Taking a premium position in the market

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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.

Published in: Business, Technology

Taking a premium position in the market

  1. 1. Gerardo A. Dada | @gerardodada www.TheAdaptiveMarketer.comAUSTIN AMA | FEBRUARY 2012
  2. 2. Premium is about value Premium. A high value or a value in excess of that normally or usually expected 2
  3. 3. Why seek a Premium Position? Make more money Differentiate Enter a saturated market Broaden product strategy 3
  4. 4. 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 Then, Allstate get’s it “We protect you from mayhem -You are in Good Hands” 4
  5. 5. Commodity - a classMy product is a commodity of goods .. which is supplied without qualitative differentiation 70.9 % of the World - Wikipedia is Covered in Water. Water actually falls from the sky. Understand the extrinsic value of your product Place and time are sources of value too Have you ever bought milk at a gas station? 5
  6. 6. 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 6
  7. 7. I am Better thanYou Are It is not about being “better’ it is about being Different ..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 7
  8. 8. Premium is a Business Strategy Product Leadership Customer Operational Intimacy Excellence Differentiation is building your business on a strategy to target a specific type of buyer 8
  9. 9. Opportunity: Customers are not satisfied Source: Statmetrix US B2c benchmark 2011 9
  10. 10. Robots don’t buy your products People buy emotionally and justify their decisions rationally 11
  11. 11. 1. Sell the Experience Your whole product as a multi-sensory experience: Starbucks sells a place, smells, warmth , reward, and location Photo by strikeseason – creative commons Photo by Stevecadman – creative commons 13
  12. 12. 2. Appeal to EmotionsMarcus Buckingham’s basic human needs Fear of death Need for security Fear of strangers and outsiders Need 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 14
  13. 13. Products that Appeal to Emotions Fear of death Fear of insignificance - need for respect Need for security Need for community Michelin Pilot Sport PS2 ZP - $1,900 Louis Vuitton handbag - $1,500 15
  14. 14. 3. Align prices with Value You might already have a premium productBut you are selling it at a commodity price Pricing Lesson from the Concorde Priced as a commodity Cost+ model based on ‘similar’ products Losing money – at risk of being cancelled Photo by: igilmour BA asked customers They doubled price $500 million in profits 16
  15. 15. 4. Goldilocks Product Portfolio Strategy This water softener is $550. Is It a good deal? 17
  16. 16. Goldilocks and Pricing Anchors Good Better Best $550. $750. $1,150. Goldilocks pricing applies in B2b – pricing proposals 18
  17. 17. 4. Packaging and Price communicate value $9. $49. $499. The main difference? The bottle The story of the Double ‘Torta’ and the placebo effect 19
  18. 18. 5. Understand the Intangibles Xeround’s product works exactly the same regardless of where the data is stored Hundreds of customers pay 80% more for the peace of mind of storing their data at Rackspace 20
  19. 19. Premium Free? Red Hat has built a $ 9 Billion dollar business selling free software. How? Red Hat sells peace of mind • Standardization – well defined target • Support – Providing a throat to choke • Legal Protection – open source assurance 21
  20. 20. 6. Be DifferentTrader Joe’s Strategy Limited choice of unique products Hawaiian shirts Quirky marketing Cedar-planked walls $8 Billion in sales“Its not what is sold on the shelves, itshow its being sold thats been the key toTrader Joes success. “ – Clark Howard 22
  21. 21. Your product must be different “My real competition wasn’tother 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 23
  22. 22. 7. Empower Employees Happy & empowered employees delight customers • 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 24
  23. 23. Watch out for bad profitsDon’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 26
  24. 24. Premium must deliver value 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 27
  25. 25. Thank You
  26. 26. 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 29

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