Are You Attracting Bargain-Hunting Clients?
If you're finding that your service consistently attracts clients who are keen on negotiating prices down to the last cent, it’s likely because your positioning is weak and generic. When you describe your business as just another ‘marketing agency’, you essentially become a commodity, comparable only by price. This is a dangerous territory if you're aiming for growth and sustainability. April Dunford, in her book Obviously Awesome, argues that positioning is about deliberately situating your product or service in a specific context. This includes market category, alternative competitors, and differentiated attributes to make your value obvious. Without strong positioning, clients will only see you for your price tag.
Understanding Positioning in Context
Positioning is the strategic process of defining how you want your business to be perceived by your target market. It’s about carving out a unique space in the market that’s distinct from your competitors. April Dunford emphasizes that positioning is not about creating something new, but about identifying and articulating what already makes your service uniquely valuable. This involves understanding your client's perspective and what alternatives they consider when making a purchase decision.
For example, take a consultancy firm focusing on digital transformation. In a market flooded with general IT consultancies, they identified their unique strength in helping traditional manufacturing businesses transition to Industry 4.0. By focusing on this specific niche, they articulated their value proposition around industry-specific challenges and solutions, making their service indispensable to a targeted audience.
The Commoditization Trap
Imagine you’re running a digital marketing agency in a medium-sized city. You describe your services using broad strokes, focusing on SEO, social media, and PPC. Here’s the problem: you sound like every other agency in town. When potential clients view you as interchangeable with others, negotiation begins with price—the primary differentiator when nothing else stands out. A client once told me, "Why should I pay more for the same service?" This mindset is the result of generic positioning.
Real-World Example: The Local SEO Agency
Consider a local SEO agency that found itself in a similar trap. Located in a bustling city with numerous competitors, they offered broad digital marketing services. They realized their client acquisition was stagnating because potential clients perceived them as just another option among many. By narrowing their focus to SEO for law firms, they could highlight their expertise in legal market nuances. This specific positioning allowed them to command higher fees from clients who saw the value in their specialized knowledge.
This transformation wasn't overnight. They invested time in understanding the unique challenges law firms face online, such as compliance issues and the need for authoritative content. By doing so, their repositioning was not just in words but in tangible expertise, which justified their premium pricing.
Reposition for Clarity and Value
To escape this commoditization trap, you need to reposition your business. According to Dunford, start by defining your real competitors—those alternatives in your client's mind. Next, choose a market category that highlights your strengths. For instance, if your agency excels in data-driven marketing for healthcare providers, make that the focus. Then, identify your best client and the problem you solve better than anyone else. Rewrite your messaging to articulate this unique value, not a laundry list of services.
Steps to Reposition
- Identify Your Core Competency: Determine what you excel at and who benefits most from that expertise. For example, a software development company might focus on developing custom ERP solutions for mid-sized manufacturing companies, leveraging their deep industry knowledge.
- Analyze Your Competition: Understand who your real competitors are from your client's perspective. This might involve researching indirect competitors who offer alternative solutions to the same problem.
- Define Your Market Category: Focus on the niche where your strengths shine the brightest. This is about finding or creating a category that aligns with your unique value proposition.
- Rewrite Your Messaging: Clearly communicate your unique value proposition to your target audience. Use language that resonates with their specific needs and challenges.
The Power of the Blue Ocean Strategy
Instead of competing in a crowded market—a red ocean—consider creating a new market space, a blue ocean. W. Chan Kim and Renée Mauborgne’s Blue Ocean Strategy suggests using the ERRC grid: Eliminate, Reduce, Raise, Create. This strategy allows you to redefine your offering and escape price-based competition.
What is a Blue Ocean Strategy?
A Blue Ocean Strategy focuses on creating a new market space that renders the competition irrelevant. It's about innovating in a way that opens up new demand and offers customers a leap in value, while simultaneously reducing costs by eliminating unnecessary elements.
Take the example of a yoga studio in a city flooded with fitness options. They applied the Blue Ocean Strategy by eliminating traditional yoga classes and instead focusing on specialized prenatal and postnatal yoga. They created a comprehensive support community for new mothers, which wasn't offered by competitors. This move attracted a loyal customer base willing to pay a premium for the unique, supportive environment.
Map and Apply ERRC
Start by mapping the attributes every competitor in your niche battles over. Apply the ERRC grid:
- Eliminate what the market takes for granted and nobody values.
- Reduce factors that inflate costs without yielding value.
- Raise attributes that enhance differentiation.
- Create elements that set you apart.
Take Yellow Tail's example: they launched with only two wines, eliminated complex traditions, and focused on 'easy drinking, easy choice, fun.' They broke away from the price competition.
Example: A Design Firm’s Transformation
Consider a local graphic design firm that faced declining revenue due to increased competition. By applying Blue Ocean Strategy, they eliminated low-margin services like business cards, raised their expertise in branding for tech startups, and created a workshop series that educated clients on brand development. This repositioning attracted tech entrepreneurs willing to pay a premium for specialized branding services, transforming their client base.
Steps to Create Your Blue Ocean
- Eliminate Non-Essentials: Identify services or features no one values and remove them.
- Reduce Costs: Cut down on factors that increase expenses without adding value.
- Enhance Differentiation: Focus on aspects that make your service stand out.
- Innovate New Offerings: Develop new elements that meet unaddressed needs in your industry.
Implementing Positioning Changes in PMEs
For small and medium enterprises, especially service-oriented ones, repositioning can seem daunting. However, it is essential for escaping price competition and enhancing profitability.
Case Study: A Tech Consultancy
A tech consultancy specialized in IT solutions for small businesses. They found themselves constantly underbid by larger firms. By repositioning themselves as experts in cybersecurity for financial firms, they redefined their market category. This shift allowed them to attract clients who valued their expertise and were willing to pay a premium for their services.
They achieved this by first thoroughly understanding the unique cybersecurity challenges faced by financial institutions, then tailoring their solutions to meet these specific needs. Their marketing materials and client interactions were redesigned to emphasize their specialized knowledge and success in this niche.
Steps to Reposition Your Service
- Identify Your Unique Strengths: What do you do better than anyone else?
- Map Competitor Attributes: What do you and your competitors offer?
- Apply ERRC: Decide what to Eliminate, Reduce, Raise, and Create.
- Redefine Your Market Category: Position yourself where your strengths shine.
- Communicate Effective Messaging: Make your unique value clear.
Escaping Price Competition
Repositioning your service is not just a marketing exercise—it’s a strategic overhaul. By defining your market category and applying frameworks like Blue Ocean Strategy, you escape the price wars and attract clients who value your unique offerings.
For more insights on charging premium prices, check out this article. If you're in a medium-sized city, learn how to create a blue ocean here.
The Growayone Advantage
At Growayone, we believe marketing and sales are an integrated system. If you're ready to stop attracting bargain-hunting clients and reposition your service effectively, visit growayone.com to learn how we can help you transform your business.
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