Taking a premium position in the market
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I'm better than you are! TAKING A PREMIUM POSITION IN THE MARKETPLACE Gerardo A. Dada | @gerardodada www.TheAdaptiveMarketer.com AUSTIN AMA | FEBRUARY 2012
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This is the presentation delivered at the Austin AMA lunch on Feb 15, 2012. Building and positioning premium products - avoid the commodity trap and make more money by selling premium products.
Transcript of Taking a premium position in the market
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
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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
