Fight Price Pressure with Differentiation

Last week I upset a bunch of people, without real jobs, in my post about practice management consultants. Let’s go for two weeks in a row. Ignore the practice management “experts,” who tell you that you just need to bill what you’re worth to get the price you deserve. Here’s how you know that’s total BS.

Let’s say you are about to provide a service that will save a client $10,000. According to some practice management geniuses, you can bill anything up to $9,999 and the client should buy. Is that true? Yes – unless. Unless the guy down the street, or halfway across the globe at this point, will provide the same service for $100. Then you ain’t getting’ no $9,999. You’re getting $100. That’s because the genius consultant you paid knows a little about demand curves, but absolutely nothing about supply curves. That was day two in Econ 101, and he was passed out at the bar by then.

There are two, and only two, ways to fight price pressure: differentiation and becoming a low cost producer. Let’s cover differentiation in this post.

Differentiation is not telling prospective clients that you provide excellent service. That’s the opposite of differentiation. Every accountant still drawing breath makes the exact same pitch. I’m not telling you excellent service isn’t important. It’s just not an effective marketing message to gain new clients. It’s a great marketing message to get referrals from existing clients, but that’s another topic.

You differentiate when your marketing message tells potential clients something that clearly sets your firm apart in the eyes of potential clients. What’s separates your firm from your fine competitor, Douchebag & Moron, down the street, besides decent grooming and less body odor?

Differentiation, like beauty (about which I know nothing if you look at my picture), is in the eye of the beholder. That means clients define differentiation, not us. We must view differentiation through their eyes. Thus, great service is not a differentiator since potential clients hear that from everyone.

Differentiation might be a practice niche or specialized market, like being an expert in the tax problems facing the owners of strip joints. That’s not my choice, but that’s largely because I’ve already been divorced once and sense that such a niche might cause me to write some more big checks. It could be serving dentists, but that’s such a crowded market that I’m not certain it’s really differentiation anymore. Our CPA firm serves small government contractors and IT professionals. You get the idea. If everyone’s doing it, it’s not differentiation.

Differentiation could be providing services that are different from your competitors. Providing buy – sell consulting could separate you from other firms. Providing inventory management consulting could be another one. Zig when other firms zag. What do clients need that accounting firms don’t typically provide, but could be a good fit?

Feel free to snicker if you remember the AICPA pushing elder care services, a.k.a bed pan counting, in the 1990’s. They found the perfect service no one would pay for. As Bob Uecker said in the movie, “Major League” when Charlie Sheen’s character threw a pitch off the backstop, “Juuuust a bit outside.”

However, there’s a third type of differentiation. You differentiate not in what you do, but in how you do it. What do clients hate about the way accounting firms typically provide services? First, they hate how firms bill. So fixed price subscription billing is a differentiator.

I am going to suggest another. Find ways to provide traditional services while taking a smaller bite out of clients’ lives. That means treating clients as an essential part of your workflow management. Just as we try to minimize our time spent as part of our workflow processes, find ways to minimize client time as well.

21st century clients hate meetings and telephone calls. If your tax season is a revolving door of clients coming and going through your office as the initial step in processing tax returns, you’re not only wasting your time, you’re wasting client time. In the 21st century, clients don’t meet with you, because that’s what they want. They meet with you, because you tell them that’s what you want.

Nearly 40% of our tax clients post their documents directly to Clarity Practice Management. Most of the rest drop off, e-mail, or snail mail their documents. Next year, we’ll have over 50% posting to CPM. Clients save time and we save time. We’re considering charging extra for meetings, since they add to our costs.

So you think meetings are the only way to provide great service? Accountants are under the misimpression that clients value more face time with us. They value results, not time with us. Now I sound like a value pricing consultant – God forbid. Consider this client quote from last tax season sending me an e-mail referral.

“Frank’s a great CPA. You don’t even have to meet with him.”

Differentiate by providing less – less of a bite out of your clients’ lives. Fight price pressure by giving affluent potential clients more of what they value – results that take less of their time. That’s differentiation that sells.

In the 21st century, meetings aren’t great service. Not requiring meetings is great service. Ditto for phone calls. This isn’t the 1980’s. Get rid of that big hair and your Duran Duran records while you’re at it.

Thanks for reading!

Frank Stitely, CPA, CPM
Clarity Practice Management

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