by Tony Vidler
For many professional services firms delivering value from actively lifting service levels is a means of differentiation, while also creating maximum value for the practice. Improving profitability through service differentiation is good for the practice of course, however it is not a sustainable differentiator in itself which then threatens future profitability.
The typical practice which does things the same way as the majority of their competitors, and with the service level also being essentially similar to competitors, has clients who are fundamentally satisfied but generally the perception of service is relatively low. “Relatively” is the key word….because that service level becomes the lowest common professional denominator. It is just typical, and therefore is just expected. The result is that average service is actually low service in when it comes to differentiating and delivering what is perceived as great value by clients. And what was once seen as a high service level by clients often becomes perceived as average service reasonably quickly.
The maximum potential value zone for a services firm though is elevated service levels over and above the competitors as well as doing different things in different ways to your competitors.
If a firms’ strategy is to compete on service standards only, then the standard must be exceptionally high in order to break away from the mainstream and differentiate and to be truly valued as exceptional. If the firm cannot differentiate in its service offering, but does maintain high service levels and delivers what is “expected” across the indistry better than its competitors, it is still a good business of course. It is just not hitting maximum value. To move to a higher level of profitability, client satisfaction, client retention…all the measures that a practice owner might value…things must not just be done better, but done different things must be done (or delivered) as well.
Just pursuing “different” is risky. Simply being different or unique is not necessarily valuable to clients, and frequently comes at quite a cost to the firm in time and resource. If however innovation is coupled with higher than average service delivery, then you’ve hit the sweet spot where you are completely separated from the average competitor AND the value becomes far more obvious to the clients.
This is the zone of maximum potential value for a firm today: Innovation combined with high service. That combination delivers high value to clients….value in to the firm in revenue terms from greater income per client, better client retention, less spending on marketing as advocacy and word of mouth increases….and therefore value in growth and capitalisation terms.
The serious future value for professional services firms long term is in utilising twin strategies of exceptional service together with a differentiated service offering.