Achieving competitive differentiation — making your practice stand out among competitive practices — requires that you uniquely position your practice to meet the needs of a narrowly defined segment of the market. Differentiation is not about being “better” in the segment you choose, but rather about being different, says Dan Richards, CEO of Client Insights in Toronto.
Advisors often mistakenly believe they can achieve competitive differentiation by selecting a niche segment, such as business owners, Richards says. But these advisors would have to “get in line” because there are many other advisors targeting the same segment. It is difficult to achieve competitive differentiation unless you can find some sub-segment of business owners who have unique, unaddressed needs.
“To really excel, you would have to narrow your focus on the clients you choose to serve,” Richards says. “The narrower your focus, the more effective you will be.”
For example, you might choose to target divorced women with minor children, which is narrower than all divorced women. He cautions, however, that you should not “narrow your focus too far or you would risk losing critical mass.” The target group of clients must be sufficiently large to grow your practice.
To achieve competitive differentiation you must be able to provide a service to your target segment that is unique to their needs. And your clients must appreciate what you bring to the table. “If you can’t add value,” Richards says, “then you’ve got a problem.”
Here are some considerations for achieving competitive differentiation:
> Know your operating environment
You must be familiar with the environment in which you are operating, including the products and services your peers provide and the segments they serve. This information will provide guidance in determining the segment in which you can competitively differentiate yourself — that is, one in which you can use unique strategies to meet these potential clients’ under-served needs.
> Narrow your focus
You will have to make choices about the segment you want to target, Richards says. Review your client base to determine the type of clients you enjoy working with, or those who have unique needs that are not met by your peers.
Says Richards: “You can’t achieve competitive differentiation without having the discipline to narrow your focus.”
> Tailor solutions
With a narrow group to focus on, you must develop services that are unique to their specific needs, Richards says. What you offer must be different from what clients can get from other advisors, putting you in a unique, differentiated position.
For example, if you are dealing with engineers, you might decide to narrowly focus on engineers in a particular industry sector who work both at home and overseas in industries that are cyclical in nature. These clients’ needs would be different from those of engineers who work for a single employer in the same location for many years.
Whichever segment you choose, you must be able to demonstrate that you can add value, says Richards. You will become a specialist, which puts you in a differentiated position.
> Communicate your value
Once you have identified a difference in your practice, Richards says, communicating it is not difficult. You can use the various communications channels you already use to spread the word that you are a “specialist” serving a particular target group.
Leveraging your difference will make your message stand out in the clutter of undifferentiated messages from other advisors.
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