Differentiation in professional services: Will AI-driven marketing make it even harder to stand out?

The decline of differentiation in professional services

We’ve been gathering data on how clients see major consulting firms for almost a decade. According to our Client Perceptions Programme, brand and reputation are less likely to influence buying decisions than some other factors: Out of a list of 17 attributes we ask about, brand and reputation have fallen from the most important attribute in 2022 to ninth this year.

Branding still plays an important role in the decision-making process, but primarily at the very early stages rather than the ultimate determiner. If a brand is positioned badly, clients don’t associate it with the work it can do and therefore don’t invite it to tender.

Reputation has, in practice, two facets. There’s the conventional sense of having a “good” reputation, the importance of which a firm only realises when they acquire a “bad” one—although, even then, reputational damage tends to be short-lived. The other side of the coin is price point. Everyone knows that the top strategy firms are more expensive than the Big Four, so they can sometimes be disqualified from smaller or more budget-constrained projects. But that same reputation can encourage clients to hire these premium firms when they feel that the price they’ll pay for stakeholder management is worth the extra cash.

So, brand tells you what a firm does; reputation tells you whether you should work with it and, if you do, how much you’re likely to pay. But neither helps clients make decisions at the next stage in the buying process: shortlisting. At this point, a firm’s expertise and its ability to convert that expertise into concrete results is what counts most. Unfortunately, while these attributes should provide the greatest opportunity for differentiation, our data shows the opposite. In our Client Perceptions rankings, just six percentage points separates the top-scoring and bottom-scoring firms for subject matter expertise overall. For sector expertise, the gap is even narrower at five points, half of what it was in 2018. In relation to the ability to implement—crucial in the current climate—most firms have improved their scores in the last eight years, but the gap between the top and bottom-ranking firms has narrowed from 19 points to five. If we look at clients’ perceptions of the value firms add over and above the fees they charge, the gap is bigger than with other factors (12 points) but is exactly what it was in 2018, so no firm has succeeded in carving out a competitive advantage in this critical area.

This doesn’t mean that the billions of dollars that professional services firms have spent on marketing over the last 20 years have been wasted: A major firm that didn’t spend heavily on marketing would have lost out to those that did. But marketing as we know it today might not be the way forward in the future. But to know what to change, we need to understand why we’ve ended up where we have.

In the B2B world of professional services, the key goals of marketing are awareness and consideration. For the major firms most of our research is focused on, awareness is not an issue. Consideration, however, could be, because most of these firms have diversified over the last two decades. Clients may know that Firm X offers service Y but be only dimly aware that of its capability in service Z. Diversification can breed confusion: Even when they do know Firm X does service Z, they may not be convinced that it will do it well. Most professional services firms have built awareness on being part of a club—the Big Four, the Magic Circle—and they continue to be endlessly obsessed with how their fellow club members are performing.

But the pressure to maintain the status quo comes from the demand side, too. Professional services firms cling on to their pre-established labels to create a shortcut in clients’ minds, to ensure they know where to go when they have a need. Firms that try to differentiate themselves by claiming to reinvent their segment of the market usually lose out because clients don’t understand what they’re talking about or haven’t considered this new service in their procurement process.

Reversing the decline: A modest proposal

At a time when the surviving marketeers are expected to do more with less, AI looks like manna from heaven. AI tools can now expedite the creation of marketing collateral, editing of material, ensuring publications follow guidelines, and much more. Much of the material is fine, and some of it is even very good, and there’s no question that it frees up time for hard-pressed marketing functions to do other work.

But even the best AI-generated material can’t build differentiation. In fact, it probably exacerbates this issue. The more we rely on AI to produce competent, “good enough” marketing collateral, the more it will erode differentiation because every firm will be doing roughly the same thing. Yes, proprietary data and small language models will do better than generic ones, but we’re all starting to recognise that gently upbeat, constructive tone that characterises AI writing. And this jovial tone is woefully out of kilter with the mood of senior executives, for whom an unreliable economic environment poses serious challenges. Moreover, a reliance on AI now, when everyone is short of time, will create a hard-to-kick habit in the future. An increasing number of studies show that extensive use of AI makes us lazy and possibly stupid. Same-y material, inadequately edited by exhausted marketeers, won’t differentiate a firm.

What will? The firm’s people.

In the aftermath of the pandemic, two thirds of clients wanted consultants to stay away from their offices because they were fed up with them wandering the corridors, hawking their business. But times change: The clients we speak to now want to have face-to-face, meaningful conversations about those serious challenges. They want real people with real experience of the issues they’re facing. Consulting and professional services firms have spent years using their branding to smooth out inconsistencies in their delivery. But no two business problems are the same: Genuine, lasting differentiation comes from having experts with deep knowledge yet different perspectives.

What should your firm do next?

To understand more about how your firm is ranked for subject matter expertise, sector expertise, ability to implement, and more compared to your peers in the market, get in touch with our team today to discuss buying one of our Client Perceptions reports. These reports are designed to give your firm the insights you need to understand the topics that are top of mind for your clients and where you can boost perceptions and market share.