A specialist commands a higher price, greater loyalty and better referrals. With professional service firms and other service industries, where there may well be others who can claim specialist status this may be achieved via segmentation.
First of all, a specialist commands a higher price due to scarcity value or perceived success rates. For example, a high-profile divorce lawyer will attract high profile clients whether or not their actual success rate is any better than a lower profile competitor. Likewise, an accountancy practice that highlights its expertise in private equity is likely to win more private equity clients. With this expertise, scarcity value and perceived success comes a higher premium. Clients will be more likely to pay extra for brand assurance.
Greater loyalty is also a by-product of specialisation. If a client believes that they are with the best firm they will tend to stay with them rather than “risk” going to another firm, even though it may be considerably cheaper. Take for example a private business where the owner is looking to sell. There are plenty of M&A specialist law and accounting firms in central London but a provincial firm may well be able to do the same job at half the rate. The central London firms tend to get the work due to the perceived reduction in risk.
And finally, better referrals. As a portfolio of work is built up so do referrals. In effect these businesses are perceived to be even more specialist as time goes on, and with good promotion alongside this work it becomes a virtuous circle.
Professional services, commercial banking and many other business-to-business concerns have many competitors who all have great people, good experience and therefore the capability in most of their business areas. Segmentation is therefore a way of creating a perceived difference.
For example a commercial bank can specialise in trade finance and further down the line narrow that market to geographical areas and then perhaps even sizes of business. A law firm can look to segment its practice into a key area such as litigation and then perhaps real estate litigation and then focus on industrial real estate.
Marketing this segmentation becomes increasingly important. Partners or directors commenting in the press as experts can make a difference, white papers can demonstrate an enhanced degree of knowledge and blogs or articles can be created for social media to spread the word. These are just a few methods that can be used to build a reputation as a leader in a particular field.
Some business create a series of sub brands to demonstrate their diversity whilst maintaining a specialist profile. Bigger law firms tend to have departments such as real estate, commercial, employment, litigation to tread the line between specialist and generalist – this is segmentation in its most popular form.
The Specialist by Charles Sale is about a local builder in outback America who specialises in building outside privies. Ostensibly a book of wisdom and humour this could actually be seen through another lens as perhaps one of the best marketing books ever written.