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ON SERVICE BRANDING, DIFFERENTIATION, AND MARKET SHARE

Written by: Mike Schultz

Article Overview: By Mike Schultz and John Doerr To maximize profit, managers have pursued the Holy Grail of becoming number one or two in their industries. Recently, however, new measures of service industries like software and banking suggest that customer loyalty is a more important determinant of profit. - James Heskett, et. al., Putting the Service-Profit Chain to Work, Harvard Business Review Product companies seek to become market-share leaders. To do this, they look to launch and manage a portfolio of differentiated products that have specific features most appealing to a specific target audience for a reasonable (but as high as possible) price.

ON SERVICE BRANDING, DIFFERENTIATION, AND MARKET SHARE

By Mike Schultz and John Doerr

To maximize profit, managers have pursued the Holy Grail of becoming number one or two in their industries. Recently, however, new measures of service industries like software and banking suggest that customer loyalty is a more important determinant of profit.

- James Heskett, et. al., Putting the Service-Profit Chain to Work, Harvard Business Review

Product companies seek to become market-share leaders. To do this, they look to launch and manage a portfolio of differentiated products that have specific features most appealing to a specific target audience for a reasonable (but as high as possible) price.

According to the famous and widely accepted PIMS (Profit Impact of Marketing Strategies) study, profit increases with market share. So, of course, product companies (and sometimes those that are marketing professional services) seek market share as a core strategic objective.

The jackpot situation for a product company is to:

Uncover an unmet market need for a product within their capability to develop and market.

Make that product unique or as much as possible unlike products currently available in the market.

Launch the product with a strong marketing and branding campaign, supported by market research, that shapes the 'personality' and appeal of the product so it can gain market share as quickly and aggressively as possible.

Develop the product to be difficult to imitate and also difficult to imitate quickly, thus keeping their hold on this profitable market for as long as possible.
This is the widely accepted model of product marketing taught in many business schools and advocated by many management and marketing consulting firms. Thus, when presented with a new business plan or product offering, we classically trained business-types are programmed to ask questions such as:

How large is the market?

What will make your offering unique?

How will you communicate your marketplace differentiation?

What are the barriers to entry?

What will prevent other firms from copying you and rendering your product a commodity, thus erasing any market differentiation you might enjoy, pressuring your prices, and squeezing your profits?

Unfortunately, the business model and the questions above do not usually apply to professional service firms. Thus, what many of us know and learned from respected business thinkers about market research, launching new services, branding, and differentiation can become an Achilles heel if applied to our service firms.

How can following such (seemingly) solid business thinking hurt us? Consider the following scenario - a business consultant trained in classical 'business and marketing strategy' tries to help a would-be entrepreneur to start a business that will succeed financially and grow. Here is how their conversation might develop:

Consultant: Nice to meet you. I am looking forward to discussing your potential new business venture. What kind of business are you thinking of starting?

Entrepreneur: Glad to meet you, too. I'm a lawyer (or accountant or consultant or engineer - this story applies to all) and have been for twenty years at well known law firms and want to make a go of it with a few other partners of mine. I'm going to start my own law firm in Boston.

Consultant: Great. I'm going to ask you a few questions to help you evaluate the viability and potential of your new business and help you with your marketing strategy. Ready?

Entrepreneur: As I'm new to professional services marketing, I'm looking forward to it. Fire away.

Consultant: What's the size of the market?

Entrepreneur: I have no idea, don't plan to find out, and probably won't because it's not really important. Suffice it to say, there's enough business for me to start a firm and grow it.

Consultant: OK. Well, do you know what amount of market share you plan to grab for your firm?

Entrepreneur: Not a clue, but I'm guessing it will be, for some years at least, less than 1%.

Consultant: Very well. Are there other companies serving this market?

Entrepreneur: Yes, and for the most part, they serve it quite well.

Consultant: How will the services you offer be unique and differentiated?

Entrepreneur: They won't. I'll offer pretty much the same core professional services as other firms. I'll focus on my specialties and those of my several partners who will be starting with me: intellectual property, mergers and acquisitions, and insurance law.

Consultant: I see. What kind of market research will you undertake so you can position your firm and professional services in the right way against the competition?

Entrepreneur: No market research. We'll not be focusing outwardly on market opinions to help us determine what people are 'looking for' in a firm. If we try to be anything but ourselves, we'll come off as insincere and we don't want to do that. What we do in the daily course of working will shout louder than what we say, anyway. We'll simply be ourselves, try to communicate that in our marketing materials and brand message, and then dedicate ourselves to living up to our service promises consistently.

Consultant: So you won't be using any market research to shape your brand image and professional services branding strategy?

Entrepreneur: Nobody likes a politician who surveys their constituency and then develops policies because one idea or another is popular at the time. People want sincerity and conviction from their elected officials, not vacillation. The same is true of professional service providers like lawyers. We may, however, survey our clients formally to make sure they're satisfied with the services they receive from us and, based on the survey results, tweak how we operate to best serve them.

Consultant: Can you undercut your competition in terms of price to steal market share?

Entrepreneur: No, and we wouldn't want to. Our services are high-quality, our people are high-quality, and you get what you pay for. It's likely we'll charge high fees.

Consultant: If your business works and you generate a certain amount of market share, what will prevent other firms from offering services similar to yours and trying to steal your clients?

Entrepreneur: Nothing will prevent other firms from offering such services or trying to steal our clients. What we will do to keep them as clients is to retain our best employees so we do great work, manage our expenses appropriately, and strive to meet and exceed client expectations every day.

Consultant: Good luck. (They'll never make it.)

The consultant above probably would not feel very positive about the prospects for this new business. Every core business question she was taught to ask was not only not answered the way she expected, it was contradicted. Surely this person's new law firm can't succeed.

Yet consider the following from the prospective client's point of view:

Do you really want a lawyer that is too 'different' than all the other lawyers, or do you just want a really good one that's experienced, honest, trustworthy, and consistent?

Do you really want to work with the lowest price (cheapest) lawyer?

Do you really want to work with a law firm that changes their firm's personality and message depending upon market trend surveys?

Even if you're a good-sized business, do you need to work with the largest law firm in the city, or just a team of competent lawyers at a firm that can reliably do the work you need to get done?
So, when you consider both your business strategy and your professional services marketing strategy, consider that what you may have learned (and what your advisers learned) in business school may not always apply.

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Article Tags: business schools, business types, consulting firms, customer loyalty, determinant, differentiated products, harvard business review, holy grail, management and marketing, marketing consulting, marketing professional services, marketing strategies, mike schultz, product marketing, profit impact, profit increases, profitable market, service profit chain, target audience, unmet market



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