Differentiation Strategy – Five Methods Consultants Use
In a previous article, we discussed how differentiation is notoriously difficult for consulting firms, particularly the top firms in the industry. These firms traditionally market exclusively to the bottom of the “funnel” (prospective clients who have already chosen consulting as their solution), focus on their people rather than on their services, and have difficulty proving ROI, all of which limit their ability to differentiate. In this article, we will explore five methods of differentiation strategy for consultants. While all of these methods are available to consultants, some may have more return than others.
Expertise
Many top firms today stand out through their acquisition of only the best talent in the country. These firms hire only from the most reputable schools and carefully cultivate their images around their talent and expertise. In addition, these firms excel at thought leadership, with entire departments devoted to influencing the industry through publishing authoritative whitepapers and other studies.
The problem with expertise as a consultant differentiator is that it is not actually an offering differentiator, but merely a claim to do something better than other firms. The largest firms have already succeeded in using expertise to market themselves, leaving little room for smaller firms to move into this space. Smaller consulting firms have more success using expertise as a differentiator by specializing in one highly specific type of consulting. These smaller firms have trouble scaling, however, because as they grow out of their hyper-specific niche, they begin to compete with the top firms for market space.
Price
Price is another means by which consultant firms can differentiate themselves, but competitive pricing leads to lower margins. Moreover, the leading firms have such strong client bases that they do not have to price competitively. Smaller firms looking to price lower will doubtless attract clients who cannot afford one of the larger firms, but given the success that top firms continue to enjoy, lower prices for the same offering tend to suggest lesser quality.
Client Services
Another means by which the top consulting firms differentiate themselves is through their superior soft skills. For example, consultancies advertise their superb communication skills, first-class client services, key consultant personalities, quality, and attention to detail. The problem lies in that these differentiators are not terribly memorable, since they are things that it seems every respectable consulting firm should provide. Nonetheless, differentiation through soft skills remains the primary way most professional services, including consultants, differentiate themselves today. As with expertise, the likelihood that all but the top firms will be able to successfully market themselves through soft skills is slim.
Tools / Processes
One of the greatest opportunities consultants have for differentiation is through superior tools and processes. True differentiation necessitates that the actual offering is different than competitor offerings, and implementing superior processes or using advanced tools provides that difference. Consultants who can give their customers a better value proposition, whether through lower cost per engagement, a faster timeline, deeper insights, or more actionable recommendations, will be able to successfully stand out from the crowd. Achieving this better value proposition through superior processes or tools will give consultants a clear and compelling differentiator.
Prove ROI (or money back!)
Another opportunity for consultants to differentiate comes through finding ways to prove ROI. As we discussed previously, because management consulting projects so often revolve around strategy, proving ROI can be difficult. By tying ROI to extremely specific areas, however, consultants can prove their worth. This approach would require the consultant to identify a number of micro-goals within an overall strategic goal. For example, a consultant could promise 40% growth in a specific area within a given amount of time. By identifying these highly specific areas within the overall strategic goal, consultants can better demonstrate ROI. In order to differentiate even further, consultants could offer money back if the specific goals were not fully realized.
Building awareness is an important part of any marketing strategy, and so consulting firms should take care that their clients know exactly what they offer and prospects understand precisely what makes them different from other firms. Before this awareness can take effect, however, consultancies need to identify specific factors that truly make them different from other firms. Different methods of differentiation will work for different firms, and consultants have met with some measure of success using all of the methods we discussed above. In the long term, however, perhaps the greatest opportunities for differentiation strategy lie in superior processes and tools and demonstrating ROI.