Become a Market Leader
Do you sell coffee? How about wheat or crude oil? No? Then why do people act as if you sell a commodity?
All too often, staffing is viewed by HR and hiring managers as if it is a commodity. Their common argument is that staffing firms all provide the same types of services drawing from the same pool of talent. To compound the problem, the industry has been its own worst enemy—teaching people how to buy based on mark-ups.
But the point of this article is not to gripe. The point of this article is to get you thinking about what you can do to differentiate yourself, and how you can become a market leader.
Commodity pressures are not unique to staffing. They are a natural outcome in any competitive industry. Several years ago, I attended a TEC (The Executive Committee) seminar by Sam Bowers, CEO of the Sales Service Institute. Sam taught me that all products and services tend to become commodities over time for the following reasons:
- Over time, the value of any product or service lessens. When we first provide a service we are usually solving a problem, and clients are willing to pay a premium to have their pain alleviated. However, as the solution becomes “standard operating procedure” the perceived value of the service decreases as does the willingness to pay a premium. It becomes a case of “what have you done for me lately.”
- More competition will always result in more pricing pressure. Someone is always willing to offer a lower price to win the business.
- Over time, buyers get smarter. As buyers become educated about the products and services you offer, they learn to better evaluate the economic value of the service provided, and they learn how to be better negotiators.
So as an industry matures, commodity pressures are inevitable. Combine these pressures with a slow economy and you have a truly tough environment in which to sell. Which begs the question: what are YOU going to do about it?
Take a Lesson or Two from Capital One
What’s in your wallet?
Unless you’re completely oblivious to advertising, I’ll bet this phrase brings to mind a Capital One credit card (even if you don’t hold one of their cards). And if you want a sure-fire solution to succeeding in the current economy—and overcoming commodity pressures—take a few lessons from their marketing strategy.
So Much for the Recession
Since 1995, Capital One’s sales have grown at a compound annual rate of 41%—and the bulk of that growth came at the expense of their competitors. Over the same period, Capital One’s earnings grew 29% and its average return on equity—an important measure of profitability for financial services companies—was 25%. Not bad for a company that sells commodity products!
But most significantly, from 2001 to 2002, Capital One Financial Services moved up 67 positions on the Fortune 500. So much for the recession!
Lesson 1: Nothing has to be a commodity
With the exception of American Express and to a lesser extent Discover, credit cards are commodities. One Visa card (or MasterCard) is essentially the same as the next. Sure the APR and card features may vary, but who cares? A credit card is a credit card, right?
Not to Capital One. Rather than competing on rate—the commodity player’s approach to marketing—they decided to compete on value. Capital One implemented a radical branding strategy to differentiate and stimulate demand—without sacrificing margins.
Lesson 2: A winning brand starts with the customer
What made Capital One’s branding strategy work was that it was derived from customer input. Through extensive data collection and analysis, they were able to determine which attributes of credit cards were most important to the consumers they wanted to reach. If you check out Capital One’s web site http://www.capitalone.com/, you will find a number of products, each offering features targeted to a different type of credit card user.
But product features aren’t the important lesson learned from Capital One’s research. The most critical finding was that credit cards users are emotional. Commodity sellers tend to falsely focus on the rational side of decision making, emphasizing product features and price in an attempt to differentiate. And in a purely rational world, this strategy would be effective.
But the world isn’t purely rational, and as Capital One learned, sales success goes to the firm that best matches product benefits to the emotional needs of the customer. In the case of credit cards, these benefits include a variety of services and promises that make life easier for the credit card user, such as being able to choose your payment date and a promise of no telemarketing.
Lesson 3: Simplify
We’re all too busy, too stressed, and too skeptical to care about or believe much of what most companies say these days (and this comes from a marketing guy). The solution? Simplify your message to one core benefit, and then drive, drive, drive that benefit home.
For Capital One, the core message is “No Hassles.” While their credit cards offer all the bells and whistles of other cards and a variety of price points, the entire focus of their promotional plan has been to dramatize the benefits of a “no hassles” credit card.
Whether it’s attacking Vikings or marauding pirates, their advertising powerfully illustrates the downside of commodity credit cards while clearly positioning the unique value Capital One offers. By concluding each commercial with the message “What’s in your wallet?,” they reinforce the perception that all credit cards are not created equal. And effective marketing is all about creating the right perceptions!
Dominate Your Market
Are you ready and willing to become a leader in your market? While the process is more difficult than it sounds, here are the steps that can get you there:
1. Pick your spot in the market.
What is your current niche in your market? Are you focusing on an area where you have an opportunity to outperform the competition? While large companies may have the resources to redefine industries, small companies typically need to focus on areas where they can be the best.
2. Determine what’s most important to your customers.
What attributes of your service matter most to the segment of the market you serve? Price? Candidate quality? Speed? Your ability to fill last minute requests? Like Capital One, your marketing strategy should start with detailed customer analysis and input.
3. Develop one or more “products” to fit each niche you want to serve.
Focus on satisfying the rational and emotional needs of your market. Be aware, you may need to dramatically change the services you provide and the pricing to meet needs of different market segments. For example, if quality is most important to your clients, determine how you could truly differentiate on quality and what you would have to charge to GUARANTEE this level of service.
Need an example? Consider one of my favorite case studies from graduate school. It’s about an exterminator in Florida who was suffering from an abundance of competition and declining profits. Rather than fight the price cutters, this entrepreneur took a different approach. He focused on a specific niche—restaurants, which needed to be completely bug free. He then created a 100% no pest guarantee—unheard of in his industry at the time, and he set up a new service process that would allow him to deliver on his bug-free promise. Here’s the best part: he also raised his prices to 10 TIMES the industry average. And as you can guess, he went on to dominate the restaurant extermination market and turn his organization into one of the most profitable in the extermination business!
4. Develop your positioning message.
Create one statement that demonstrates how you are unique. When we create a marketing plan for our clients, we work with them to complete the following statement:
To (market niche you want to serve), (your company) is the one (type of service you offer) (key benefit you deliver better than any other firm in your market).
Ideally, your positioning message will focus on the one attribute of your services that is most important to the segment of the market you want to serve. Also, it’s best if your positioning message satisfies an emotional need. Rational needs are OK, but not as powerful.
One catch. It’s easy to make a bold claim in a positioning message, but more difficult to prove it. When creating your positioning message, we recommend simultaneously creating a list of reasons why your positioning message is true. For example, Capital One introduced the no telemarketing and flexible payment date features to support it’s “no hassles” claim.
5. Create a powerful marketing campaign.
A great positioning message isn’t worth much unless you can get it out into the marketplace. At this point you know your market, your product, your pricing, and the core message you want to promote. The next step is to create the promotional plan.
While you may not have a Capital One sized budget for marketing, you can create a powerful and effective campaign without breaking the bank. Your promotional plan should be comprehensive, including advertising (classified and other print), direct mail, e-mail, changes to your web site, training for your sales and service staff, and even changes to other forms of communication such as your letterhead, invoices and fax cover sheets.
6. Live your brand.
Once you’ve decided on a branding strategy for your business, it must become the heart and soul of your activities. If your actions don’t reinforce the brand promise, you will not be successful. Capital One got it right by physically changing the attributes of their product to meet the brand promise. The exterminator I mentioned earlier redefined the customer service process to fulfill his bug-free commitment. Once you have selected a course of direction, do not waver from it-period. Absolute consistency is essential to bringing a brand to life…and dominating your market!