Differentiating Your Firm In The Marketplace.

By Clare G. Ross CMC

If you want to continue to compete more effectively and maintain a competitive advantage, firms will find it necessary to identify their core competencies and build their firm’s strategic plan around them.  A core competency is a bundle of skills and technology that enables a company to provide a particular benefit to its clients.

Identifying your core competencies is not something you can finish in a two-hour session or even in a two-day meeting. It takes a lot of thought and introspection over a period of time to let the ideas gel into a cohesive form. It is a process that is continuous and ongoing. It is a top management responsibility and requires attention at that level. Core competencies provide the foundation for determining new services, positioning the firm, developing your marketing tactics, and differentiating your firm in the marketplace. You must identify them specifically so that you can preserve and build on them.

There is a tendency today for some firms to identify characteristics such as “quality services” and “good reputation” as core competencies, when these characteristics are really the result of performing different activities well. If you are unable to associate specific, underlying activities with these claimed competencies, you will be unable to focus on preserving and strengthening the building blocks that create quality services and results in the first place. When management digs deeper, they will find that the real core competencies are tangible, value-added activities that are performed more effectively and at a lower cost than that of the competition.

These competencies are the combination of the skills, knowledge, experience, and technology that enables a firm to deliver a fundamental client benefit. The following example of Jas Nakaoka, an architect, demonstrates how a core competency can contribute to the value a client receives.

I first met Jas Nakaoka at a Professional Services Management Association (PSMA) meeting, helping to organize the Los Angeles chapter. When he introduced himself, my first response was to  ask him what he did for a living. He replied that he was an architect specializing in the design of retail facilities. My first response was, “Oh, that work with the buck and a quarter per square foot design fees.” He said, “Not at all. In fact, he said,  we usually get design fees two to three times higher than our competition.” With that, my ears perked up and I asked, “Tell me more.”

He said that a major upscale retailer approached him to see if he would be interested in designing a new facility. The client also stated that he already had a proposal from another architect to do the job for a fee of $500,000. Jas told the store executive that he would be happy to take a look at it and get back to him with his answer. Before he did, he probed the client for more information about client demographics, the kinds of merchandise handled, the store’s average transaction size, gross margins, net margins, etc.

After analyzing the client’s business and financial data, Nakaoka concluded that there was no way the client could make a profit in the new store given its average transaction size, gross margins, and the number of transactions needed. In fact the store was likely to lose money. Based on this, the client contracted for a larger space and focused on increasing the average transaction size, and they hired Nakaoka to design the new facility for $1,500,000.

Nakaoka is known throughout retail circles not just as an award-winning designer, but as someone who can use his design expertise to improve the profitability of a retail specialty store. He does it with good architectural design and a thorough understanding of what motivates his clients. He knows how good design can impact the client’s bottom line. Nakaoka will tell you that he doesn’t sell design services, he helps his clients make money. His basis for differentiation is his organization’s ability to develop innovative design solutions for specialty retail firms that have proven impact on the store’s profitability. This is enhanced and supported by his personal salesmanship and marketing capability, which allows him to effectively persuade clients that their bottom line will improve from hiring his firm.

Source:  “Beyond Strategic Planning, Developing and Implementing Winning Strategies for Engineers, Architects and Construction Companies.” By Clare G. Ross CMC.  Second Edition,  2007 Converse Publishing.

SELL YOUR WAY OUT OF THE RECESSION

By Clare G. Ross CMC

The first sign of trouble in a down economy is not the bottom line.  It is often the top line.  Usually a drop-off in sales volume is the first indicator that something serious is happening in the business.  Sometimes it is gradual but often it can be dramatic and severe.  And sometimes, no matter what you try, you can’t seem to find the handle to crank up your sales again.

            Short lists get longer, competitors start cutting fees, you start meeting them and profit margins start shrinking.  This is a dangerous spiral and a risky scenario for the architect or engineer.  What can you do in the coming months to bring your sales volume back to acceptable levels, maintain profit margins, and improve your competitive position in this recession.

 Focus on Your Top Line 

            Since it’s sales volume, the top line , that drives a company’s profit machine, cutting operating costs, overhead and other indirect costs can only go so far in restoring profitability.

            At the same time that you are cutting non-essential costs and streamlining your operation, you need to also be evaluating the effectiveness of your current sales and marketing efforts with an eye to finding out what needs to be changed and what can be changed to improve the top line.  Some design and construction firms start cutting marketing staff, support staff and promotion budgets.  Tread very carefully, this could be suicidal.  Of course, you need to cut out waste and inefficiency and justify every expense, even in sales and marketing.  But indiscriminate cuts, however, in sales and marketing can work against you.

Here are three things you can do right away to improve both your top line and bottom line.

1.      Hunt where the ducks are

2.      Focus on Customer Service

3.      Sell Value

 Hunt Where the Ducks Are 

            Most firms find Pareto’s Law, sometimes known as the 80/20 rule, to be valid when they evaluate past sales patterns.  Often firms will find that 80% of their sales come from 20% of their clients.  While most situations don’t adhere exactly to the 80/20 relationship, design and construction firms that do this analysis almost always find that most of their sales are concentrated in a handful of clients and markets.  In most markets you will also find that 80% of the potential business is usually controlled by 20% of the clients.

            The message here is that you need to start by evaluating individual clients and markets to understand where your business comes from.  Armed with this information,  you are in a position to concentrate your sales efforts on your top clients and potential clients, the 20% who account for 80% of the volume or profits rather than spreading yourself too thin trying to be all things to all clients.  You will be hunting where the ducks are.  You will be focusing your sales and marketing efforts on the clients and potential clients who offer the greatest potential for success.

Former clients or inactive clients can also be good sources of new business.  Renew your contact with a personal phone call or use a cost-effective post card mailer.  Even a simple mailer with a message designed to peak their interest can have a dramatic impact.

            Attend some trade shows or conferences that your clients attend. You don’t have to exhibit.  Walk the show floor, talk to potential clients.  Observe what they are interested in.  What are their current needs?  What are their unmet needs?  Trade shows are also a great place to gather market data and competitor information.

            Focusing sales efforts on new markets and services is a risky business in this kind of a business environment. The only time this should become an option is if your core business is no longer viable.  Doing so in other situations will only divert your limited resources away from the higher probability  clients and prospects towards higher risk opportunities.

 Focus on Improving Client Service 

            In a competitive marketplace, client service can be the most important element in the client’s buying equation. Your principals need to be in touch personally with the clients and end users of your services.  That’s the only way your principals can really understand what’s happening with their client’s business, their buying habits and other changing needs.

            Client service involves elements like the client’s role in the design process, project schedule management, quality, warrantees, employee’s attitudes on the phone, employee “phone voices,” ability to handle irate clients, keeping promises and commitments, your attitude toward credit terms,  your marketer’s approach, and more. It includes all the things that affect how your clients feel about your firm.

            What is good client service?  Good client service is always what the client says it is.  It can be different for every client and even for different buyers in the same organization.   You need to find out from each client just how he or she defines good client service, and then provide it.  There are several techniques you can use to get that information about what clients expect in the way of service.  Below are some of the most frequently used and most effective techniques.

1.      Marketer and Project Manager feedback resulting from direct client contact.

2.      Direct, regular, personal client contact by your President or CEO

3.      Surveys

a.       Written questionnaires

b.      Telephone surveys

c.       Client focus groups

d.      Image studies

These techniques can cost anywhere from a few hundred dollars to tens of thousands of dollars depending on the scope of the survey, the number of contacts involved, and the amount of information needed.  Practically speaking, for most firms with a limited budget and a short time line, cost-effective studies can be developed to fit their budget and provided the needed information.  The important thing to remember is that the information should give you a significant advantage over your competitor.  It is extremely valuable information.

Your clients will tell you what they want, need and expect from your firm.  When this client  information is analyzed and conclusions are made about client service, you will need to review your own current practices to see how well you measure up. From this review, you can identify the gap between how you measure up in providing client service versus what your clients expect.  With this important information, you are now in a position to make meaningful changes to improve client service through training, changes in practices and procedures or whatever it takes to meet the client’s needs.

Sell Value 

In a competitive marketplace you need to focus on what is unique and distinctive about your firm, its capabilities and services.  Focus on how this uniqueness will impact your client’s business, goals or bottom line.  Emphasize how your capabilities will provide more value at equal or less cost than your competitors.

            Learn all you can about your client’s business, the client’s problems and needs.  You can improve your client’s business with your capabilities and services.  Look for ways to lower the client’s costs, improve productivity or improve the quality of their end product.  Be perceived as adding value to your client’s business instead of being viewed as just another project cost.

            When you provide value, you will set yourself apart from the competition that focuses on fee.  When you do, then value, not price, becomes the focus of your client’s buying decision. It will also provide you with a significant competitive advantage and significantly increase your win rates.

            When you provide value to your clients, you will no longer be viewed as just another architect, engineer or builder, you will be viewed as a “valued partner” in the process and a valuable member of the client’s team.  A value marketing approach will yield solid sales results and productive long-term business relationships.  It can provide the competitive edge that you need in a soft economy.

            Work hard at hunting where the ducks are.  Focus on providing excellence in client service.  And differentiate your firm effectively by selling value.  Master these three elements and you will do more than survive this recession.  You can even prosper and gain market share.  What’s more, you will be positioning your firm for substantial growth and profitability when the recession ends.