In an era characterised by increasingly sophisticated customers, margin pressure and candidate shortages, small recruitment businesses in particular struggle to position themselves effectively. In the fight for survival, many adopt the pricing schedules of larger competitors, but do so to the detriment of their competitive positioning.

It may come as a surprise, but price is not the sole driver of the decision to use a particular recruitment firm. Admittedly, procurement-oriented Preferred Supplier Agreements have a tendency for price-focus, but these arrangements are in the minority. The 2002 Client Satisfaction Report prepared by Navigator Consulting actually found that only 1% of respondents rated value for money/pricing as their most important factor when hiring new staff (56% nominated getting the right quality candidate with the best possible fit).

Price is only one element of the customer value proposition. It is poignant to note that recent anecdotal evidence suggests that many clients are actively choosing not to engage cut-price recruitment service providers, as the lower fees tend to communicate negative messages, such as an inability to deliver, desperation and lack of value. Clients want the best perceived value, not the lowest possible price.

This perceived value is clarified in a customer value proposition, which essentially defines how you are choosing to compete. It works hand-in-hand with the understanding of the target customer segment and is the precursor of all operational processes, marketing communication and the makeup of your workforce. The generic customer value proposition model outlines the key elements that define a company's competitive positioning:

Product/Service Attributes

Functionality refers to the breadth and depth of a product/service offering. For example, we are seeing an increasing number of larger recruitment firms broadening their suite to include talent management, statutory compliance and HR advisory services. Whilst the investment required for developing, launching and delivering such services often exceeds the resource constraints of the smaller recruitment business, tools such as psychometric profiling, OH&S audits and performance management services are readily available through partnerships and strategic alliances.

The well-publicised adoption of ISO, Best Practice Certification and other quality programs by recruitment firms demonstrates the significance of such efforts to the overall value proposition. Some client segments put high emphasis on the attainment of such standards, whilst others see little direct value, preferring to judge quality purely on outcomes.

Price, one of the most debated topics in the past few years of rampant discounting, is an important element, but is by no means the most important as discussed earlier. Keep in mind that at the other end of the spectrum, premium pricing can actually be a selling point. Executive search firms are a case in point. Their fees suggest a higher level of professionalism and a guarantee of the best possible result, even though they may be double that of the mainstream recruiter.

The final product/service attribute - time - appeals to the quick turnaround assignment. This tends to be important to higher-volume clients and those needing temporary or contract workers at short notice. Keep in mind, though, that a faster process is more often than not at odds with the desire for quality.

Image

The image and reputation dimension reflects the intangible factors that attract a client to a company. Again, an effective value proposition is based on a thorough knowledge of the core customer segment and their motivators. It is therefore critical to create an external visage for the company that accurately reflects the desired image and reputation.

A core element of image is the company's brand, and it is worthwhile undertaking a thorough brand assessment process to ensure that the company's branding is consistent with the target market. For example, an image that attracts government business is unlikely to appeal to dot-com entrepreneurs.

Relationship

The relationship dimension defines the client experience. Clients, prospects and candidates often point to the level of service they received and the depth of their relationship with a recruitment firm as a key factor in their buying decision. Firms with high consultant turnover and an end-to-end model find it difficult to compete effectively in this dimension as clients find it extremely difficult to build effective relationships with a consistent level of service.

So how are you choosing to compete?

Despite the lure of matching the price levels of competitors at a moment's notice just to win the business, there are more factors at play than price alone. Besides, most industries are suffering from candidate shortages, which according to Economics 101 principles should actually drive prices up!

Before defining your company's value proposition, it is important to truly understand your target client segment. What matters most? Least? What are their expectations? How does using recruitment firms fit into their overall workforce strategy? Once you understand these drivers and others, your value proposition should be crafted to appeal to buyers.

It is easy to fall into the trap of attempting to be all things to all people, but such efforts invariably end in disappointment and the dissatisfaction of clients, candidates and/or employees. A well-defined value proposition provides the clarity and strength of purpose to compete effectively in the recruitment marketplace.