Practice Improvement Tips and Techniques
Differentiation – Another great way to make more money and become a client magnet
by Gordon Holley, CA, CFP, CPB
President & CEO, Bookkeeping Express
So in Part I of this article last month, we talked about how to select a specific target market and how to specialize so that your value increased in the marketplace. As promised, Part II of this article which follows deals with differentiation – another way to increase your value in the marketplace.
So, how can I differentiate myself from my competition so that prospective clients choose me rather than my competition?
In a crowded market place, it is difficult to be successful selling the same thing as everyone else. Successful differentiation strategy attempts to answer the question "Why should my prospective clients buy from me rather than from my competition?” Successful differentiation strategy can be based on the nature of the services offered, the service delivery, or the packaging and pricing of the services.
Nature of Services
As discussed in Part I, many bookkeepers differentiate themselves through targeting a specific target market and through specialization. In most cases, this results in a type of boutique firm offering a limited number of services to a select target market. In some cases, these firms are expanding the services they offer to include consulting or are bringing in additional specialists to be able to offer one-stop shopping to their clients in particular industries.
Bookkeepers can also create competitive advantage relative to their competition through better service delivery. When asked, most bookkeepers will say that they offer great client service. As a result, client service is seldom a differentiating factor between firms. However, some professional services firms - like lawyers and accountants - have successfully differentiated themselves in this manner by offering client satisfaction guarantees[i]. Ungaretti and Harris in Chicago is an eighty-lawyer law firm that was one of the first to offer its clients satisfaction guarantees. The Summit Law Group in Seattle offers a client satisfaction guarantee with a unique twist – all of their invoices have a "Value Adjustment” line that allows each of its clients to adjust the invoice to reflect the value they feel they have received. Bookkeepers would do well to follow these examples.
If you are going to offer service guarantees, you need to have training and policies and procedures in place so that all clients feel like they are getting extremely good value for money. This takes time and energy to implement and refine, but has a huge payoff in the long term. It makes marketing much easier when you can say that you offer a 100% money back satisfaction guarantee. We do this with our firm today and have been doing it for four years – not one client has ever asked for their money back.
Packaging and Pricing
More and more firms are also differentiating themselves by packaging and pricing their services in new and innovative ways. In 2002, the American Bar Association produced the ABA Commission on Billable Hours Report[ii] that examined hourly billing practices and reviewed some alternatives that might help provide clients with better value and increase client satisfaction. One of the appendices to the report contains an excellent bibliography of resources on the topic.
In fact, in the report, the President of the American Bar Association at the time went so far as to say that hourly billing was killing the legal profession. He suggested strongly that the whole legal profession should implement alternatives to hourly billing in order to increase client satisfaction and perception of value.
There is no reason that bookkeeping should be any different. Many bookkeeping services can be offered on a flat-fee or value billing basis. This allows clients to know how much there bill is going to be every month and many are willing to pay a higher price in order to have that kind of peace-of-mind.
Ron Baker is the self-proclaimed evangelist for ridding the accounting profession of the billable hour. According to Accounting Today, he is one of the 100 most influential people in the accounting industry.
The Professional’s Guide to Value Pricing[iii], by Ron Baker is an excellent reference on value billing in the accounting industry – which is obviously very similar to the bookkeeping industry. It’s a very long read though, and a very expensive book (around $100).
The easiest read on the subject I’ve ever come across is Ron Baker’s "Burying the Billable Hour”. Click the link to read the White Paper – you’ll be glad you did (and it’s even free!).
Final thoughts on differentiation
In addition, to be really useful, components of differentiation must be demonstrable. Many suppliers will tell you that they are the best, without telling you why. Since there is no easy way to verify statements like this, there is usually little value in making them. Independent third-party reviews, peer referrals and client testimonials provide a much higher degree of persuasive ability.
Real differentiation is conscious and intentional - you want to distance yourself from the pack in order to make it easy for your target market to find you and choose you over the competition.
Useful questions to consider in building competitive advantage through differentiation include:
· How many bookkeepers or firms are already offering the types of services that I am contemplating to the target market that I am after?
· How can I stand out from that crowd through thought leadership in my area of specialization?
· How can I stand out from that crowd through innovation in service delivery?
· Can I package my services in innovative ways that makes it easier for clients to buy from me?
- Service delivery and client satisfaction
- Pricing strategy
· Can I price my services in ways that make them more attractive to clients and more profitable for me?
· Am I already a leader in the marketplace? By whose standards?
· Can I enter into strategic partnerships or relationships that will allow me to offer more value to my clients?
Answering questions like these, and building the answers into your business plan, can help you differentiate yourself in the marketplace and help clients easily choose you over the competition. And they can also help you increase prospective client’s perception of the value you offer which makes it easier to increase your fees (notice I said "fees” rather than "hourly rates”).
So now that you understand how to select a target market, specialize to offer specific value to that target market and differentiate your firm so that you stand out from your competition, we are ready to discuss marketing and advertising.
Many people try to start advertising and marketing a product or service that is just like everyone else’s – and guess what – it doesn’t work very well. By creating something worth selling first (targeting a specific market, specialization, differentiation), you make your marketing and advertising time and money significantly more effective – because you will stand out from your competition – all you have to do is get the word out. If you get the word out about a firm that doesn’t stand out from the competition, you don’t give prospective clients any reasons to choose you.
So the most effective strategies for advertising and marketing bookkeeping services will be the topic of my article next month. Talk to you then.
[ii] The ABA Commission on Billable Hours Report (American Bar Association 2001 – 2002)