How to Thrive in the Age of Commoditization
Of the top seven threats to professional services firms over the next few years, five involve the eroding value of services. According to our most recent research, increased competition from new and larger firms is creating downward price pressure that is squeezing already low margins. And the ongoing artificial intelligence and automation revolution will only hasten the commoditization of many once-high-value services.
It might seem as if the world of professional services is being turned upside down. After all, how will you generate referrals when the perception across audiences is that cheaper, good-enough alternatives exist?
Fortunately, there is a way out of this looming storm cloud. But first, we need to revisit referrals, themselves.
A Fresh Look at Referrals
There are two general types of referrals:
- Experience-based referrals — These are the most familiar type of referrals. A client works with you and has a good experience. Later, when someone asks them whom they would recommend to provide the same kind of work, they pass along your name and their positive recommendation.
- Brand-based referrals — These referrals come from people a firm has never worked with. They are produced on the basis of a firm’s reputation in the marketplace or their perceived expertise.
Experience-based referrals are naturally limited by the number of happy clients you have. Brand-based referrals, on the other hand, are almost limitless — if you can figure out how to get them. For this reason, high-growth firms put a high priority on attracting more brand-based referrals.
Research on professional services referrals shows that 94.5% of firms receive brand-based referrals. When we delved into where people learned about these firms, we discovered a panoply of sources:
- Heard them speak at an event or conference
- Read articles or blog posts written by experts at the firm
- Interacted with the firm on social media
- Read a book they wrote
- Impressed by their website
- Found them in online search
- Read positive online reviews
Notice a common theme here? All of these sources are ways firms share their expert knowledge.
How Visibility Beats the Commoditization Trap
To avoid the commoditization trap, you need to do what the fastest growing firms are doing — make your expertise more visible. In fact, firms that have visible expertise generate 61% more referrals than their general reputation alone would garner.
The most practical way to build the visibility of your expertise is to deploy a content marketing program that puts your expertise — your knowledge and your ability to solve problems — on the front lines. In effect, that means becoming a teacher: to educate anyone who’s interested in your area of expertise how you go about solving problems. You will do this at no charge.
To extend your reach as wide as possible, you will want to find multiple online and offline venues for your content — and you will use SEO techniques to ensure that the people who are interested in what you have to say can find you easily.
When people can sample your expertise that is the first step to developing trust. Over time, they will consume more of your content. And eventually, when they have a need, they will put your firm at the top of their list. To your followers, you will become synonymous with your area of expertise.
While it may sound foolhardy at first to give away your hard-earned knowledge for free, this is a proven path to prosperity. The world has changed. Today, people expect to be able to find the information they want online and for free. If you don’t offer your expertise, somebody else will – and you will never build a large, engaged, brand-based audience for your services.
Differentiation — The Final Piece
While visibility is critical to building a powerful referral marketing program, you need one more tool to overcome the commoditization problem. You need an angle. To distinguish your services from other firms, you must be able to differentiate your approach. Usually, this involves specialization — often in a specific industry or a narrow service offering (click here to discover 21 ways to differentiate your firm).
When clients seek out experts, they gravitate toward firms with deep experience solving the kinds of problems they have. And nobody has more relevant experience than a specialist. This is why specialists can often charge higher fees. Confronted with the choice between a cheaper generalist and a more expensive specialist, most buyers will go with what they perceive as the safer choice: the specialist.
When you differentiate your firm, you give people a reason to choose you — and a reason to say no to your poorly differentiated competitors.
For an overview of differentiation and a step-by-step process to achieve it, check out this in-depth article on differentiation strategy.
Take the Next Step
If you are concerned about competing in a marketplace of increasingly commoditized services, you can do something about it. But advantage will go to those that move early.
To build a referral marketing strategy that can withstand the market forces that are remaking your industry, start designing a marketing program that both increases your firm’s visibility and sets it apart in the minds of your clients and prospects.
Don’t underestimate what this entails. If you take a traditional approach to marketing today — relying on face time with prospects, sponsorships, advertising and the like to bring in new business — prepare yourselves for a radical departure. While you shouldn’t abandon everything you are doing today, you will need to exercise new marketing muscles and introduce new skills to the mix.
More than anything, you will need to retrain your brain to think more like a teacher than a seller.
- Our free Differentiation Guide for Professional Services Firms guides you through how to build a powerful differentiation strategy.
- Download a free copy of the book Inside the Buyer’s Brain to learn how to build a well-differentiated brand to help your firm close more sales.
- Learn how to uncover your firm’s true differentiators with Hinge University‘s Differentiation, Positioning & Messaging course.
How Hinge Can Help:
Hinge specializes in helping professional services firms grow. From developing and implementing your growth strategy to facilitating your planning retreat to conducting market research on your firm, Hinge can take your business to a higher plane of growth and profitability with the Visible Firm Program.
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