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?

Opportunity Cost Analysis – How Much Will You Give to Get?

Over the past few months (and even before that, with mentoring), I’ve been evaluating businesses in the many stages of inception – including getting to becoming a start-up. One of the questions I ask of whomever I’m meeting with is, what is the opportunity cost?

An opportunity cost analysis is a useful exercise to run for a company/product idea, a new project or simply assessing a decision to be made.

Conducting an opportunity cost analysis allows you to study possible benefits and risks associated with taking one action instead of the alternative action in an effort to determine if the possible benefits would be worthy of those risks.

This allows you to take assumptions you’ve made about the company/project/decision and run through scenarios with some of the following questions.

How much will it cost in estimated outlay; labor, hard costs (computers/equipment), and time vs. what (revenue/exposure) can be gleaned from the idea in a space of time, such as revenue and/or exposure.

Who else is in the market space? Would you be first? (and can you set the pricing based on being first?)

What is the risk of not doing it? Less revenue, lower market share, or another company will execute the idea. Could the time and money be used elsewhere for a higher benefit?

Like most other information freely available on the internet, there are many examples of analysis questions and examples that could be run through (many including calculus equations).

However, when you own, (or are a part of), a small business (or start-up), determining an opportunity cost can be a challenge. Here’s a marketing example of a friend who owns a photography business.

The photographer is looking to grow their business in the corporate market space within 60 miles of their location. One idea they have to accomplish this is through a direct mail postcard campaign.

Let’s say the postcard cost $2500 to print and mail 500 pieces, ; the mailing list purchase of businesses in the area adds an additional $500, and the graphic designer another $200.

Total money outlay $3200 + time the photographer spends choosing images and writing copy.

My first question is: Is direct mail still an effective marketing tool? Do people still look at their physical mail? (And if so, are there current response rate statistics out there?)

How many jobs booked at what dollar amount would need to occur to recoup the postcard cost? To make a profit?

Are there other marketing avenues opportunities the same $3200 (and time) could be spent at for less risk and higher return?

Are other photographers in the area marketing this way?

Once they she gathers all the information, my friend will able to make a more informed decision based on an opportunity cost analysis.

In looking at the example above… what would you do?

 

 

 

 

 

 

 

 

Creating Business Strategy Around Product Strategy

In many of the start-ups I’ve seen and been working with while mentoring, the companies have been focusing on building and developing their product, and then sorting out their product strategy. Since, for many of these start-ups, this is their first foray into business and product ownership, they tend to focus on getting the product built (which is not an unreasonable investment of time), and neglecting the overarching business objectives and operations planning to get there.

Supporting business

It’s important to build a tight business structure to support your product.

The difference between a business strategy and a product strategy is that a business strategy lays out your business operations objectives, customer acquisition plan and metrics for measurement; whereas product strategy outlines what will get built and how the product will be positioned to achieve the business objectives.

Thinking about how to create a business around a product can be challenging, but if the product is well defined enough, you can reverse engineer the process. This is exactly how I’m approaching it with the companies I’m mentoring; the start-ups have the defined product and an idea of the needs it will fill, and from there, we work out the additional pieces and begin to look at the overarching business strategy model.
A business strategy should:
1. Identify who the customers are and what they need
2. Define the product(s)
3. Include a sales, marketing, and communications plan
4. Forecast financial/revenue targets over time
5. Determine the equipment, staff and operations costs required to meet the growth projections

From here, we can overlay the product pricing model to see when revenue will turn into profit. Regardless of whether or not a company is going for funding (though most seem to be), it’s important to review all the pieces together, as it also allows for identifying areas where there might be gaps or too broad of an approach.

Running a business is more than simply selling a product. It takes identifying and understanding of all the supporting pieces needed to get your product out the door.

What other items would you add to a business strategy?

 

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?

 

 

5 Things I Learned From Conference Planning

Conference Planning

If we organize it, will they come?

Back in April, I volunteered to join the yearly US based community conference of the open source technology my company works with. I enjoy event planning on a smaller level, and I thought it would be a challenging side project to take on. I had only met some of this year’s committee members once or twice, and had very little idea about how the group functioned.

Here are my observations from the experience:

Conference Visions Vary

This year’s committee was picking up from where 2012’s committee left off. There was very little overlap or knowledge transfer from the previous year, which meant the committee spent a fair amount of time horse-trading their ideas about what would make up a good conference. It took the committee members some back and forth to establish the direction we wanted to go toward.

It’s A Chance To Step Out Of Your Usual Role

If you’ve been thinking about a marketing role, possibly interested in budgeting and accounting, or understanding website design, then conference planning can be a good vehicle to test the waters with some group support. Some people are inherently good at some things. As for myself, I was curious to see if I could create interesting and friendly (but not pushy) content promoting the conference over a period of time. On the flip side, I also took over the financial management of the conference, as it was an area that needed to be organized immediately since it impacted many of our decisions.

It’s A Great Way To Get Noticed In The Community

My contributions toward the community fall on the product strategy and advocacy side. One way to support the hard work and contributions of the developers is to give them a really great arena to show off their efforts, and be able to interact with the user base and other community members. I personally had attendees ranging from the C level to newbie users come up and thank me for assisting in putting together a successful conference.

Be Prepared To Assist On Site

Part of the responsibilities of a conference member is to make sure all things are operating smoothly. Checking in attendees, answering questions about lunch (yes, there are vegetarian options and some items are gluten-free) and helping speakers connect the A/V leads in each room were just a few items which occurred throughout our days. Very quickly the registration desk became a one stop knowledge base for the whole conference – and the surrounding area…Need a bank? One block over. A pharmacy? Two blocks down.

Pack A Survival Kit

I’m not talking about sleeping bags, a flashlight and granola bars (these items would have been useful during my 6 hour delay at the airport, however). I spent almost the entire conference walking around talking to attendees, speakers, hotel staff and some seriously lost souls who wandered into our conference space. My kit included a bottle of water, cough drops, Sharpies and tins of mint Altoids (a great way to kick off an introduction to someone you haven’t met, by the way).

Overall, the conference was a great success, our sponsors were happy, the attendees enjoyed the talks and the conference committee kept things flowing between all of us. After sleeping and decompressing for a few days,along with the right group and support of the community, it would be worth doing again.

Have you ever been part of an organizing committee? What did you learn from it?

 

 

How Do I Know When I Can Pay Myself?

A question I run into regularly with companies I’ve mentored and/or offered advice to is, “How do I know when I can pay myself?”. One of the toughest realities in starting/running your business is that you may be paying everyone else around you, but not you, for some time.

Coins representing payment

With all this money passing though – where’s your paycheck?

The answer is not cut-and-dry, as many items factor into the answer, however, one thing holds true – it’s a business decision. There’s a lot of personal stress, angst and indecision that already go into getting your business off the ground and running. However, when it comes to salary, it’s a numbers game.

Below are items to consider when deciding when and how much to pay yourself.

  • Are you cash flow positive? Know your financials.

Whether or not your company is profitable is a different story. Does your company have enough cash on hand, as well as coming in the door, that if you were to take a percentage as payment, the company could continue cover expenses? If not, what actions need to be taken and what’s the forecast for getting there?

  • What’s in your pipeline?

Combined with the above, are there enough sales opportunities forecasted to possibly provide the cash flow? How far out can you predict your company’s new and repeatable sales?

  • Money not spent is money to be reinvested in the business

Any money not taken out for payment can be used for company growth, additional headcount and/or infrastructure. If you’re anticipating a large amount of capital expenses in the coming months, you should look at a balance between taking payment and preparing to spend.

  • Evaluate the tax impact

Your accountant is an invaluable resource. Take the time to meet with him/her to review where the company is, how much cash is/could be available, as well as what the tax implications would be in both not touching it, and using it as your salary. If the expense forecast is low(er), leaving more cash coming in, depending on the structure of the business, you could be liable for tax on it as part of the owner’s pass through, and taking some as payment could offset that.

  • Don’t Get Discouraged

Regardless of if you decide to start paying yourself through your business (or not), growing a business is a marathon, not a sprint. If you’ve done the diligence in forecasting and have a plan to generate cash flow, you’ll know exactly where things stand and what the road ahead looks like.

As you can see, it’s not a one-size-fits-all sort of answer. I’ve met business owners who only intermittently paid themselves, paid themselves for a while and then stopped, as well as those who started with small draws and increased that into real income as their businesses developed.

Do you have additional advice for getting yourself paid?