding strategy and brand image.
Entrepreneur: No one likes politicians who survey their constituents and then only develop policies based on what is popular. The people want their elected officials to be sincere and steadfast, not hesitate. It is the same for professional service providers such as lawyers. However, we may survey our clients to ensure they are satisfied with the service they receive and then, based on their responses, adjust how we work to serve them best.
Consultant: Can you undercut your competitors in price and steal their market share?
Entrepreneur: We wouldn’t. You get what you pay. Our services and people are of high quality. We’re likely to charge high fees.
Consultant: If you have a successful business and generate a particular market share, how can other companies compete with your services and try to steal your customers?