Jun 26, 2024

Importance of market perspective in professional services sector.

Leaders of firms should develop a process that enables them to take stock of their target market regularly. This process should include a regular assessment of their businesses, the market environment, and their competitive position. 


Why market understanding is essential? 

No matter how big the company is and how the company works in the market, its leader needs to understand the market perspective to make sound decisions that safeguard the future health of the business. Closeness to the clients is considered the greatest strength of professional services firms. 


A reprise of relevant concepts. 

*Clear view of market definition 

The most important for leaders to think about is how they define the market they are operating in. If the leaders define their market as a ´high-end executive search´, they are limiting themselves to a model of business which operates in a small potential fee pool. If defined as executive ´recruitment´, that involves recruitment advertising and interviewing across all levels of management. Furthermore, if defined as a ´top talent management´ it is a more hands-on approach, offering ´top executive team benchmarking´, internal development, and advice on organizational structure. 


*Insights from the phases in the growth of a market 

The market evolves through several key stages: introduction, growth, maturity, and decline. Each company has different success criteria and cost challenges so they should adopt different strategies. If leaders understand the phase they are in, they can set a strategic direction for the firm in the light of those insights. For instance, at the time of writing, executive coaching is in the introductory phase. In the phase of growth, firms must concentrate on servicing demand. The signs of the maturity phase include informed and demanding clients; buyers’ knowledge of the offer; price pressure and slowing growth; rationalization and consolidation in the market; the rise of niche suppliers and new laws and regulations. 


*Understanding the competitive position 

Competitive position matters as it is based on client perceptions of value. By holding a clear position, a firm can maximize its margins. Every company has its position in the market: ´Market leader´- dominant share and ability to influence the rules and engagement; ´Follower´- it is smaller and able to earn a profitable existence by providing a healthy alternative either in terms of price or the features of the service. Other positions include: `Least cost´- which means low price and low quality, while ´ premium ´ and ´niche´- high price and high quality. 

To improve internal communication, it is smart to use perceptual maps based on both client’s perceptions of value and the firm´s views. The map highlights the gaps between what the firm believes and what the client thinks. 


Opportunity analysis. 

The reason for undertaking the analysis of the market is to gain insights into new opportunities or to find justifications for closing declining areas of business. Three tools can be used to structure thinking and debate: 

  • SWOT Analysis: it helps with the identification of internal strengths (S), weaknesses (W), external opportunities (O), and threats (T). 
  • Ansoff matrix helps examine both current and potential offers in current and potential markets. It helps leaders think through four different growth strategies: market penetration, market extension, product development, and diversification. 
  • Directional policy matrix: it helps the firm balance its strengths against the attractiveness of a market. 




Tags: competitive position, Market Perspective, Professional Services