In part two of our Go-to-Market strategy we will discuss the Product Definition phase. I am reminded of the movie Field of Dreams and the illusion that “if you build it they will come”. OK in the movie Kevin Costner’s dream did come true and they did indeed come, but that’s Hollywood for you!
Don’t get me wrong, you need to have a dream or a vision for your business, but you will need a rock solid strategy to go with it if you want it all to come true. During part 1 of the Go-to-Market strategy we covered market definition, this month we move on to product definition.
There are three critical elements to consider in this phase- Package, Pricing and Positioning, and the end result will provide answers to the following questions:
- How should I package the product or service in a
way the buyer can understand it?
- How should it be priced so the buyer sees value?
- How should the product or service be positioned
so the buyer selects it over others?
It’s important to put yourself into the mindset of your target customer as you work through this exercise. First let’s look at Packaging; beyond the physical appearance of the product you should think about how the product is purchased- single unit or multiple, is it usually purchased along with another product (consider bundling). Should it be available in different sizes- trial size, individual, family, daily doze, weekly, bulk, etc. If you are selling a service; do you offer it for a one-time use, monthly subscription service, or bundle it along with other services that the target market requires. Maybe the package includes 30 days tech support, or a special access to a premium service or future product.
If your target market is eco-conscious then you might forego the elaborate and wasteful packaging, but if it’s an up-market luxury product then the visual appearance and materials used will be vital to creating the right perception of a chic or exclusive product. Often times once you break into the package the product is similar to many others on the market, so this may be your only opportunity to create differentiation.
Moving on to pricing; the simple approach would be to work out all of your costs, decide on a profit margin and launch. ie cost based pricing. That’s not a bad place to start this exercise and provides a good backstop to set the lowest price where you still have a financially viable product. What’s missing from this equation is the customer- how much are they willing to pay, how much does a similar competing product cost. Don’t get fooled into thinking you have no competition, as unique as your great new
widget is there are always other ways to satisfy the buyers needs. (Revisit the consideration set you developed from the market definition phase).
Also during the prior phase you will already have evaluated what it takes to be in the consideration set and you know the buyers purchase drivers- if cost was a major driver then you will likely be closer to the cost based pricing end, however if it’s not even a factor in defining the consideration set then market pricing is appropriate.
A third option is value-based pricing, and while it is highly attractive strategy it’s very hard to get right. Price is determined by the relative value of your offering and can be used to justify a premium over what others may offer. You need to be able to answer the question “As a result of working with us rather than an alternate solution, how
will the customer be better off”. The challenge of value pricing is doing the work; it requires information, structure, training, controls and incentives to be effective.
The final element of the product definition phase is positioning- at this stage in developing the Go-to-Market strategy we don’t need to get into the whole topic of branding (promise, experience and engagement), that will be the subject of a future article. However we do need to be able to answer a few key questions:
- What target market is the product designed for?
- What is the single most important benefit it offers?
- How is your product different from the competition?
A product or service can be positioned from the perspective of an attitude, belief or benefit, use or application, price or level of quality. Even if you do nothing the market will position you, probably based on what they hear from your competitors. Clear, concise, and meaningful product positioning helps you cut through the relentless advertising clutter and marketing noise.
The most important task is the development of a value proposition; simply stated what are the user benefits (real or perceived) that the buyer gets from using a product or service? What most people struggle with is separating features from benefits- a feature is a statement of fact about the product (what it does), a benefit is an expression
of why that feature should matter to the user. If the user thinks “so what” when evaluating your product they are unlikely to purchase.
While developing your value proposition remember to evaluate it against these 6 characteristics-
- Is it Meaningful
Above all make sure to do this exercise from the customer’s perspective not yours.
Unlike Costner’s character Ray Kinsella you don’t have to take the risk of just hoping your Hollywood dream might come true. But it will take a lot of work to gather all of this information; the good news is that if you followed the process during the market definition phase you already know who your customers are, how to reach them, how they make the purchase decision and what are the competing solutions on the market. In the next article we will start looking at sales channels and building your sales strategies.