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.

1. Gerardo A. Dada | @gerardodada www.TheAdaptiveMarketer.com
AUSTIN AMA | FEBRUARY 2012

2. Premium is about value
Premium.
A high value or a value in
excess of that normally or
usually expected
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3. Why seek a Premium Position?
Make more money
Differentiate
Enter a saturated market
Broaden product strategy
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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”
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5. Commodity - a class
My 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?
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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
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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
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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
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9. Opportunity: Customers are not satisfied
Source: Statmetrix US B2c benchmark 2011 9

11. Robots don’t buy your products
People buy emotionally and
justify their decisions rationally
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13. 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
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14. 2. Appeal to Emotions
Marcus 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 chaos
Need for authority and classification, order
Fear of insignificance
Need for respect
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15. 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
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16. 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 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
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17. 4. Goldilocks Product Portfolio Strategy
This water softener is $550.
Is It a good deal?
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18. Goldilocks and Pricing Anchors
Good Better Best
$550. $750. $1,150.
Goldilocks pricing applies in B2b – pricing proposals
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19. 4. Packaging and Price communicate value
$9. $49. $499.
The main difference? The bottle
The story of the Double ‘Torta’
and the placebo effect
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20. 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
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21. 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
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22. 6. Be Different
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
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23. Your product must be different
“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
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24. 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
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26. Watch out for bad profits
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
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27. 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
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28. Thank You

29. 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
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