Monthly Archives: April 2014

A look at Lazy but Successful Businesses

Have you ever noticed that some service businesses are inherently weak at marketing themselves, but still tend to be very lucrative? Professions that tend to centre around compliance (and adding little direct value) such as legal services, accounting. However many other services, which may have a much more positive impact on your business and have enormous value, such as pretty much everything in the marketing domain, struggle to gain and keep customers and all to often go under.

You, like I, may ask yourself, “what the hell is going on here?”

I’ve been mulling this over and come up with a two by two matrix that I believe explains what’s going on, and can be useful to those finding themselves fighting this battle.

High Barriers to Entry ^ Architect        Solicitor

                       |                     

Low Barriers to Entry  | Marketing       Bookkeeping

                        ————————–>

                         Wanted           Needed

 

Firstly its about being Wanted versus being Needed

Some businesses supply what you need, and some what what you want. Insurance is something that you need, especially if you are bidding for a government contract. accounting services is something that you need, especially if you don’t want to get fined by the tax department, legal services is something you need, especially if you are being sued. Alternatively, training of staff, public relations, design services etc are just something something that you want, but can do without.

Secondly its about Barriers to Entry

Some services have high barriers to supply. You need 6 years of training before you can even think of specialising as a surgeon, you need a licence to be an electrician and you need to hold vast amounts of capital, before you can become licensed to loan money. Alternatively anyone can do their own bookkeeping, learning to write HTML is a free course on the web and you can buy press release templates and media lists online. Y

Positions in the matrix are not fixed in stone though, barriers are constantly dropping and new needs arising. For instance the rise of free online courses such as Code Academy and Scratch are lowering the barriers of entry to professions such as software engineering. Legislation can also create new professions and specialisations, such as mortgage brokers and financial planners. Note also that the “needs v’s wants” and “barriers to entry” attributes for your service business don’t have to be real, they just have to be perceived to be real. This creates an option of tweaking your business to make life easier. Consider:

 

You can move from “Wanted” to perceived “Needed”:

Robert Cialdini wrote about this in his seminal “Weapons of Influence” with techniques such as Reciprocity, Commitment & Consistency, Social Proof, Liking, Authority and Scarcity. Behavioural Economics also focuses on this when discussing irrational buyer behaviour. Examples of how this actually plays out include:

  • Fear Marketing – The perennial favourite line of consultants is “You will go bankrupt/be shunned/die unless you use me”.
  • FOMO – Or Fear of Missing Out. Grants Consultants use this technique to get customers to pay high success fees for money that they are led believe is just waiting for them.
  • Industry Statistics – Everyone loves a good survey that will tell you what your competitors are doing and why you are a loser for not doing it to…

You can also move from “Low Barriers to Entry” to “High Barriers to Entry”:

High Barriers to Entry can be real or just perceived to be real. For instance real barriers that you acquire could include:

  • Industry Certifications
  • Being the Local Node of a Global Network.
  • Being the sole licensee of a methodology or system in your region.
  • Owning registered designs, trademarks or methodologies.

Perceived barriers to entry could include:

  • Having access to individuals or relationships that others don’t.
  • Having unique insights.
  • Having a secret formula.

If you have value, are needed and have high barriers to entry, life becomes very, very easy.