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Differentiation Strategies

How To Differentiate A Jewellery Business

How to differentiate a jewellery business is another of my trade and industry focused guides to differentiation.

This is just an introduction to the issue of differentiating a jewellery business and not definitive. It’s intended to give you ideas if you are a jeweller who is struggling to find a clear position in your market and isn’t intended to replace working with me or another strategy consultant or coach.

Jewellery Business Or Jewelry Business

Let’s first deal with the spelling issue.

I’m based in the UK so for me it’s jewellery and jewellery business.

If you’re American, it’s jewelry and jewelry business.

Don’t blame me, blame Noah Webster for causing confusion.

What Is Jewellery?

According to Wikipedia…

“Jewellery or jewelry is a form of personal adornment, such as brooches, rings, necklaces, earrings, and bracelets.”

I’d also add watches to this list of items since many watches go far beyond the functional issue of telling the time.

It may contain jewels (gemstones) or precious metals or it may be a trinket with little intrinsic value but look pretty.

Why Men Buy Jewellery?

Retail guru and author Paco Underhill (in his book, Call of the Mall) says that jewellery has bought by men for women for three big reasons:

  • Keys to the front door – Engagement, anniversary, birthday – these are public statements of affection and intention.
  • Keys to the back door – Presents for mistresses and girlfriends that create very favourable impressions but avoid commitments.
  • Keys out of the doghouse – To say sorry and to make amends for bad behaviour. Jewellery is expensive and that means making a big sacrifice to buy it, a clear sign that the man is sorry.

Why Do Women Want Jewellery?

Jewellery helps a woman to feel even more attractive and more valued and loved by her husband or partner.

It helps to differentiate her from the other women she knows (and who her partner knows).

It also helps draw attention to and emphasise particular features.

Jewellery can also have sentimental meaning. A particular piece may have a far higher sentimental value than intrinsic value because of all the memories it has.

While women have worn some kind of jewellery across all cultures and time, certain associations are due to advertising. Diamond firm De Beers have done a fantastic job of linking diamonds to engagement rings with the slogan “a diamond is forever” and the desire for everlasting love and commitment.

Now that we’ve taken a quick look at the reasons for the demand for jewellery, let’s look at the main topic.

How To Differentiate A Jewellery Business

We’ll look at the seven big questions of business success and how they can be used to differentiate a jewellery business.

What’s important is that you create a distinct definition and feel for your business that sets it apart from your competitors in a way that adds value to the customer and creates an emotional or logical reason for deciding to buy from your business.

This isn’t about being different just to be different and the ways that your jewellery business are different need to make sense in a way that reinforces rather than offsets the customer value criteria.

Your aim is to qualify as a suitable supplier and then win preference.

This means you have to balance the general industry key success factors while providing factors of difference.

It involves managing a trade-off between what many customers want and what particular customers want so that you hit the marketing bullseye.

BullsEye Marketing - A Bull Is A Probable Buy

1 – Using “Who” To Differentiate

I find “who” is a great question to start with when thinking about differentiating a business because it puts the focus on the customers.

Suitable questions are:

  • Who is going to buy the jewellery? Is the business going to specialise in helping men make the right buying decisions?
  • Who is going to wear the jewellery? A business could specialise in men’s jewellery or women’s jewellery. Perhaps there is some social/demographic factor that can be used to create a niche.
  • Who has designed or made the jewellery?
  • Who has worn the jewellery? Celebrity endorsements can create preference because of the desire to be like someone you admire. As a middle-aged British man, I’m drawn to associations with James Bond so Omega watches have an appeal.

2 – Using “What” To Differentiate

The second question refers to what and this means that the jeweller can specialise in certain types of jewellery – engagement rings or necklaces – and build a reputation as a specialist.

Or certain types of components. The obvious are the metals – gold, silver, platinum – or the gemstones – diamonds, rubies, sapphires. I remember talking to the owner of a business that only sold pearls in the Jewellery Quarter in Birmingham. This helped to set his business out as special.

A less obvious what is “what’s the story behind the jewellery?” Perhaps it’s my romantic soul but I find stories about products and businesses appealing. This can also link to differentiating by why.

3 – Using “Where” To Differentiate

Before the Internet, location used to be a key factor. Many businesses didn’t need to worry about differentiating themselves because their location in a small town meant that they were the only viable supplier.

Many towns were large enough to make one jewellery store profitable but not two.

The growth of the Internet, TV shopping channels and mail order and the increased specialisation that has enabled means that the “where” factor for differentiation has lost some of its local impact.

In larger towns, where remains an issue. There are advantages in both being well separated from competitors or being close to the competition. We all find it easier to buy when there is a small choice, and we can make direct comparisons.

Where might relate to jewellery from a particular country or region which has a unique style.

4 – The “How” Factor For Differentiating

How can refer to how the business markets its jewellery to customers. An Internet business relying on search is very different from a retail store dependent on passing traffic or a jewellery business that promotes its products on the shopping channels on TV or through mail order.

How may refer to some unique process for making the jewellery or the components. Perhaps everything is hand made and assembled.

5 – The “How Many” Factor For Differentiating

How many is all about using numbers to differentiate your business.

It may be about the stock range – more than 2,600 engagement rings, the largest selection for 200 miles.

It might be a factor in the jewellery itself – we only sell diamond jewellery with diamonds on at least one carat.

It might be about the number of items of a particular design – all our jewellery is unique, designed for you and only you. Our guarantee is that we will never create two identical pieces of jewellery.

Or it might be a small limited edition – only 25 of these necklaces will ever be made and sold.

6 – Using “Why” As A Factor Of Difference In Your Jewellery Business

It can be effective to link your business to a good cause to help differentiate the business and provide a unique reason for the customer to buy from you. It’s less obvious for a jeweller than other businesses – think charity Christmas cards – but any business can find some link.

Or perhaps the why is about why your business exists.

Someone ripped off by an immoral jewellery dealer might start a rival business and emphasise ethics and fair dealing.

7 – Using “How Much” To Create Customer Preference

The final way to differentiate yourself is to use price.

At its simplest level, we can see this as positioning along the customer value map.

If a reasonable sized town has one jewellery business doing very nicely with a mid range offering, it may attract attention from a competitor with shops in other regional towns. If it’s a well-to-do area, then a premium jewellery business might do well. Alternatively a budget jeweller might increase the overall market as price conscious customers can buy jewellery as well as other presents.

Alternatively this may be about creating customer preference by offering the lowest prices for the same pieces of jewellery. Purists may challenge whether this is a differentiation strategy and argue that it’s more about being the lowest cost supplier. My view is that low selling prices and the lowest buying prices don’t necessarily have to go together although economic viability will limit some options.

How To Differentiate A Jewellery Business

Many businesses struggle to find ways to differentiate themselves on their own, partly because the owners know their own businesses too well. They struggle to see what’s special about it.

The seven big questions shows that there are plenty of different dimensions to make your jewellery business different. At its core, differentiating a jewellery business is about looking at:

  • the business;
  • the customers – who they are and what they want and need; and
  • the competitors – what they do and what you can do that’s different.

Good luck.

in 3 – Your Strategic Positioning

Vertical Differentiation or Horizontal Differentiation?

I was reading my good friend,  Ian Brodie’s excellent blog, and he introduced me to the term “vertical differentiation” in this article,

Ian helps consultants, coaches and other professionals to get more clients, and he was saying how difficult it is for these people to be unique.

Often these businesses provide similar services to their competitors and have little opportunity to do something new and different – what Ian calls horizontal differentiation.

Vertical Differentiation – Being Better Than Your Competitors

He selects several well known names and argues that what makes them different and successful is not that they do things different, but they do things better.

This is vertical differentiation.

The firms occupy the same horizontal places in the market but clients generally rank them as above competitors.

Vertical Differentiation And The Strategy Canvas

Just to be clear, if you use a visual technique like the strategy canvas (from the Blue Ocean Strategy book) or what I call a customer value attribute map, vertical differentiation is a higher rating on the attributes considered most important to the customer)

Vertical differentiation an interesting idea but I think relying on a strategy of being seen as better is dangerous.

Claiming To Be Better Is Dangerous

First, better is such a nebulous concept and especially for services where so much of what is provided is intangible.

How can a potential client assess whether one lawyer is better than another?

Second, even if they can make an assessment, better like beauty is in the eye of the beholder. It’s difficult to influence since it comes down to personal tastes unless you introduce factors of genuine difference.

Third, if all the professional firms look the same, then different becomes better. Standing out suddenly makes the business look more attractive.

Imagine ten identical beautiful blonde girls in a room – you’d expect each to get an equal amount of attention. Now imagine one went out of the room and came back with her hair dyed brunette.

She stands out and becomes more magnetic. She’s no more beautiful than she was before, but she is different from the others and more memorable because of it.

That little difference can help focus attention and instead of being dazzled by sameness, genuine quality differences might be perceived.

The final big concern about basing a strategy around vertical differentiation and being better is that it increases competitive rivalry. Competition is focused on a few specific attributes. As one rival improves in one dimension of customer value, another is encouraged to take actions to match or improve on that same dimension.

This is likely to create a cycle that increases costs of services but, although the customer value delivered increases, the competitors are unable to capture that value because of competitive pressure on price. Businesses are trying to move away from the customer value line to create advantage rather than along the customer value line to create a different value proposition.

Better Is Worthy But It Can Be A False Perception Of Reality

I believe being better is very worthy (we should all aim to be the best we can be) but it can lead you into a false reality.

We all tend to believe that we are better than we are.

I remember reading some research on professionals who were asked to rank their skills and knowledge compared to their peers. Something like 90% rated their skills as better than average!

How does that work?

It obviously can’t. Average means that 50% are above and 50% are below (strictly speaking that would be the median).

It does point to the problem that people generally think they are better than they are. In marketing this means relying on false hope which isn’t a strategy for success.

Even Clients Will Give You A Biased Answer

I bet you think that you can ask your clients to get an unbiased opinion but the question is rigged.

“Do you think your professional firm is better or worse than average?”

It sounds like a fair question but what’s it really asking?

“Did you make a wise, intelligent decision and use a professional firm that is better than average  or are you an idiot and have you continued to use a professional firm that is below average?”

Yes, you can expect to hear that clients made a wise decision even if they’d never think of making a referral.

If you think you’re better because you’re biased and your clients think you’re better because they are biased too, then vertical differentiation can lead to complacency and you finish up with the stalemate that you see in many professional services.

Differentiating by trying to be better sounds like a cop-out to me unless customers are rigid about their buying criteria and what they expect to experience.

Advantage – ABCDEF

I commented on Ian’s blog with a little acronym I’ve used for years.

ABCD – your Advantage can be Better, Cheaper or Different.

After I’d written it, I thought some more and wish I’d extended it to ABCDEF – your Advantage can be Better, Cheaper, Different, Easier or Faster.

The easier and faster helps to give a couple more dimensions to think about how your business impacts on the customer’s experience. Depending on your definitions, easier and faster could have come out of either the better or different categories.

I’d like to know what you think.

Is there merit in following a vertical differentiation strategy and being better than competitors rather than having horizontal differentiation?

And if it is, how can you communicate that you are better?

in 3 – Your Strategic Positioning

Differentiation & Business Start-Ups

Is differentiation and how you will attract and convert customers a vital issue that needs your attention while you are thinking about starting a business or is it something that you can afford to leave until your business is more established?

The Role Of Differentiation In Business Start Up Planning

This is one of those irritating questions where the answer is “it depends”.

Differentiation is about establishing positive reasons for customer preference in the buying decision.

In my article, Will Your New Business Start-Up Succeed? I looked at the three big risks that every business must face and conquer.

Differentiation is a key issue in the second risk – can your business survive the competition?

If You Don’t Have Any Competitors?

If you’re selling into a very clear need or want and you are in the very lucky position that you don’t have any competitive rivalry or threats from close substitutes, then differentiation isn’t a core issue that needs to be tackled in your initial business start-up planning.

You can focus more on the demand risk (and whether there is enough demand for the business to be viable because there might be a good reason why this opportunity has been ignored) and the capability risk.

However, your success might attract competitors and at that stage differentiation and defending your market share become critical issues.

If You Do Have Competitors

If you are competing against competitors then there’s only one occasion when differentiation isn’t a critical issue for your start-up business planning. That’s if demand is much larger than supply and you confidently expect that situation to continue for the foreseeable future.

Few of us are in that situation.

Usually we have spare capacity and so do our competitors. Winning a customer increases our profits and losing an opportunity reduces their profits. If competitive rivalry is intense, then price wars can easily develop unless customers’ bargaining power is reduced by forcing them to make a choice between products and services that aren’t commodities.

If you’ve got competitors, you need to be thinking about target marketing and about what it takes to win business rather than just get in the game.

That means that you’ve got to have a very clear differentiation strategy from the very beginning.

And as you’re clear, you can build it in to everything your business does, inside and outside its boundaries. Your differentiation strategy has a big impact on what you say in your marketing and in how you structure and manage your business.

in 3 – Your Strategic Positioning, Business Start-Ups

It’s very nice to build a business that is different and distinctive.

It gives you a feeling of superiority because you’ve created something that you can be really proud of.

But we can’t escape from the basic idea of differentiation…

Differentiation Must Be Profitable Differentiation

You differentiate your business because you believe you will make more profit than you will if you either get caught in the commodity trap or stay as a commodity and any business you win is by offering a low price.

Not all differentiation is profitable. You need to make sure you avoid the differentiation traps.

The 5 Differentiation Traps

First you can be different in ways that your customers don’t value – you don’t care whether I’m the tallest or shortest business coach in the world because my height is not one of your purchase criteria.

If you want your differentiation to be profitable, you must be different in ways that customers appreciate. I call these factors your order winners.

Second you can be genuinely different in ways that matter to your customers but you can hide your light under a bushel.

Differentiation will only create profit if the customers know about it and understand why your factors of difference create value for them through better results or a better experience.

A unique feature about your product or service only becomes a differentiating factor if customers understand the importance.

Third, you can fail the message to market test. You can have a great, well differentiated offer which is highly valued by one customer segment but if you send it to the wrong market, it will miss its target.

Different customers want different things.

Just think about clothes shops. What you want when buying clothes is very different from what your partner wants, what your teenage children want and what your parents want.

The choice of what you do has to be closely connected to whom you do it for.

To make matters more complicated, the same customer can want different things at different times.

The choice of hotels and restaurants may be very different for a business owner or manager when they are away on business than when they are buying for their family and friends.

Fourth, a classic differentiation trap is to increase your costs by more than the customer value you generate.

You do your market research and you find out that customers would love it if your product could have a longer battery life (think of a long-lasting smartphone for example). You research the market and you find that just like your products, your competitors products also need to be recharged every day.

After researching the product possibilities, you find that you can get a battery that will last 5 days. It sounds like a competitive advantage which will differentiate your product so you’re excited.

You buy the batteries, which cost £30 extra. You incorporate them into the product and you do a big marketing campaign only to find that no one buys.

The extra battery life will cost the consumer an extra £120 including sales taxes and profit for you and the distribution chain but the consumers don’t value it that much. The short battery life is an inconvenience but it’s not a critical inconvenience – it’s a “nice to have” rather than a “must have” and at an extra £120 price in the stores, it turns into a “can do without”.

The usual way to think about differentiation is to think about the price premium it can justify and higher price is certainly one way that differentiation can deliver profit.

The concept of the customer value maps makes it clear that providing extra value justifies a price increase if you stay on the fair value for money line. It can also create an irresistible offer if you move away and offer more value for money although it can trigger a price war.

The fifth way that differentiation can be a profit trap is to make promises that you can’t deliver. This is the distinction between shallow and deep differentiation.

Making big promises may convert leads into orders but failing to meet the promises won’t create a big group of customers eager to repeat the experience and buy again and again. I think the airline industry is the exception (Airlines suck).

This creates a bad experience and with social media, people love sharing their horror stories.

How To Have Profitable Differentiation

If you want profitable differentiation, you need to avoid the 5 differentiation traps

  1. Differentiating on factors the customers don’t value. Instead, differentiate on the factors your target customers value highly.
  2. Having a genuine difference and not telling the customers. Be proud of your valuable differences and make sure no customer who wants what you sell, misses out through ineffective marketing.
  3. Marketing a differentiated offer to the wrong customers. Get your marketing bullseye clear in your mind.
  4. Differentiation that costs more than it earns. Make sure you are clear o the difference between nice-to-have factors and those customers really want.
  5. Not delivering consistently on the differentiation promise. Repeat business is a key to creating a profitable business and you’ll only attract customers back if they believe they have received value for money.
in 3 – Your Strategic Positioning, Business Problems And Mistakes

Too Scared To Differentiate Your Business?

Let me be blunt. If you haven’t differentiated your business, is it because you are too scared to be different?

In a survey people said that there were more scared of public speaking than dying!

That’s a bit extreme but some people don’t want to be the centre of attention, all eyes on them, watching what they do and listening to what they say.

Or what about the nightmare of being invited to a fancy dress party, getting dressed up in your Superman costume and getting to the party and finding out that your hosts changed their minds and it has become a black tie do? Just thinking about it sends shudders down my spine.

It can be like that when you think about differentiating your business.

The entire point is that you are standing out, different… even exposed.

The big name gurus say that you must be differentiated to earn big profits.

You see the problems of not being differentiated in your own purchases each week. It is difficult to make a buying decision when all your options seem to be virtually the same along with the worry that you might make an arbitrary choice and it turns out badly.

Like me, you probably get frustrated when you can find plenty of people selling what you don’t want and no one selling what you do.

You may also see the problems of not being differentiated in your own business.

The symptoms are pretty common:

  • You find it difficult to attract leads.
  • Not enough of the leads you get convert into customers.
  • You have far too many conversations about price and really feel the pressure to cut your prices.
  • You find it difficult to say what’s special about your business.
  • Your customers show little loyalty and are tempted away as soon as a better price is offered to them.
  • Your best staff leave you and go and work for your competitors.

But there’s a feeling of safety about being one of the crowd.

You have a chance – even if it’s a small chance – of getting an order from anyone who enters the market because you haven’t made the tough decisions of ruling anyone out.

There’s a feeling of safety of doing what everyone else is doing.

  • Your competitors have a website so you have a website.
  • Your competitors advertise in Yellow Pages so you advertise in Yellow Pages.
  • Your competitors advertise in the local newspapers so you advertise in the local newspapers.
  • Your competitors add the special widget to their product so you add the special widget to your product.

There’s a glimmer of sense and a lot of madness in this approach.

It is sensible to look at your competitors and see what seems to be working well and to work around the theme.

If a lot of business is done through the Internet, then you should probably have a website if you can make it special.

But the world doesn’t need a lot of clones in any market.

We don’t need Microsoft 2 because we’ve got Microsoft.

Or Google 2 because we’ve got Google.

Or Apple 2 because we’ve got Apple.

Or Starbucks 2 because we’ve got Starbucks.

Or Aston Martin 2 because we’ve got Aston Martin.

The world doesn’t even want another Paul Simister and there’s not much of me to go around. Crazy I know but that’s life.

But we do want variations on a theme.

A PC operating system that doesn’t crash so often or slow the processor down.

A place to have afternoon tea with the emphasis on the quality of the tea.

A fancy car that James Bond will drive and I can afford to buy without cashing in my life savings and selling the house.

Clone businesses survive because the cloned business is too busy or too expensive (mmm supply, demand and prices are linked – that’s interesting).

But what happens when the market dips down, like in these tough times, the business that is being copied still attracts plenty of clients because they are still first choice. The copies lose business and being near the bottom in a declining market is a very vulnerable place to be.

Perhaps you shouldn’t be too scared to differentiate but too scared not to differentiate.

in 3 – Your Strategic Positioning, Business Problems And Mistakes

How To Differentiate Your Accountancy Practice

I’ve been interested in the big question of “how to differentiate an accountancy practice” since 1981.(This article was first posted on my Differentiate Your Business blog in July 2011 but I believe it is still very relevant.)

That was when I was in the last year at University studying Economics and Accounting and I started looking for a job as a Chartered Accountant trainee.

At that time the profession was dominated by the Big Eight and Price Waterhouse and Coopers & Lybrand were head-to-head competitors, KPMG were known as Peat Marwick Mitchell, Arthur Andersen were seen as the brash newcomers and Spicer & Pegler (a name I always liked) were just outside the big eight.

I must admit the big ones did seem to be pretty much the same although there were two common preferences amongst my classmates – Peats (because they were the biggest) and Price Waterhouse (because they were the poshest).

Being different, I turned down job offers from both and was one of four to join Neville Russell (now Mazars) in Birmingham in 1981, mainly because they seemed less stuffy because they had a young, female staff partner and because they offered plenty of small business accounts work which for me meant variety and contact with entrepreneurs while still offering the full training support.

I left Neville Russell and the accountancy profession in 1985 with ACA after my name and since then, I’ve been looking at the accounting market with interest as an outsider. At one stage in my consulting and coaching career (since 1995) I thought I’d take advantage of the qualification and branded myself as a chartered accountant, even though I didn’t do accounts and tax because it added credibility to my strategy and financial management services. All it did was cause a lot of confusion and I quickly changed.

“Accountancy Practices Can’t Differentiate Themselves – Accountancy Is A Commodity Service”

If that’s how you think, then you’re right.

You won’t be able to differentiate yourself as an accountant because you won’t make the decisions needed to create a clear position in the market.

There’s no argument that the tangible output of an accountancy assignment – in terms of the set of statutory annual accounts and the various tax returns – are going to look remarkably similar because the formats are prescribed and many of the details will be the same.

The numbers may be very different.

It’s like the old joke of an employer interviewing candidates for the job of company accountant.

To test their skills and professional opinions, he devised an exercise where each accountant had to go away and calculate the profit for the period.

The first went away and came back with the answer, “the profit is £567,387.” The entrepreneur looked at the very detailed calculations and the very conservative assumptions that supported the profit figure and made certain judgements about the candidate.

The second came back quickly and said “profit is around £600k” and presented the entrepreneur with a “back of the fag-packet” calculation with some broad assumptions. This time, the judgement of the entrepreneur was very different.

The third took the bit of paper with the exercise on it and before he stood up, he leant forward and asked “what profit do you want it to be?”

The Big Impact An Accountant Can Have On A Business

You and I know that the impact of one accountant compared to another on a business is much than some calculations,decisions on accounting policies, assumptions and judgements.

The underlying numbers can be affected even more by the advice given by the accountant to the business owner, either directly or indirectly through referrals.

The impact of a good accountant compared to a weaker accountant can be seen in the profit, cash flow and tax paid by the business and in the money that finds its way to the business owner’s personal bank account.

The Professional Accountancy Bodies Are A Commoditising Force On The Profession

It’s inevitable but the role of the professional bodies like the Institute of Chartered Accountants In England & Wales is to keep standards high and that narrows the opportunities for differentiation.

You have to do certain things in a certain way because it’s required. And accountants who don’t are disciplined, fined and even expelled from membership.

This is a grievance for me personally because I have a practising certificate from the ICAEW because I “give financial advice” even though I don’t provide any of the standard services Chartered Accountants do.

The Big Marketing Advantages Accountants Have Which Hinders Differentiation

Accountants have two big advantages which help them to attract clients which other professional service providers don’t have.

  1. The output of the accountancy service in terms of accounts and tax computations are required by law and they are too complicated and scary for the vast majority of business owners to do on their own.
  2. The work has to be done every month (PAYE returns), every quarter (VAT) or every year (accounts and tax assessments).

Effectively accountancy is a compulsory purchase and it’s one that business owners have to make each year.

Just like banks, accountants keep clients, even if they are not particularly happy, because of customer inertia. It’s seen as too much trouble to change.

So if all accountants appear to look virtually the same, and the professional bodies keep standards high, the business owner may as well pick one at random – often based on convenience – and if the fees seem reasonable based on the effort of talking to more accounting firms, decide to become a client.

Of course the client doesn’t look at the decision the right way because he or she doesn’t factor in the inertia issue.

The difference between the £1,000 free from accountant A or £1,300 fee from accountant B is only £300 but over ten years, it becomes a £3,000 difference assuming fees don’t change. A 10% increase in fees per year increases the difference significantly.

The Downside Of Client Inertia

If a client thinks that “all accountants are the same” or more negatively, “all accountants are as bad as each other” then there is little incentive to change.

Clients can even test the water by looking in Yellow Pages or taking a look at competing firms websites. Unfortunately what they are likely to see is a lot of the same phrases being used time after time – see Marketing Bingo For Accountants

It’s a case of “better the devil you know”.

And that makes it difficult for an accountant to attract clients which are already established businesses unless the client is extremely unhappy with the incumbent, has a new, special requirement which the existing accountant can’t handle or is being pushed hard by a third party to move to another (often better known) firm of accountants.

So many of the new clients an accountancy firm are start-up businesses who have very little money, are unsure what an accountant does, are unable to tell a good accountant from a bad one and are daunted by the big fees for uncertain value.

And the accountant is unsure of the business start-up. Even if the talk is big, will it succeed and grow into a substantial business which justifies an investment of time and attention?

Differentiating Your Accountancy Practice – Creating A Positive Reason For Choosing You As The Accountant

In contrast, if your accountancy practice is differentiated from competitors, you provide a positive reason for some clients to choose you rather than your competitors, both for start-ups and for established businesses.

Even better, the established businesses may be relatively happy with the service they get from their existing accountants but your differentiated offer of services is strong enough to motivate them to change and to pay a premium price to work with you.

Attracting Some Means Repelling Others – Nobody Buys OK

There are only four levels:

  • You can be worse than your competitors – and obviously you don’t want that.
  • You can be the same as your competitors – this is the big problem because many accountants are perceived as the same.
  • You can be better than your competitors – it’s an easy claim to make but much more difficult to prove. You can taste all the different types of tinned tomato soup and eventually decide that Heinz is best but you can’t do it with accountants. You can get testimonials to say something along the lines of “XYZ accountants are much better than our previous accountants and we wish we’d changed years ago” but it’s a very limited comparison.
  • You can be different from your competitors – and communicate those differences to your target market.

But being different is a bit like being a magnet. You attract some clients but repel others.

One of my popular sayings is that “nobody buys OK”. People don’t buy an average product if something better is available in some dimension of customer value.

Accountancy services may be the exception that proves the rule. Many small business owners do buy OK and put up with it year after year because they can’t see that anything better is around.

How To Differentiate Your Accountancy Practice

I use the seven big questions of business success as the basis for thinking about how to differentiate one business from it’s competitors.

These questions are who, what, where, when, how, why and how many and are designed to move attention away from the profit killing question “how much do you charge?”

Can Accountants Differentiate By Who?

The who dimension of differentiation can be applied to:

  • Who are your clients? Are they different or special in any way?
  • Who are your employees? Are they special in any way?
  • Who are your suppliers? Is a supplier unique to you in the local area?
  • Who are you and your fellow partners? Are you or can you be a celebrity in some way so that clients feel privileged to have you as their accountants?

It has always struck me that a very easy way for accountants to differentiate their practices is by type of client.

“We provide accounting and tax advice to small manufacturing businesses…” or

“We provide accounting and tax advice to subcontractors…” or

“We provide accounting and tax advice to privately owned retailers…”

I see this kind of differentiation by who regularly in the coaching market and it works very well.

People like dealing with specialists because it makes them feel special. It’s a hit directly in the marketing bullseye.

Of course specialising in one type of client means ignoring or at least discouraging other types of clients.

It significantly weakens your positioning if you cop out and say “we provide accounting and tax advice for independent retailers but if you’re a service business or manufacturer we’d be happy to have you as a client.”

Don’t laugh… it’s the type of think that I’ve seen and it becomes anti-marketing i.e. it actually puts off your target market.

While I think about differentiating by who, I should mention the accounting umbrella organisations (I don’t think I’m supposed to call them networks) like AVN and PROBIZ.

In my opinion they are both positive and negative forces for differentiation. Where membership has geographical restrictions, then being the PROBIZ representative can be helpful because you are the only one. I live close to the West Bromwich Albion football ground which is covered with PROBIZ Tax signs.

But across the membership it is another commoditising force. One PROBIZ accountancy practice offers same products and services as another.

How Accountants Can Differentiate By What

What is the answer to the basic question asked by clients of “what do you get for your money?”

The core services are accounts preparation, tax preparation and tax advice but many other services can be included.

Some accountancy practices have differentiated so much by what that they’ve stopped being general practice accountants and instead are tax specialists or insolvency practitioners which can then create their own sub-specialisms.

Others have taken focus from the differentiation by who and developed specialist services for their niche markets. If you concentrate on retail businesses, you can see how you can develop very focused services based on your unique insights into the problems and issues of the clients.

Claiming to be a specialist means that you’re very knowledgeable about the subject.

Not compared to your clients who know little but to your competitors.

This means that you can make a big mistake in claiming to be a specialist in too many things unless you have the scale of a PWC or KPMG and you really do have a narrow specialist (or department) in just about everything.

If you’re a small firm and have few resources, then the broader your coverage, the shallower will be the perception of your expertise. It’s the opposite of a recent PhD who knows all there is about a tiny field.

Differentiating Your Accountancy Practice by When

I’m not sure there is much scope in this dimension of differentiation for accountants since it refers to when the service is available (think all night chemists) or how fast the service can start or finish.

Having said that I’m shocked by accountancy practices who offer a management accounting service or part time FD service and think it’s OK to get the monthly accounts out by the end of the fourth week of the month. Experienced industry based accountants know that a lot has changed by then and the only value of old numbers is for trend purposes.

Differentiating Your Accountancy Firm By How

To be honest for basic compliance work, clients don’t care how you produce their statutory accounts and tax returns.

The effort that goes into providing the service is invisible to them and that is one of the reasons why they complain about high fees. While having the accountants in on site can be irritating, at least business owners get to see the hours being put in and even want a reasonable number of questions.

How can be more interesting with specialist services, even if the client doesn’t really understand the process.

Think tax schemes. The end result may be similar but one tax saving scheme may fit much better with the business owner than another.

Or a service like SystemBuilder from AVN members which is software which helps you to document and formalise systems following the E Myth idea. I haven’t seen SystemBuilder in practice and have no idea about the numbers but something that has been used more than 1,200 times would be much more appealing to me as a client than a proprietary system for one accountancy practice which has been used three times.

The other “how” which is important to accountancy practices and the clients is how you charge, since Ron Baker’s value pricing ideas have been so popular. For the client fixed fees gives certainty and for the accountancy practices who use it, fees often increase and cash flow improves since you can introduce monthly direct debits during the year rather than waiting for payment after the service is provided.

Differentiating By Where Is The Classic Way For Many Rural Accountants

Once you get out of the cities and big towns, the choice of accountants is often easy because there is only one in the local area.

Of course differentiation become an issue if another one moves into the territory – perhaps a breakaway by one or more partners of the existing firm.

One of the nice things about having competition is that it gives you something to be compared against and that can help you to look good.

The human brain finds decisions easiest to make if there is a choice – not too big a choice – but it’s much easier to decide if something is good or bad based on whether it is better or worse than something similar.

Differentiating By Why You Became An Accountant

The why differentiation dimension is an interesting one because people are attracted to people with passion or a cause.

My story about why I’m a small business advisor and passionate about helping small business owners make more money relates back to one of my first accounting assignments and a small transport company which didn’t make it through the early eighties recession. I really liked the owner and he was kind to me as a raw novice and i wish I knew a small fraction of what I know now because it could have made a big difference.

Perhaps you have an interesting story which shows that accountancy is not just a way to earn a living but something that you care passionately about.

Differentiating By How Many

Our focus here is to focus on the value element of the value for money to provide a reason for engaging your accounting firm instead of a competitors.

It’s the same idea as a bottomless cup of coffee or eat as much as you want at your favourite Chinese restaurant.

I’ve already mentioned fixed fee pricing as part of the “how” differentiation but the call our accounting, finance and tax helpline as many times as you want in the year as part of our service can provide important reassurance to some clients.

Small businesses are all to wary about the money clock running up a big bill when they talk to professional advisers and they may have been stung by a lawyer, consultant or previous accountant. That creates a problem. It stops many asking for advice they need and it stops you deepening your relationship with the client and referral opportunities.

There Are Many Different Ways To Differentiate An Accountancy Practice

I realise this is a long article but I have really just scratched the surface of what can be done with the 7 big questions approach. It’s also important to realise that what you can do to differentiate your business depends on what competitors do at the moment, what they might want in the future and what clients and potential clients want.

Some clients will just want a cheap and cheerful service. I’m like that with banks.

Others want and need much more and provided there is genuine value in what you do (i.e. the benefits to the client far exceed the fees), they will be willing to pay.

As you think about how you can differentiate your accounting firm, please realise that differentiation can be shallow or deep.

Shallow differentiation is jazzing up your marketing communications a bit to make your firm sound special or unique.

Deep differentiation is taking the differentiation concept and making sure that it is reflected in everything you and your staff do consistently and reliably.

Advice On Differentiating Your Accountancy Practice

If you’re based in the UK and you have a small accountancy practice or you’re planning to start one, I’d love to help you to differentiate your business. Give me a call on 0121 554 4057.

It can be difficult to recognise what makes your business special because you take so much for granted and you may miss the WOW factor.

What Makes An Accountancy Firm Special To You?

It would be great if you could share your thoughts on what differentiates one accountant from another by leaving a comment.

If you’ve already differentiated your accountancy firm by one or more of the dimensions I’ve gone through, I’m happy for you to do a bit of self promotion by sharing your niche, speciality, story etc. Just don’t try to keyword spam the comments because I won’t publish.

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How Important Is Your Differentiation?

I believe every business needs to have some way to differentiate itself from competitors who are equally eager to snare business from customers.

Your task is to communicate the factors that differentiate your business and its products quickly and effectively so your customers understand and appreciate why they should buy from you.

First list down all your features about your product or service.

Second, link them to benefits for your customers. You need to translate your features into things that your customers want. It can be useful to use the FAB model – Features, Advantages & Benefits.

For example.

This PC has the super XYZ chip (feature) and is the fastest PC on the market (advantage) and tests show it will save the average Windows user 20 minutes per day (benefit).

Super techie people will know all about the XYZ chip and go looking for the feature when they want to buy, others will want the advantage (the fastest) whilst others will be eager to save so much time – 20 minutes per day is nearly a day each month.

Third, I want you to plot your features/advantages/benefit combinations on a 2 x 2 matrix. One side is about the uniqueness of the feature/benefit and the other side is the importance to the customer. [The brave can go one step further and ask their current and prospective customers to assess the features/benefits.]

You’re got four boxes to consider:

Unique & Important

Unique & Not Important

Standard & Important

Standard & Not Important

This can be a humbling experience as you realise that many of the reasons for buying that you promote in your marketing are generic benefits of your product or service which virtually every provider promises.

Even more alarming, you may realise that your claims for uniqueness are not important to the customer.

We can be so eager to find something unique that we don’t think whether it matters to the customer. We know that we need to be perceived as different.

Because I’m 6 foot 4 inches tall, I genuinely stand out in a crowd. It’s a silly example because my height has no bearing on my ability as a strategic business coach. However,  as a supermarket shelf stacker, it’s got value but a coaching client is more interested in my brain and my ability to communicate my ideas.

Even worse, we can be wasting our time talking about things that a customer takes for granted. I am staggered at the number of accountants who promote a “professional service”. It’s a disgrace if there are accountants don’t offer a professional service. This is what I call an order qualifier and is a minimum standard that is normally assumed unless there is evidence to the contrary.

The gold is in that first category – genuinely unique (or at least rare) and of significant value to customers. These are your order winners.

For me, this is my positioning as a coach who specialises in helping service and commodity product businesses to differentiate themselves.

It may be the accountant who specialises in green technology businesses and who has plenty of contacts with investors who want to provide funds for environmentally friendly start-ups.

It is these special and unique factors which really resonate with potential customers and need to be the focus for your marketing message.

You then supplement and extend your marketing messages with the standard items that are important to customers. Your customer may be specifically looking for solutions or assurance on these factors. Not mentioning them could mean you miss out, even though you know they are standard.

You should only drop to the unique but unimportant level if you don’t have any unique and important factors. They may lack impact, but they can help make you stand out.

And any positive reason to be memorable is better than nothing.

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Does Your Marketing Dazzle Like A Zebra?

If your marketing dazzles like a zebra, then potentially you’ve got a big problem.

Let me explain.

On its own, a zebra is a beautiful creature unlike anything else. You can think of it as a stripy horse but smaller.

I took this photo on a safari holiday in Botswana many years ago and I think it makes the point well.

Just like your marketing, a zebra looks good on its own.

But zebras normally hang around in groups or small herds. In fact the collective name for a zebra is a “dazzle” for one very good reason.

When in a group, it’s difficult to see where one zebra ends and another begins.

In fact, it is a challenge to even count up how many zebras are in the photo because of the angles and the way the stripes confuse the eyes.

This trick works very well for the zebras because it helps to protect them from predators like lions. Apart from a powerful kick, the zebra doesn’t have any defence but if a lion can’t single out one animal from the dazzle, it won’t attack.

Not standing out from the crowd is good for zebras but it’s a killer for your business.

Just like zebras tend to congregate together, your customers are looking at your business along with your competitors.

It’s the way old Yellow Pages always worked by bring you and your competitors together and forcing a difficult selection decision. It’s the same with the Internet.

There’s another problem too.

The on-tap power of the Internet to give your customers access to the information they want, when they want it, means traditional outreach marketing – which lets your business be the equivalent of the single zebra standing on its own – is less effective. Potential customers see little value wasting time on things that interrupt them when they are not relevant and when they can go to Google and find everything when they want it.

This puts the emphasis on your business to be different, to look different, and to feel different in some way that matters to the customer.

Or your customer will decide that you and your competitors are much the same.

Which gives you a problem.

Because your customer will decide that the only difference that matters is price and the lowest price wins the customer’s preference.

That’s bad for you, bad for your profit margins and bad for the customer who may actually have special needs which aren’t being catered for – see Is Your Marketing Hitting The Bullseye?

How Your Marketing Becomes Zebra Marketing

It is very easy to fall into the zebra marketing trap.

You look at how your more successful competitors are marketing and you borrow phrases and ideas which you think will appeal to your customers.

In fact, you’re probably right to do so.

There will be some things that really matter and you should cover them in your marketing – see key success factors.

But you don’t want to find yourself playing marketing bingo where a customer will look at five competitors and see the same “you must buy from me” reasons from each of them.

Stop Being A Normal Zebra

You need to find a way to make your marketing stand out. If Seth Godin can have a Purple Cow, I can have  Pink Zebra.

Your marketing needs to emphasise your unique selling point or your key factors of difference if you have more than one. It’s much better that these differences are genuine and not a case of “jazzing up your marketing to look different” when the underlying product or service is the same – see You Want Deep Not Shallow Differentiation. This isn’t a case where you want to “razzle dazzle them” as Billy Flynn in the musical, Chicago would try.

You need to give your business a chance to attract attention and to create preference with buyers. It’s true that not everyone wants a pink zebra but some will if you make sure your differences are important to your target group of customers – see How Important Is Your Difference?

What If You’re Guilty Of Giraffe Marketing?

Did you notice the giraffe in the photograph of the zebras?

You don’t have any difficulty telling a giraffe and a zebra apart – a zebra is like a horse with black and white stripes, a giraffe is a creamy yellow with brown spots… oh yes and it has a very long neck and very long legs.

A giraffe shouldn’t have any trouble standing out from the crowd of zebras.

But this one does.

Take another look. It seems to be hiding, putting itself in the background and making itself look small.

That can happen with a business and its marketing too.

You can have genuine differences that existing customers recognise and value. They can be the reasons why repeat customers keep coming back to buy again and again (what I call order winners).

But what if your marketing doesn’t recognise these vital factors and explain them to the other people you want as customers?

What if you don’t recognise what it is that does make your business unique and special?

“It can’t happen” you might be thinking.

But it does.

We grow used to things and accept them as normal.

It’s just the way things are.

So you hide rather than shout about the things that will make your business stand out from the crowd.

It’s an important reason why it is so useful to work with someone from the outside who looks at things with fresh eyes and can be amazed by what you really do for your customers and how they benefit.

Just like you want your customers to be.

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Differentiation Strategy

If you are going to implement a differentiation strategy in your business in a way that is valuable to your target market, you need to focus on:

  • What you can do;
  • What your target customers want; and
  • What competitors offer

I have a ten step, four stage differentiation strategy process to help you to create the deep strategic differentiation which leads to success.

Beware of zebra marketing, it looks good on its own but is too similar to competitors.

My Differentiation Strategy Process

Stage 1 – Your Strategic Snapshot

The first step is to do a quick but comprehensive review of your business against the five pathways to profit to highlight key issues which need to be focused on and which issues don’t require detailed assessment.

Stage 2 – Your Differentiation Analysis

Steps 2 to 6 involves taking a detailed look at your business, your customers and your competitors and then thinking about how things might change in the future.

Stage 3 – Your Differentiation Options & Strategy

Steps 7 and 8 involve clarifying your potential differentiation options and deciding which to choose. Read about order winners and qualifiers.

Stage 4 – Communicating Your Differentiation Strategy

Steps 9 and 10 involve communicating your new differentiation strategy to your staff and to the market. Your staff need to understand the new priorities while your marketing, from your USP to your detailed copy and sales scripts need to emphasise these key factors of difference.

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Is Your Differentiation Shallow Or Deep?

For me, differentiation is about creating customer preference by having a clear message about what you do and for whom and what you don’t.

But this brings up an important issue.

Your differentiation can be shallow or deep.

What do I mean by that?

Well shallow differentiation is based on having a marketing message which is distinct and differentiated from your competitors and valued by your customers.

Deep differentiation goes further. It also has a distinct and differentiated marketing message but the differences between you and your competitors ripple through everything your business does so that the business delivers a unique customer experience.

Shallow differentiation has a clear promise, deep differentiation consistently delivers on that promise.

The difference is critical to your long term success since a promise kept creates satisfied customers who are eager to buy again. A broken promise leads to disappointment and a need to keep finding new customers.

It comes back to how you look at differentiation.

Shallow differentiation comes from seeing it as a marketing and sales issue – the responsibility of the Sales & Marketing Director or the Chief Marketing Officer and their staff. It’s a criticism I have of the USP concept created by Rosser Reeves.

Deep differentiation comes from seeing it as a general management issue where the responsibility belongs to business owner, the chief executive officer, the senior management team and everyone else in the business who has a responsibility to deliver on the promises made to customers.

In shallow differentiation you tell your customers.

In deep differentiation you tell your customers and your employees.

I shudder with horror when I read some blogs and see differentiation as one small topic in a list of marketing tactics.

How you differentiate your business is the key strategic decision in your business.

It’s not something to do quickly and think “I’ve done that. I can now cross it off my to do list and move on.”

Shallow differentiation can require some difficult decisions. For example, it’s often difficult to narrow your focus on a particular customer niche or specialisation since it means saying “no” to many opportunities.

Deep differentiation requires hard work. Yes that four-letter word you should never mention because it puts some people off.

But that’s good.

Differentiation is the source of competitive advantage which has the potential to lead to long term improved profitability.

But the key phase is “sustainable competitive advantage.”

The easier it is to copy, the sooner you are back in the undifferentiated world of commodity products and services.

Shallow differentiation is easy to copy. At its heart, it is just a marketing promise so it’s easy to see and easy to do.

Deep differentiation is hard to copy. It’s embedded in the activities, the routines, the skills and the culture of the business. The impact of deep differentiation is easy to see but it’s hard for a competitor to diagnose and even harder to copy. You only get deep differentiation if you go through a differentiation process.

Back to my original question…

Is your differentiation shallow or deep?

If on reflection you think it’s shallow, then you’ve got more work to do to make sure that the essence comes through in the business activities. If you don’t, then any differentiation advantage you have will be short-lived because your business is based on foundations of sand.

What do you think about the concept of shallow or deep differentiation?

in 3 – Your Strategic Positioning