I'm better than you are!TAKING A PREMIUM POSITION IN THE MARKETPLACEGerardo A. Dada | @gerardodada www.TheAdaptiveMarketer.com

AUSTIN AMA | FEBRUARY 2012

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Premium is about value

Premium.

A high value or a value in excess of that normally or usually expected

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Why seek a Premium Position?

Make more money

Differentiate

Enter a saturated market Broaden product

strategy

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Then, Allstate get’s it

“We protect you from mayhem - You are in Good Hands”

Leading with price erodes value

Dad, All these companies

claim to be the cheapest.

They must be lying.

- True statement from an 8 year old girl

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70.9 % of the World is Covered in

Water.

Water actually falls from the sky.

My product is a commodity

Understand the extrinsic value of your product

Place and time are sources of value tooHave you ever bought milk at a gas station?

Commodity - a class of goods .. which is supplied

without qualitative

differentiation- Wikipedia

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Commodities in technology

SQL is an ANSI and an ISO defined

standard

MySQL is a powerful and free SQL

database engine used by large enterprises

Yet Oracle and Microsoft have built multi-billion dollar businesses selling “commodity” SQL

databases

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..better and different for who?

Premium Positioning is achieved by focusing efforts and optimizing

products for a segment of the market that is willing to pay a premium price

I am Better than You Are

It is not about being “better’ it is about being Different

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Product Leadership

Premium is a Business Strategy

Operational Excellence

Customer Intimacy

Differentiation is building your business on a strategy to target a specific type of buyer

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Opportunity: Customers are not satisfied

Source: Statmetrix US B2c benchmark 2011

THE ONE SECRET TO BUILDING PREMIUM PRODUCTS

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People buy emotionally and justify their decisions

rationally

Robots don’t buy your products

SEVEN STRATEGIES TO ESTABLISH PREMIUM POSITIONING

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Your whole product as a multi-sensory experience:

Starbucks sells a place, smells, warmth , reward, and location

1. Sell the Experience

Photo by Stevecadman – creative commonsPhoto by strikeseason – creative commons

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Marcus Buckingham’s basic human needs

Fear of death Need for security

Fear of strangers and outsidersNeed for community

Fear of the future and uncertainty Need for clarity

Fear of chaosNeed for authority and classification,

order

Fear of insignificance Need for respect

2. Appeal to Emotions

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Products that Appeal to Emotions

Fear of death Need for security

Fear of insignificance - need for respect

Need for community

Louis Vuitton handbag - $1,500Michelin Pilot Sport PS2 ZP - $1,900

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Photo by: igilmour

3. Align prices with Value

You might already have a premium product

But you are selling it at a commodity price

Pricing Lesson from the Concorde

Priced as a commodityCost+ model based on ‘similar’

productsLosing money – at risk of being

cancelled

BA asked customersThey doubled price

$500 million in profits

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4. Goldilocks Product Portfolio Strategy

This water softener is $550.

Is It a good deal?

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Good

$550.

Goldilocks and Pricing Anchors

Better

$750.

Best

$1,150.

Goldilocks pricing applies in B2b – pricing proposals

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$9.

4. Packaging and Price communicate value

$499.$49.

The main difference? The bottle

The story of the Double ‘Torta’ and the placebo

effect

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Xeround’s product works exactly the same regardless of where the data is stored

Hundreds of customers pay 80% morefor the peace of mind of storing their data at

Rackspace

5. Understand the Intangibles

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Red Hat has built a $ 9 Billion dollar business selling free software.

Premium Free?

How?

Red Hat sells peace of mind

• Standardization – well defined target

• Support – Providing a throat to choke

• Legal Protection – open source assurance

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Trader Joe’s Strategy Limited choice of unique products Hawaiian shirts Quirky marketing Cedar-planked walls $8 Billion in sales

“It's not what is sold on the shelves, it's how it's being sold that's been the key to Trader Joe's success. “ – Clark Howard

6. Be Different

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“My real competition wasn’t other brewers. It

was ignorance and apathy.

Our mission is to educate people about

beer”

“Sam Adams is not a beginner’s beer”

- Jim Koch, founder of the Boston Beer Company

Your product must be different

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• Trader Joe pays employees $16 per hour plus 25% of profits shared

• Happy Rackers go the extra mile to deliver fanatical support

• Every Ritz Carlton employee has a ‘make customers happy’ budget

• Nordstrom employees build life-long relationships with customers

7. Empower EmployeesHappy & empowered employees delight

customers

SUMMARY

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Don’t deceive or abuse customers Internet charges at hotels Gas charges at rental companies Anything called a “convenience fee” Bag fees at airlines ‘Premium’ products without value

Watch out for bad profits

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People Buy Emotionally People buy Experiences Price communicates value Packaging communicates value Employees create value Differentiation, when it serves a set of

customers, creates value

Premium must deliver value

Thank You

GERARDO A. DADA

www.theAdaptiveMarketer.com

@gerardodada

gdada@hotmail.com

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Sources:• http://blogs.forrester.com/sucharita_mulpuru/12-02-02-the_guts_to_grow_what_amazoncom_trader_joes_and_westin_hotels_have_in_common

•http://www.pbinsight.com/blog/details/if-trader-joe-managed-your-communications/

•http://www.cbsnews.com/8301-505125_162-28245442/10-secrets-to-trader-joes-success/

•http://www.clarkhoward.com/news/clark-howard/shopping-retail/trader-joes-offers-new-model-for-success-in-grocer/nFWF/

•Torn paper from http://greatvectors.com

•Koch quotes from ‘Killing Giants’ by Stephen Denny, p. 30-33