Who are your closest competitors? How are you going to beat your competition? What makes you better than your competition? What are the differentiating factors between you and your competition?

You get asked these types of questions all the time from your prospects, your clients, and your internal staff. Don't overdo trying to answer them.

Reading service firm business plans and talking to service business leaders about becoming more competitive are a part of what I do every week. Invariably, I find that the people who run services firms waste a lot of time and effort worrying about, and angling against, other firms that provide similar services. Usually, it's just not worth your time and focus.

Below you'll find an outline of four common mistakes that service firm leaders make and five tips on how to save time, money, and heartache when thinking about the dreaded competition.

Mistake #1: Beaten-to-Death Research

Some service firm business and marketing plans list and describe page after page of information about their competition. "Over the past three months, we were able to successfully locate 77 other negotiation consulting firms. Detailed descriptions follow, along with our unique positioning against each one..."

My Reaction: What a waste of three months of someone's time. Most people would laugh at an accountant who confidently stated, "I have discovered that there are 142 other accounting firms in the state and can confirm that 131 of them offer a number of services similar to ours." Yet somehow this information shows up in service firm marketing plan after marketing plan as if it were a necessary component.

Mistake #2: Market and Service Offering Reluctance

Many service firms are reluctant to offer a new service that compliments their current services because a competitor already offers it. "You see, we can't launch an intellectual property law practice. At least five other firms offer that in our market, and I learned in business school that first movers have an advantage. If you're not No. 1 or No. 2, you shouldn't launch into the market."

My Reaction: Law firms, consulting firms, IT firms, financial services, and other professional services are not Coke and Pepsi. The market dynamics just don't work like that.

Mistake #3: Cliché Competitive Differentiation

"We at ABC Tax and Consulting Services are the number 1 provider in our market. Our biggest differentiator is our people who take a strategic look at our clients' businesses and blend people, process, and technology to create efficient and effective solutions for our clients' most pressing strategic needs. We're more than tax services, we're strategic business advisors with the experience you need."

My Reaction: Copy like this takes a lot of space and says nothing except, "I have nothing real to say, so I'll use some meaningless marketing speak."

Mistake #4: Unique Methodology

"We have a unique methodology that allows us to deliver projects more efficiently and with greater ongoing success. There are 5 major steps: discovery, design, development, implementation, and measurement."

My Reaction: Sure, it's unique—there's just one process like this—but everyone uses it or something similar.

Misconceptions like these hinder service business growth and success because they limit the thinking of the people who run firms and practices.

What should you do about these misguided views of your competition?

Tip #1: Forget Your Marketing Textbook

Your marketing textbooks will tell you to...

  • Be the first mover in a market. You'll have an advantage over later entrants.
  • Be number one or two in a market. No one else can make enough profit.
  • Have a unique selling proposition that other firms can't easily duplicate.
  • Be amazingly different from other firms in your space. Differentiation is key.

I ask you, who grabbed the position first, and now owns, high-quality investment advice in Boston?

John Hancock • Citigroup • Brown Brothers Harriman • Fidelity Investments • Charles Schwab • TD Waterhouse • Salomon Smith Barney • Banknorth • TD Waterhouse • Charles Schwab • Citizens Bank • RBC Dain Rauscher Tucker Anthony • Wainright Bank • Eastern Bank • Sovereign Bank • Prudential Financial • Legg Mason Walker Wood • Merrill Lynch • Morgan Stanley • Paine Webber • Bank of America • Boston Private • Fiduciary Trust • Edward Jones • A.G. Edwards • Bear Stearns • Dozens of smaller banks • Hundreds of CFPs, CPAs, and insurance firms • Hundreds of others

Does it matter who was there first?

Do you think people in a six-person law firm can't make big money? They can, and they can do it in a market where there are 200 person law firms that deliver the similar services to similar kinds of clients.

Are their services really different from each other? Do you want a "different" kind of dentist fixing your teeth, or do you just want a good one?

Marketing textbooks (and many business books and consultants) focus on Proctor and Gamble, Whole Foods, U.S. Steel, and Coke vs. Pepsi. We identify with them all, and they're quite interesting. But the strategies they espouse can't usually help the 35-person consulting firm grow to 50 people. More often, they get in the way.

Tip #2: Don't Worry About Crowded Markets

I couldn't tell you how many Italian restaurants are in New York's Little Italy, or how many steak houses there are in Chicago; there are simply too many to count. But, I am pretty confident that there is not a booming row of authentic French bistros in Peru, Maine.

If you're a human resource consultant, and there are a multitude of human resource consultants that do what you do in the market where you do it, it simply means there's a market for it. If you look for a space to "create a market" and "be the first mover," there's a good chance nobody's there because nobody's buying.

In the micro-economic technical sense, the Coke vs. Pepsi market dynamic is "oligopoly," while service firm markets are "monopolistic competition." In oligopoly, you have a few top players with all the clout, market share, and profits, and everyone else struggling to survive. This doesn't happen in monopolistic competition. There are 88 pizza restaurants in the Yellow Pages in Miami, FL. The 89th can make it, too, if the pizza's good.

Enter a crowded market where there's lots of business to be had, and lots of clients with needs, and (assuming your pizza's any good) there's a good chance you can thrive. Open a French bistro in Peru, Maine... good luck selling foie gras.

Tip #3: Change the Question from Competition to Clients

Let's say you're interviewing someone for a job at your firm. It's perfectly reasonable for them to ask you, "What differentiates you from your competition?" Same thing goes with your clients and prospects. You may feel the need to answer—comparing yourself both categorically to your competition and then against specific competition. And on and on about your competition.

You don't want the conversation to linger on about competition. The more you talk about them, the more you validate that your client, prospect, or staff member should be comparing you to them.

Instead, like a good salesperson, take control of the questioning and you will take control of the conversation. For example, you might answer, "Well, we have a very robust research division that keeps us on the cutting edge of the ABC field and, to my knowledge, the competition doesn't. In fact, they quote our research to make their points, but at the end of the day we're the leaders, not them.

"Importantly, I don't know what they do with our research. I know what we do, however, and how it makes our clients' lives better. Here's a specific example from your industry... How might this fit with what you're doing?"

Tip #4: Drop the Clichés

When you do answer the question, "What makes you different?" don't answer, "our people...people process and technology...efficient and effective...we're the best...we're unique...cutting edge...push the envelope...go the extra mile...client-centered...etc."

If you do, you'll simply be helping people win their game of buzzword bingo. (Don't believe me: Google "buzzword bingo," and see what comes up first.)

Have something real to say.

Tip #5: Overcome Your Greatest Competitor—Client Indifference

Finally, and perhaps most important, realize that for most product companies the competition is another product company. For most service businesses, the stiffest competition is the indifference of your client to do anything, do more, or the desire of your client to "just do it with in-house resources."

In How Clients Buy: The Benchmark Report on Professional Services Marketing and Selling from the Client Perspective, 40% of 200 buyers of consulting and professional services encountered service providers that did not understand their needs; 32% said that the service providers did not convince them of the value they would receive from the service provider.

You have to convince the buyer of the value that your services will bring to the table regardless of how you stack up with some competitor. So worry less about who your competitor is, and worry more about the value you offer to the client. You'll win more deals in the process, and beat the competition without even giving them a second thought.

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image of Mike Schultz

Mike Schultz is president of RAIN Group, a global sales training and performance improvement company, and director of the RAIN Group Center for Sales Research. He is the bestselling author of Rainmaking Conversations and Insight Selling. He also writes for the RAIN Selling Blog.

LinkedIn: Mike Schultz

Twitter: @mike_schultz