Research is important. But did you realize it could help your organization avoid one of the most significant pitfalls: self-commoditization?
[Side note: For this post, the “self” in self-commoditization refers to the organization as a whole—as a result of employee perceptions.]
The benefits of brand research
Before we get into this wily concept, let’s have a quick refresher on the importance of brand research.
Research helps you understand the following:
Your clients’ perceptions of your organization
Untapped opportunities
Who your real competitors are
Which services your clients value
Your true differentiators
Where internal and external audience perspectives differ (those dreaded perception gaps)
Ultimately, regular brand research helps your company grow and become more profitable. How? Research gives you the strategic insights you need to validate and support important decisions. These market insights also help you craft appropriate, targeted messages to your specific audience.
What are the drawbacks?
What is self-commoditization?
Broken down into its root elements, commoditization is the rendering of a good or service widely available and interchangeable with one provided by another company.
This concept is typically witnessed within the consumer goods market, with common purchases like toilet paper and paper towels. Naturally, there is an element of brand loyalty involved in the purchase decision. However, it’s very easy to relegate the choice of goods to a price point—putting more pressure on companies to invest in brand, advertisement and product innovations to appear more differentiated.
We see commoditization more and more in the professional services marketplace, as well. As the pool of competition grows (through formation of new firms, mergers and acquisitions, etc.) it is more difficult for providers of professional services to differentiate themselves. This increased competition also creates a buyer’s market. Greater choice puts more pressure on procurement and the need to compare “apples to apples.” Without seeing or understanding differentiators, the choice is a matter of “ini, mini, miny, mo.” No organization wants to be considered a simple checkmark in the needs column of a project.
As a service provider, you would be remiss if you did not anticipate that buyers may will commoditize your services. You may be conducting research, developing your targeted messages and embarking on a campaign to alter external perceptions. But what is often overlooked (or misunderstood) are the internal perceptions. This is where the “self” of self-commoditization comes into play.
Hinge regularly conducts primary research on the professional services industry. In the past decade, we have sought out the insights of more than 8,500 CEOs and executives of companies of various sizes and focus. We also conduct brand research (as well as other kinds of research) for our clients. As a third-party researcher we have been able to expose the growing trend of self-commoditization.
An insidious disease within your organization
More often than not, self-commoditization goes unrecognized, unacknowledged, or sometimes a combination of both. It can be difficult to see and understand its symptoms. And that is why conducting both internal and external research is so important.
Let’s look at a prime and practical example.
In brand research we often will include a question that we call the “big question.” This question sets the tone for the conversation with an interviewee (your organization’s client, prospect [lost or active], or influencer) because it focuses solely on them and their issues and challenges. We purposely do not mention the organization for which the research is being conducted. (When looking to connect with your external audiences, you want to make sure you are finding ways to address their biggest challenges—any way you can.)
As people respond to this big question, we find their biggest challenges or priorities fall into three typical responses, listed in order of decreasing importance:
Budget pressures and other financial issues
Maintaining quality or efficiency
Attracting and developing new business.
There can be upwards of 10 or more responses in addition to these top three. Yet, these have reigned supreme over the last 6 or 7 years.
[Side note: You may be wondering how you can help your clients with these issues unless you’re a business consultant or financial advisor. A individualized approach based upon your firm’s capabilities and potential is helpful in these circumstances. But that is fodder for another blog post]
We also ask this question (as it relates to your organization’s clients) to internal audiences—employees. Overwhelmingly, internal responses indicate that employees consider three items as their client’s challenges or priorities:
Budget pressures and other financial issues
Keeping project costs in control
Maintaining quality and efficiency
At first glance this list may seem innocuous. Indeed, it is nearly identical to the external audience responses. However, pay close attention to that second item “Keeping project costs in control.” This is, in fact, the first hint of self-commoditization that we see in research analysis.
You may be surprised to know that, while internal respondents often indicate project cost control as the highest or second-highest challenge for clients, clients typically rank that response among their bottom two responses. The gap in perception is upwards of 60–70%.
This disproportionate internal focus on cost arises in other questioning of internal respondents. While budget and financial pressures are a concern for your clients, it has to do more with their organization as a whole versus their particular interactions with your firm.
The following sample of top internal responses allude to the problem of self-commoditization.
Question: What tips the scales in favor of an organization when buyers make a provider selection?
Response:
Delivering a quality product
Ability to deliver results
Cost and budget determination
Question: What are buyers trying to avoid when making the provider selection?
Response:
Overpaying, cost overruns, billing surprises
Question: What doe buyers really want from a provider?
Response:
Competitive pricing/cost
Great customer service
Question: What clients would change about a service provider:
Response:
Price/cost
Again, these responses may not seem a cause for alarm, but we have conducted brand research for hundreds of firms. We know how damaging the internal misperception can be. It reduces vibrant organizations to their bare elements: doing the job/providing the service and pricing “fairly.” These are the absolute vestiges of commoditization.
What reveals the issue also helps reveal solutions
As I indicated early in this post, brand research is the tool to assess the extent of the self-commoditization disease and to combat and help eradicate it.
This does not mean that research is the only solution. In fact, research studies are intensive and sometimes problematic. Often firms learn something (from either internal or external audiences—or both) that is unexpected or even unflattering. Very few organizations invest in research as a vanity exercise.
The real purpose of brand research is to reveal the health of your brand and summon true and deliberate change.
Hinge has guided many firms through this process and helped them use research insights to make improvements. Although it is hard work, it is a necessity for organizations that want to grow in the years to come.