Tired of Competing on Price? Be Different.

Firms have a problem and it's a marketing problem. Marketing 101 taught us that Price was one of the 4 "Ps" of Marketing. Funny that most firms don't "let" marketing stick their noses in the pricing strategy and process.

Firms seem to think marketing and pricing aren't related. But they are. 

Yesterday, Seth Godin picked on accountants in his post "We're the Same. We're the Same. We're the Same." He refers to their websites and says:

Sometimes, we try so hard to fit in we give consumers no choice but to seek out the cheapest. After all, if everything is the same, why not buy what's cheap and close?

Did you "hear" that? Seth explains that we CAUSE buyers to compare us on price, alone. And he is exactly right.

When marketers are tasked with building websites, or anything that has to do with positioning, partners are prone to killing innovative ideas that would lead to true differentiation. Instead, they want the assurance their peers would say or do "that"—they want PRECEDENT. They want to know what their competitors are doing. They want "best practices." 

Guess what??? If someone, ANYone, is doing it, it's not different. 

On May 17, Rick Telberg posted 12 Hot Growth Tips for CPA Firms that mentions some of what I'll be talking about June 9 at the AICPA Practitioners Symposium. Here's a snip from Rick's post:

“Without other distinguishing factors that buyers can readily see and know, clients resort to looking mostly at price for making their decisions,” she says. “This, in turn, drives down the firm’s revenues, which impacts the attitudes of those performing the work.”

Furthermore, “Without high enthusiasm for the engagement, customer service is not at its highest and this, in turn, reduces the quality of the customer’s experience, which makes them less likely to rehire the firm, and certainly less apt to refer the firm to others.”

“It’s a vicious circle,” she says. “Ironically, while the opportunity for firms to articulate and convey their distinctions via the Internet is more ripe than ever and costs almost nothing, especially relative to advertising, it is unfortunate that most firms are reluctant to embrace the advantages that the social media and an improved Web presence afford them.” 

 Pricing too low has deleterious effects on morale of everyone involved.

Here's a diagram I developed to illustrate the cycle.

What do you think? Does this convince firms to let marketing into the pricing conversation?

Does it compel firms to look at better, more visible ways to show their distinguishing characteristics (i.e. their PEOPLE)? 

Will firms be more to exploring what social media can help them achieve if they really understand how much it can help them in these other ways? 

Comments

[Accounting Marketing]

While I like the graphic I don't see a firm allowing marketing into the pricing conversation. THis is the case for a few reasons:

1. Most marketing managers are not thought of or perceived as professionals with enough knowledge to accurately price out a job. For example, how many hours does it take to do a benefit plan audit? The answer is (depending on the firm) 80-100 hours.

2. Realization. Most firms have a minimum realization level. Unless marketing knows the budget and personnel assigned on the job it will be difficult to understand/influence the pricing process.

3. Assertiveness. I suspect that the marketing manager would need to be very assertive to become involved in the pricing process. My sense is some Partners will resist inclusion.

I like this post, but I just don't believe many firms will allow marketing into the pricing process.

[Julian Summerhayes]

Michelle as a UK based lawyer, I have witnessed over the last 15 years the erosion of margin/profit on certain key areas of practice: conveyancing and probate being the hardest hit.

We have got to the point now where I would be surprised if any profit was being made; and in fact a number of firms have gone down the route of offering a fully commoditised service.

I think the issue of price though often plays too big a part in the discussion over professional services when all the studies I have seen make it clear that clients do not place price at the top of their shopping list. Usually it places at 3/4 with client services, expertise and efficiency ranking higher.

I think law firms should look more closely at the concept of value and seek to educate their clients accordingly. As a dispute resolution lawyer, the number of times I have found myself trying to explain to a client that if only they had spent a few hundred pounds on getting their T&Cs sorted but they ignore doing so and then find themselves involved in a protracted and costly dispute. The diagram is helpful but I find it a little self-defeating. Great post though and thanks for commenting on this issue.

Julian

[Dianna Huff]

Michelle,

I can't speak to the pricing issue and accounting firms, but I have worked with companies that want Websites that look / sound the same as their competitors.

One exercise to do is to find 10 or 15 sites in your industry and then go through each one right after the other.

Then ask yourself which site / company stood out?

Chances are, none of them did because they all look and sound the same -- including using the same stock photos (as David Meerman Scott points out).

Great post!

[Christina Steder]

Michelle,

I most certainly agree with the thought that partners look for precedent and use their competitors as a guide - I've had innovative ideas shot down more than my fair share of times. However, I think that sometimes as marketers, we can also blame ourselves. We've worked with many clients who came to us with websites or brochures that droned on for pages and said essentially nothing. In some of these cases, I think the problem was that the person/agency who did the firm's marketing didn't really understand the services that were being offered. So, they wrote a lot of words that said nothing. It can be risky, but as marketers, we have to push ourselves to continue to ask questions until we fully understand what we're trying to explain. Unfortunately, this takes time and time is money, which may the root cause in the first place. Just like accounting firms can't whip out an audit, marketing firms can't auto-generate the perfect marketing plan in five hours or less.

[Kiner CPA]

I think Seth Godin hits the nail on the head with "We're the Same". It is not always easy for a small accounting practice to differentiate themselves from competitors, but if you don't at least try a different angle then price will always be what stands out in the client's mind.

[Marty Desmond]

Michell,

I think you've hit a great point here. The comments make valid points, but show why many CPA firms find some services becoming commodities.

If the "professional" can cost out and price a service at $3500, and the marketer knows the market will bear $4000, why charge $3500? Partners should realize that the value of the external data the marketer brings is as important as the internal data/costs of the services.

There are firms that embrace this. Their people collaborate and execute well. They do not compete on price.

Marty