Price versus value, cost versus value

differentiation, Marketing, Positioning, Product Management, Value, value proposition

This is a pertinent question in marketing or sales. I keep getting the statement – the price is too high – compared to what?

Does anyone going to a Ritz Carlton or a Four Season hotel say the price of the room is too high. Does anyone who is buying a Roll Royce or Lamborghini ever say the price is too high. For a lot of people the Mona Lisa is just another painting, but for a lot of others it could have huge value hence its kept under so much security unlike another painting in the Louvre museum.

I think its the marketing and sales teams’ responsibility to position the offering that they have, correctly. This does not mean that there won’t be competitive situations. Especially in technology marketing where the entry barriers are very low, the competition heats up very fast.

Even in technology companies though you will see that there are disruptors who come in and take away a large share of the market suddenly but companies like IBM , Oracle and others who continue working on giving more value to their customers and charging a distinct price differential.

The key point that needs to come out is Value. Like beauty lies in the eyes of the beholder, value is specific to the buyer. Unlike Gold which has a fixed value defined, most other things like houses, shares etc. all have relative value. For one person who is selling a share the value is less than the price he is selling it at, while the buyer is seeing more value than the price she is paying for it, hence she is buying it.

Similarly if the customer see the value that you offer for your product same as what someone else offers, then the only differential is price that the customer can work on.

One of the best ways to reduce the cost/price value argument is to educate the customer so she sees you as the authority on the subject. I have shared multiple posts on how education has eliminated the price discussion from the buyer’s mind altogether.

Other ways off course include things like the ecosystem – if you are part of a proprietary ecosystem than you have very little competition – IBM Mainframes , Apple and others have very strong ecosystems and the discussion on just price does not take place.

The key for any marketing or product management person is simple they have to be able to build the value of the product or service in the minds of the customer preferably through education. For the sales person its important to identify and understand the value that the customer is looking for before easing time on a deal.

As I said earlier “VALUE” lies in the mind of the person buying.

Till next time then.

Carpe Diem!!!

Importance of the ecosystem in marketing

Marketing, Marketing Ecosystem, Product Management, Technology

I have been harping for a long time, in case you are coming out with a new product/service in the market, you need to check for the availability of the ecosystem in the technology market space. So if you are Google or Facebook, you cannot expect to enter or dominate the market if there is no internet connectivity.

I have also written earlier about how Thomas Edison was among the few people who had systematised the concept of testing in his New Jersey Labs . There were hundreds of people testing various aspects of his inventions in parallel. He was not testing things serially which is more time consuming.

Incidentally while the light bulb is attributed to Edison, there were at least another 20 odd people who were building the light bulb at the same time.

What is important to remember is that Edison understood the concept of the ecosystem for the success of the light bulb. If there was no electricity, the adoption of the light bulb would not happen. I guess his experience of working with the telegraph company, had given him this background.

For those of you who don’t know Edison was also among the original promoters of what we know today, as the General Electric company and it was called the Edison General Electric. So while the light bulb was being designed, they were also designing the electric network that would get the electricity to the homes of the people so that there would be an immediate market for his invention.

Edison was the perfect marketing / business person who understood that the ecosystem is most critical when getting a new concept into the market.

Even today, there’s so much noise about different technologies that are hitting the market. What is important for the technologies to succeed is the infrastructure or ecosystem to be present in a very stable condition. If the ecosystem itself is shaky then you won’t be able to get the new technology launched successfully. This is one of the most critical lessons in product management which people miss.

Till next time then.

Carpe Diem!!!

Segment Profitability

Product Management, Profitability, segmentation

As a product manager you look at creating extensions to meet needs of different markets. However not all segments are created equal.

While it’s good for the ego to know that our product is present in multiple segments, some segments are more profitable than others. As a product manager you need to be aware of it because otherwise some finance guy may draw up his own conclusions and shut down your product line.

There could be various ways of doing an analysis of each segment. One method that I have found easy and quick to use & keep me aware is suggested by Richard Koch in his seminal book The 80/20 Principle. If you have not read this book, I would recommend you stop doing everything else and pick it up at the Kindle store.

His suggestion is to segment your market by competitors. The segment where you face the same competitors you club together. Whenever the competitors change you account as different segment. Now fighting different types of competitors in different market segments requires bandwidth of all kinds of resources.

If you know against which competitors you win more easily and also make more money because of scale or whatever else, then as a product manager you should do everything to win even more so that the absolute profit that your product line creates grows.

On the other hand if there are segments, where you find it difficult to win against other types of competitors then you should avoid.

There was a time when I was carrying a product line of an operating system . Now I could sell services to end customers for managing their operating systems, I could sell them training on those operating systems for corporate customers and individuals who wanted to pick up the skill.

While it was easy to sell services and training to companies, when it came to selling in retail our systems were failing against dedicated retail training companies. So even though my product remained the same, in the retail market my competitors were different and I had to leave that segment. Till that time I had not read this book. Now I like to keep evaluating on regular basis how my different product lines are doing in different competitive segments.

Till next time then.

Carpe Diem!!!

Understanding your competition

B2B, competition, Marketing, Product Management, segmentation, single target market

If you can’t think what your competitors can do you will be someone’s lunch soon.

In my earlier posts I have written about why it’s important to have competition. For one it shows there’s a market. That’s a very critical point.

Second if the competitor has entered the market before you then you can learn from their mistakes. Third it helps you define your niche even better.

But competition is a very dynamic thing. The horse carriage people did not think Automotive would make them a relic.

Especially when you are doing product management in a technology industry you need to look out where the next competition will come from. Generally it never comes from your known competitors.

Did Nokia realize that Apple will totally decimate them. Or for that matter Kodak even though Kodak itself had built the first digital camera.

One of the best ways to understand where you competitors could hurt you is by placing yourself in your competitor’s shoes. Knowing the weaknesses that exist in your existing product or service or technology identify where could some other company come and displace you.

This may not always alert you to the company who could hurt you but it could help identify trends in the market which could go against you.

Which brings me to the other aspect of product management. Be out there in the market, in the store or with a customers, consistently trying to understand why customers are looking at something else instead of buying from you. It’s most often not only about price.

Till next time then….keep watching for your competitors.

Carpe Diem!!!