What makes your financial planning business different from any other one? What differentiates it?
Differentiation is hugely important for IFAs. People automatically assume that “different is better” when they look at different brands. If you look the same as everyone else, we subconsciously file your business away as “irrelevant information” in our brains – soon to be forgotten about.
There are many strategies you can use to differentiate an IFA practice. Some compete on low cost, for instance, whilst others might emphasise their knowledge and experience in a particular field.
Bowman’s Clock is a useful theory which outlines eight possible strategies businesses can use to position themselves and differentiate their brand from competitors.
Here is a visual representation of it:
Looks a bit intimidating and confusing, doesn’t it? Don’t worry, it’s actually quite straightforward once you look briefly at each of the eight strategies.
It’s also incredibly useful for financial planners to shed light on your current approach to your positioning, and to find out if another route might be a more effective differentiation strategy.
Let’s look at each one in turn with some examples to illustrate. As always, if you’d like to explore these topics in more detail then please feel free to get in touch, or browse our dedicated page on our marketing services.
Strategy #1: Low price/low value
When you see this one, think “bargain basement” (e.g. Poundland). This approach is mostly about competing on cost, which is not usually the best route for financial planners.
Whilst you do not want to be unreasonably expensive to clients, it is a constant battle trying to race to the bottom and hold that position. Especially when bigger brands could swoop in and know you out of that position.
Strategy #2: Low price
Lots of supermarkets like to take this approach (e.g. Walmart, Tescos etc.), leading the market on costs by promising large volumes to their supplies.
Again, this is a difficult approach to take in services-based businesses such as financial firms. At least half of the UK’s financial planning firms are also small businesses, which naturally limits their ability to compete on this kind of scale anyway.
Strategy #3: Hybrid
Here, a business will position its pricing somewhere in the lower/middle of the market whilst differentiating their brand, product or service on another basis.
For example, in the aviation industry, both Ryan Air and EasyJet have competed at a low price. However, The latter has, historically, tried to differentiate itself by offering more comfort, features and luxuries to passengers than the former – which has tended to offer a cheaper, more basic solution.
A financial planner might use this strategy, for instance, by trying to match rivals’ very low management fee whilst differentiating their brand by offering more client benefits throughout the year.
Strategy #4: Differentiation
This approach does not really compete on the basis of low cost, but rather offers something completely different to the client which cannot be found amongst competitors.
For instance, a financial planning practice might differentiate itself on the basis of design (e.g. a great brand and visual identity) and/or personality, such as the main financial planner/company director who might specialise in a particular industry (e.g. dentists or GPs).
Strategy #5: Focused Differentiation
This strategy has got more to do with specific products or services, rather than your entire brand. Here, a business might offer a selection of highly-priced products which are perceived to have a high value.
Obvious examples here can be seen in the automotive industry, where specific car models with a high value are sold at a high price. Think, for instance, of the Bugatti Veyron designed by Volkswagen Group – a vehicle priced between $1.7 million to $3 million.
Financial planners, as services-based businesses, would need to think carefully about specific financial products or services which might be perceived as highly valuable, if you are considering this strategy.
Strategy #6: Increase Price/Standard Product
This approach involves taking something that used to be fairly common and low-priced and re-positioning it, making it appear more valuable compared to other items/services on the market.
Think, for instance, of tablet soap – something which used to be seen as widespread, ordinary and low-cost. Nowadays, however, as pricy liquid soaps have become more common, tablet soaps have made a resurgence as an alternative product with a higher cost than before.
Are there any financial products or services which might be positioned in this way?
Strategy #7: High Price/Low Value
If you happen to hold a monopoly, then this strategy could work for you. Think of Google, for instance, with a near-monopoly on the UK search engine market.
Since most financial planners are small businesses with plenty of competitors, however, so it probably isn’t a viable option unless you have a product or service which clients want and no one else can offer!
Strategy #8: Low Value/Standard Price
This isn’t a very sustainable strategy for any business, let alone financial planners and advisers.
It can work in the short-term within certain industries and sectors, until customers start to realise that the quality of the product or service is overpriced – leading to a sales contraction.
On what basis, above, is your financial planning business currently competing?
Are you competing mainly on price, or are you perhaps offering a completely differentiated brand experience, product or service which clients cannot easily find elsewhere amongst your competitors?
It could be that you have realised that there are other strategies open to you, which you hadn’t considered before. On the other hand, maybe you’ve realised that your current positioning strategy isn’t really viable in the long term.
Regardless, it’s crucial that you have a well-thought-out positioning strategy as a financial planning business which will carry you forward over the long-term.
Remember, if you are perceived as the same as any other financial planning firm, then you will subconsciously be regarded as inferior or irrelevant compared to your rivals. You need to differentiate in some way, and ideally, this should be done on another basis than low cost.