I'm better than you are!

TAKING A PREMIUM
POSITION IN THE
MARKETPLACE
Gerardo A. Dada | @gerardodada www.TheAdaptiveMarketer.com
AUSTIN AMA | FEBRUARY 2012

Premium is about value

Premium.
A high value or a value in
excess of that normally or
usually expected

Why seek a Premium Position?

Make more money

Differentiate

Enter a saturated
market

Broaden product
strategy

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,
Then, Allstate
Allstate gets
gets it
it
We
We protect
protect you
you from
from mayhem
mayhem -- You
You are
are in
in Good
Good Hands
Hands
4

Commodity - a
class of goods ..
which is supplied
without
qualitative
differentiation

My product is a commodity
70.9 %

of the
World is Covered in
Water.

- Wikipedia

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?

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

I am Better than You 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

Premium is a Business Strategy

Product
Leadership

Customer
Intimacy

Operational
Excellence

Differentiation is
is building
building your
your business
business on
on a
a
Differentiation
strategy to
to target
target a
a specific
specific type
type of
of buyer
buyer
strategy
8

Opportunity: Customers are not

satisfied

Source: Statmetrix US B2c benchmark 2011

THE ONE SECRET TO

BUILDING PREMIUM
PRODUCTS

Robots dont buy your products

People
People buy
buy emotionally
emotionally and
and
justify
justify their
their decisions
decisions
rationally
rationally

1
1

SEVEN STRATEGIES TO
ESTABLISH PREMIUM
POSITIONING

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

1
3

2. Appeal to Emotions
Marcus Buckinghams 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
1
4

Products that Appeal to Emotions

Fear of death
Need for security

Fear of insignificance - need for

respect
Need for community

Michelin Pilot Sport PS2 ZP - $1,900

Louis Vuitton handbag - $1,500

1
5

3. Align prices with Value

You might already have a
premium product
But you are selling it at a
commodity price
Pricing
PricingLesson
Lessonfrom
fromthe
theConcorde
Concorde
Priced
Pricedas
asaacommodity
commodity
Cost+
model
based
on
Cost+ model based onsimilar
similarproducts
products
Losing
Losingmoney
moneyat
atrisk
riskof
ofbeing
being
cancelled
cancelled

Photo by: igilmour

BA
BAasked
askedcustomers
customers
They
doubled
They doubledprice
price
$500
million
in
profits
$500 million in profits

1
6

4. Goldilocks Product Portfolio

Strategy

This water softener is

$550.
Is It a good deal?

1
7

Goldilocks and Pricing Anchors

Good

Better

Best

$550.

$750.

$1,150.

Goldilocks pricing applies in B2b pricing

proposals

1
8

4. Packaging and Price

communicate value

$9.

$49.

$499.

The main difference? The bottle

The story of the Double

Torta and the placebo
effect
1
9

5. Understand the Intangibles

Xerounds
Xerounds product
product works
works exactly
exactly the
the same
same
regardless
regardless of
of where
where the
the data
data is
is stored
stored

Hundreds
Hundreds of
of customers
customers pay
pay 80%
80% more
more
for
for the
the peace
peace of
of mind
mind of
of storing
storing their
their data
data at
at
Rackspace
Rackspace
2
0

Premium Free?
Red
Red Hat
Hat has
has built
built aa $
$ 99 Billion
Billion
dollar
dollar business
business selling
selling free
free software.
software.

How?
Red Hat sells peace of mind
Standardization well defined target
Support Providing a throat to choke
Legal Protection open source assurance

2
1

6. Be Different
Trader Joes 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
2
2

Your product must be different

My real competition
wasnt other brewers. It
was ignorance and
apathy.
Our mission is to
educate people about
beer

Sam Adams is not a

beginners beer
- Jim Koch, founder of the Boston Beer
Company

2
3

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
2
4

SUMMARY

Watch out for bad profits

Dont 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

2
6

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

2
7

Thank You
A
DA
D
A
A
D
D
.
A.
OA
O
D
D
R
R
A
m
RA
om
ER
o
c
.
GE
c
r
.
G
r
e
t
e
arrkkeet
a
M
M
e
e
v
pttiiv
ap
a
daa
d
d
ad
A
a
A
d
e
d
e
o
h
t
o
h
d
.
r
w.t
m
ww
ww
geerraard maaiill..ccoom
w
@g
@
oottm
h
h
@
@
a
da
daad
gd
g

Sources:

http://blogs.forrester.com/sucharita_mulpuru/12-02-02-the_guts_to_grow_what_amazon
com_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-m

odel-for-success-in-grocer/nFWF/
Torn paper from http://greatvectors.com
Koch quotes from Killing Giants by Stephen Denny, p. 30-33

2
9