Play to Your Strengths – Strategies For Product Positioning

The past few months have had me thinking a lot about product positioning. Several projects that I’ve had, and more than a few business plans I’ve reviewed recently, struggle with the concept of their product’s strengths. This can apply to companies as well as a positioning message of what they offer over competitors. Product positioning is all around us, whether you notice or it or not.

The goal of product (or service or company) positioning is to keep you in the customer’s mind at the time they are looking to purchase. A positioning strategy feeds into the marketing message in terms of how you talk about the product. The strongest brands and products you know about have succinct positioning statement.

But how do you get there? Define, then refine.
Much, if not all, of the data we’re going to look at below can be used for other product areas – price forecasting, operational improvements and marketing messaging around the product; but for today, we’re looking at positioning.

Define as much as possible about the product:
Product attributes and market segmentation: is it a luxury item, a mid-tier market, or economy based? Obvious examples of this are hotels: the Ritz Carlton (luxury), the Hilton (mid) and Comfort Inn (economy); each are positioned within a market segment.

  • Benefits to the customer: what will the customer gain from your product or service? The affluent traveler looking for an experience (Ritz Carlton). Ideal for ease of business travel – cookie cutter accommodations/amenities (Hilton). Inexpensive, and won’t break the bank for quick trips or family vacations (Comfort Inn).
  • Characteristics of the customer: define a couple of scenarios of ideal customers, including demographic information. What target features are they looking for? Where would your product ideally reach them? What would drive them to purchase from you?
  • Characteristics and strengths of competitors: conduct analysis using publicly available data; company annual reports, industry news and blog posts. Create an evaluation of their strengths and weaknesses to determine your competitive advantage. Opportunities for competitive pricing, improved distribution and product refresh cycles can be derived from analyzing your competitors.
  • Analyze gaps between your product and your competitors. Understanding these gaps will help you determine where your product positioning strengths stand out. These are areas which your product (or service offering) can easily target (to become)? market leaders.

Note, in some market segments the product gap could be very small, in which case your product might be competing with an established brand if it’s new to the market. Incumbents to a marketplace could be entering a profit-limiting segment.

To arrive at a product positioning statement, refine the ideas from the analysis narrow it down. Identify the top 10 items/concepts from the exercise. Then hone to the top 5, then finally the most important 3. Those 3 should be distillable into 3 words. You’ve arrived at the product positioning and the basis for your product/service/company’s marketing message.

Put it out there on all the channels used to connect to customers.
Do the concepts resonate with customers? Are you getting more sales or inquiries?

Market positioning for products change over time. Changes,whether economic or innovative, are constant in marketplaces and customers’ needs. Assessing your product positioning at regular intervals allows for retaining the competitive edge of customer needs in your market area.

Is your product playing to its strengths?

Are Your Operating Costs Costing You?

It’s the most wonderful time of the year when companies large and small are wondering how they can reduce next year’s operating costs. If you’re not wondering, or you haven’t forecast your company’s, or your group’s, upcoming costs, take the time to investigate now and potentially set up your company for a better 2014.

Take time now to insure your company is a well oiled operations machine.

Take time now to insure your company is a well oiled operations machine.

This is especially important if you’re just looking to launch or finish developing a product. The overall cost of everything is given to rise year after year, even the basics if you’re paying attention – food, gas, utilities, insurance. These increases impact your business’ every day spend, even before the product gets out the door (or escapes, as one of my friends likes to term it).

Why is this important (other than you should know where the company is spending its money)? The lower the company’s operating costs or ratio to costs of goods sold, the more profitable a company generally is. At the end of the post is a basic calculation for how to get to the ratio.

Expenditures for core business operations, such as production costs, salaries and benefits, rent and utilities, sales and marketing and inventory are numbers which should all be included.

Pick a timeframe to conduct the information gathering – whether it’s the past fiscal year, past 6 months, or somewhere in between Looking at the numbers over a period of time will help you identify variances (or variables), areas where there could be potential savings, or areas where spending will possibly rise.

It’s a rare company that doesn’t have to horse trade currently running expenditures vs. future spend planning; who wouldn’t want an uncapped operations budget? For the rest of us, by analyzing where the company encountered bumps, unanticipated (or anticipated) increases in operations spending will give us information as to how the next set timeframe will look. Even the simplest things such as giving your employees a raise will be reflected on how the additional cost plays out over the timeframe.

As mentioned above, if you want to take this a step further and see where your company’s operating ratio lands (and you have the other pieces of financial data on hand), test out the formula below and see what percentage comes back.

Operating Ratio = Operating Expenses / Net Sales (for the same period of time)

Here’s a useful description of what the resulted number means.

At a high level, any ratio less than 100 means there’s some profit being generated in the company. Anything over means that for every $1 in sales, your company is spending that dollar + x% to make the sale. It also indicates the company is running at a deficit due to some circumstance.

Regardless of what your operations analysis resulted in, the numbers are important to not only track, but to assess at specific points to see how and where the money is really being spent vs. budgeted for in your company.

How often do you review your company’s operating expenses? Have you found any surprises?

 

 

Getting Illustrative – Determining Your Company’s Value Proposition

I’ve been talking (and asking) about creating a value propositions for small businesses. What is a value proposition you might ask? A brief statement of benefit that summarizes why a customer should purchase a product or service. Basically, it explains the customer what will they will get exchange for their dollar(s) and your company’s unique identifiers from the competition.

I thought it would be interesting to represent questions that should be considered when creating your company’s value proposition in a handy graphic this week.

value proposition

What’s in the box? Your company’s value proposition should answer as many of these as possible.

It can be a bit of a challenge (almost like a mad-lib) to distill the answers down into a couple of sentences. White board, Trello board, or even traditional post-its can be useful in defining the concepts and arranging their order.

Once you’ve put the sentences together, which may take some time and revision to polish up, test them out. Try your value proposition out on various social media channels, email it around to you advisory groups and create some discussion around if you’re headed in a good direction with your proposition. Tor has some helpful (and humorous) advice for testing.

As your company moves forward and the product evolves in the marketplace, it makes sense to revisit your value proposition in scheduled intervals as it should reflect your product’s strengths.

I’m searching for great examples of value propositions that are out there today. Can be in any vertical. Seen any recently that have caught your eye? Post them below!

Dollars to Donuts – The Importance of Business Financial Planning

There’s an adage that goes “no business planning? plan to have no business”, and while some recent upstarts have been running around waving their arms around proclaiming “you don’t need a business plan, don’t waste your time”. At some point, you do. It might not make sense to create one at the inception of an idea of what you’d like your business to be, however, once you start thinking about customers and marketing, that would be a good point to put some financial data together. Remember, even the most disruptive, game changing, thought leading companies out there still need to pay their rent and employees. (How was that for buzz word compliance?)

My other favorite adage of recent note is “your company should be producing revenue whether or not you’re at work that day”. In fitting along those lines, as part of my role in the company I’m working with, I’ve been thinking about ways to create reoccurring revenue via licensing streams and reseller opportunities. Neither of these options are going to spring alive fully formed and ready to go. Both paths will take time, effort and cost to set-up relationships and build customer bases for.

Regardless of which, if either, path we choose, I’ve entered into running multiple forecasting scenarios for upcoming revenue. Forecasting is a good exercise to conduct a couple of times a year, it allows you to take a look at where you are, review variables for how successful (or not) your current revenue streams are, then make informed decisions – like where to expend marketing effort, from the results.

I like to run the worst case scenarios first. I feel as though if you can conquer the worst case scenario for any situation, you remove much fear, unknowing and doubt from your actions. In my spreadsheets I have scenarios of “what our revenue decreases by 50% for 6 months” (it would be a struggle and after month 2 we need to reassess the business goals and opportunities ) as well as  “what if we run out of operating cash” (less survivable and probably game over). While no one wants to mange themselves out of a job; what the exercise is doing is to help establish where you might run into trouble on your current course walking the line between revenue and overhead.

Now that you’ve looked at the worst case scenario, it’s easier to approach where it makes sense to address growth opportunities. Growth comes with costs, whether tangible or intangible. It invariably means more overhead expenses including equipment and or possibly moving into a larger location to support additional staff. Many pundits are advocating slow-growth company cycles. This is not a bad idea as until you are running your company, it can be tough to you see where the potential for increases are, and having initial slower growth periods can help identify them.

Back on the upside, along with growth, doing periodic financial budgeting and forecasting will allow you to arrive at a company valuation, and personal equity in it, regardless of what, if any exit strategies you might have. In addition, if you’re going for funding, having a solid understanding of what your company is worth, will be a benefit in the negotiation process.

Knowing what your company valuation is, is useful in other areas as well. Perhaps you just need something as simple as a corporate credit card, or a line of business credit to help with short term purchases. Banks want to know who they’re dealing with and what the risk value is of the credit they’re extending. Being able to walk in and talk to a banker with your balance sheet in hand goes a long way to getting approvals and building relationships with them.

Businesses inherently have many moving parts, but in order to keep the momentum, it’s important to check in and see how the financial part is moving, and what steps need to be taken to keeping it so.

How often do you review and forecast your company’s financial data?

Product Pricing – How to Approach the Art and Science Behind your Model

Pricing is the valuation of your product or service. Arriving at one is a healthy combination of art and science. There are over 10 different methods you can assign to figuring out your product pricing model, however, without looking at the variables that go into creating your product, you run the risk of creating problems for your product in the future.

Know your costs
Whether you’re creating the latest and greatest time saver app, manufacturing tools or harvesting produce to sell at a farmer’s market, costs have been incurred in the process. Fixed and variable costs such rent, labor, any debt or loans on equipment and distribution/delivery costs are the basis for knowing what you need to recoup. Create a list, meet with your accountants (or accounting department) to develop an understanding of the costs needed to recoup. What mix of margin percentage and customer acquisition volume is needed to get to profit?

Assess Market Size
Who are your customers and how will you reach them? Creating a list of basic demographics of your product’s customer will help drive estimates of sales, as well as where you’ll need to focus marketing/accquistion efforts.

Competition
Look at your competition’s price points. Identify where their strengths and weaknesses are in the marketplace. Run your own scenarios based on their price point. It’s too hard to reverse engineer a pricing model. Identify where your product or service wins and loses based on comparisons with other products out there.

Know your product’s differential points
This is where your products perceived value will come from. When customers recognize the value, it will drive customer acquisition.

Look at what the market will bear
After looking at your competition in the space, where is your product landing? Are you positioning to be a premium brand in the market, or on the value end? Depending on where you want the product to land, is the value proposition to the customer enough to drive a higher price than the competition – or lower to undersell it?

Listen to your customers
Maybe you’ve done a beta period with your product, or if you’ve been operating for a while. Create a customer advisory group. Offer these customers something for their time and feedback. Encourage open conversations about how they’re using your product and value vs. cost to them. Be prepared for the good, the bad and the ugly. By offering to participate however, these customers have taken an interest in your product’s success, so take time to analyze their feedback.

Try Tiered Pricing
Tiered pricing will give you a sense of where the largest interest lies for your product. If you’re not sure you want to offer everything at one price, a test of a tiered scenario could quickly allow you to see what value customers are willing to pay at what price point.

Reassess 
Pricing changes over time due to supply and demand, other emerging products and technology, or market conditions. Your business is an ever changing entity, and innovation and growth come from being proactive (as opposed to reactive) in your marketplace.

Here are some pricing strategies people love. (I found it a better read than listen).

What are your best tips for creating a pricing model?

Should you build a product without a channel? If you build it, will they come?

It’s a rare few these days who would take the risk based on the Field of Dreams riff “if you build it, they will come”. Most of us spend at least some time looking at market opportunities, niches or areas where products/services could be made better/faster/cheaper. 

What would incite you to take the risk? I asked this around my network and received a few ideas back:

  • Belief that the market or technology would evolve
  • Large marketing budget  
  • A strategy for intersecting of two industries creating a new customer pool

Certainly all worthy considerations. I also think it depends on how much risk vs overhead is involved in producing the idea to get out the door. 

However, as Allison Bradley notes, you could also run the risk of devaluing your current brand in the process.

Since I don’t assume to have all the answers, I’ll leave you with a recent real world tale:

A friend of mine works for a company manufacturing high end consumer home products. Hard goods. You would spend close to 5 figures on one of their products. They’re a small company, and they’ve been spending resources to understand where their market opportunities lie at that price point, creating relationships with resellers and retailers, all things to ready for a larger distribution jump.

A few months ago the CEO walks into my friend’s office and says “I’ve commissioned 5,000 lower cost units to begin assembly next week for to sell at 1/4 of what we’d retail our main product line. We (you) need to figure out how to get them into the marketplace and sold”. 

Whoa, right? The effort and market positioning to date has been focused on a much higher end.Cross selling can be tough, Ian Smith offers some practical actions. 

I’ll post updates as events transpire.

What steps would you take to get this product out of the warehouse? 

Why Your Next Product Could Come from a Maker-Faire

Remember when Legos came in piece-sets as opposed to tied to some specific object? I’d just dump all 300+ (or 1000+) pieces on the floor and get building. Castles, moonscapes, a walled garden and once a huge moving city were constructed out of my imagination. 

Do you have a father or grandfather who would disappear into the basement or garage, where the “man cave” wasn’t a plush recliner with flat screen and surround sound, but a dank, rough space with tools, maybe an old radio and bits and pieces of projects that never quite got finished? My grandfather  visited an apt I was living in in NYC during the mid-90’s. Opened up one of my closets, took a few measurements, and by the next time I saw him had custom built me a shelving and drawer unit that fit perfectly into one of the closet corners.

Ok, family stories aside, what’s the correlation between the two? In our day of digital age where companies are running out of inspiration for “the next big thing” and there becomes a closer and closer tie to our inherent biometrics and computing, gatherings like maker-faires or maker-groups are giving people the opportunity to once again explore the edges of their imagination.

I’m intrigued by the amount of growing interest in maker groups, many of them I see stemming out of cities where there isn’t extra space for your table saw, belt sander and Arduino kit (saw dust and soldering are never compatible), and getting a few friends together to rent a cheap space seems like a good option. 

Another side of the equation are the amount of micro devices such as Raspberry Pi’s that allow small bits of data transmitting. The opportunities to create your own personal technology are seemingly endless. 

Companies in search of inspiration should pay attention to this. Tying together people’s personal interests and/or technology could help jump start the process. Maybe the next best way to innovate your product would be to host a “maker day” and allow employees to unplug and recharge their creative juices.

I know I’m certainly interested in liberating my personal projects off the dining room table. 

Have you ever been to maker-faire or group? What would inspire you to join?