Why Services Commoditize, And How To Avoid It?
The expertise and information you need to deliver your services are free - you can’t put it in a cage. As more and more people learn those skills or acquire this information, the supply in the market comes up and the price for it goes down. This is caused by a number of factors:
What's the solution? You avoid service commoditization through specialization.
This happens because it makes your services clearly understandable, memorable to the right prospects, and able to earn trust more readily.
Also, the narrower your focus the more often you will be exposed to repetitions of similar problems. This gives you an expertise-building advantage that helps you move out of the bottom of the market. Your generalist competitors take much longer to cultivate meaningful expertise.
The degree to which expertise accompanies any specific segment is coupled inextricably with the possibility of malpractice or causing harm to the general public by exercise of that expertise. At the top of that expertise pile would be a surgeon, perhaps, who navigates years of education and residency and is then certified to practice in a narrow area (...). If that surgeon fails in his duties and violates his public oath, his malpractice insurance carrier will drop his policy, he might be sued, and he might go to jail.(...)
Which professional service is at the bottom - as in, the lowest barrier to entry and the least amount of oversight? Probably marketing, sad to say, or even management consulting in general (...). As much as we like to say that we appreciate that the government is out of our business, they apparently think that consultants can't do enough harm - or good, if you flip that around - to warrant a second glace.(...)
The point here is that the more good or harm that any expert can cause, the more specialized their positioning.
High growth firms (who average a 9x faster growth rate and 50% higher profitability than the market) are almost 3x more likely to have a strong differentiation - either via specialization or business model innovation.
Can you, without any preparation, provide 20 surprising and practical insights that emerge from your current specialization decision?
Example: You are a marketing firm that works with food and beverage brands. Assume I'm smart and know a fair bit of marketing. As you share your insights, will I learn some things about marketing for food and beverage brands that have never occurred to me?
If you can't articulate those insights quickly, you probably don't have that expertise and will struggle to communicate it to a prospect. And if you can't put 20 of them together, your positioning isn't deep enough. You can and should specialize more.