Have you wondered what the “magic bullet” might be to ensure your financial firm stays ahead of the competition and thrives within the marketplace?
The answer might lie in four letters: VRIN, which stands for “Valuable, Rare, Inimitable and Non-Substituable”. It’s a framework which was developed by Birger Wernerfelt in the 1980s, and it offers a powerful way to evaluate your value proposition in light of the competition.
In this article, our team here at MarketingAdviser will be outlining how each component of this framework works – specifically with regards to the financial services industry. We hope it inspires you to think about your own branding and marketing strategy.
If you would like to discuss your own financial marketing/branding strategy with a specialist here at our financial services agency, please get in touch to arrange a free, no-commitment financial consultation.
Wernerfelt’s framework essentially asks you to look at your financial services firm, and compile a list of its resources. These resources might include financial assets of course, but you should also include the other assets you have too – such as experienced/talented staff, company contacts and capabilities.
Once you have spent a good amount of time compiling your list of resources, as yourself: which of these assets could be seen as valuable by your target market, and also offer you a potential advantage over the competition?
It’s important to be honest with yourself when making judgements here. After all, it’s possible for financial advisers and other firms to believe that a part of their business offers value to their clients, yet the latter actually do not see it as a source of real value.
For instance, perhaps you believe that your branded smartphone app offers real value to clients. However, if none of them uses it – despite months of marketing investment, encouraging them to download and utilise it – then is it offering real value?
On the other hand, perhaps you have a resource which your customers regard as very valuable, but which you have marked as “lower priority”. So, you might want to consider asking them which resources on your list are actually perceived as valuable to them, via online surveys or focus groups.
Are any of the resources in your financial services company difficult to find elsewhere, amongst other available options for your target market? If not, then it could be regarded as “rare” and, therefore, possibly offering you a competitive advantage.
For instance, does your financial advice business not only offer traditional services in financial planning (e.g. inheritance tax and pensions advice), but also accounting and probate solutions? In our experience here at MarketingAdviser, that seems to be quite a rare offering amongst financial advisers.
Or, perhaps your business specialises in pension transfers – again, something which many financial advisers do not deal with, and often refer to other firms. Alternatively, maybe you focus specifically on international pension transfer, expat pensions and QROPS.
Try to think about the resources your business possesses which are not only seen as valuable by your target audience, but which are also considered rare. Immediately, this will start to give you a competitive advantage and possibly even give you breathing space to charge a premium.
Think about it, how often are we willing to pay a bit more for something which we really want, but which is hard to find?
Of course, you might have resources which are valuable are rare. Yet how easy would it be for your competitors to notice this, and then copy what you are doing?
Here, we are starting to touch on the subject of “sustainable competitive advantage” in financial marketing. In other words, are your valuable, rare resources likely to remain rare for the foreseeable future? If so, then there is a strong case to build your marketing strategy around these resources.
If not, then ask yourself whether your strategy is going to carry your business forward into longer-term profit and dominance in the market segment you are targeting.
For instance, if you are a financial adviser which also offers accounting and probate services, how easy would it be for your rivals to also develop these assets and also offer them to your target market? It might be that most of your competitors simply do not have the infrastructure or staff to present a viable threat. On the other hand, perhaps they could plausibly pivot in this direction if they wanted to.
Finally, it’s important to look at your business resources and ask yourself: “Could any of our valuable, rare and inimitable assets be realistically replaced by something else – possibly which is cheaper, faster and/or more reliable from the perspective of the customer?”
In the financial advice and investment management sectors, this is where the subject of “robo advisers” often comes up. Could software and computer algorithms ever replace human advisers and active fund managers, offering a cheaper and more reliable service for investors and clients?
Some people would say that these technological innovations do indeed pose a significant threat to traditional businesses in these sectors, and they should, therefore, adapt and integrate these new solutions into their value proposition in order to remain viable.
Most financial services firms, however, would likely argue that these technologies might well offer a plausible advice/investment solution for lower earners and for those with lower wealth. Yet for higher earners and wealthier individuals, robotic advice and investment management will never be able to replace the value offered by a human adviser, particularly with regards to the value of long-term client relationships and emotional guidance.
It’s an interesting discussion, but not one we really want to focus on here. The point, rather, is to get you thinking about the parts of your financial services business which are not only valuable, rare and inimitable, but which are also highly protected from substitution by other products, services or solutions in the marketplace.
If you can identify the resources in your firm which meet these four VRIN criteria, then you are in a strong position to craft a viable, long-term marketing strategy which can set you on course to achieve your marketing and business goals.