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Tuesday, December 28, 2004

Getting the big picture

The great thing about commenting on marketing, especially marketing of high tech products, is that by standing on the shoulders of giants we see further. Thus, we'll now steal a page from Geoffrey Moore, who wrote Crossing the Chasm and some other fine marketing material. If you consider yourself a technology marketer and don't have a well thumbed copy of this book on your shelf - drop everything and read the book. Moore has a number of ideas, some of which have only gained credibility in the 15 years since he wrote the book. The idea we want to borrow for a while today is called the "Whole Product".

As a brief digression – the “Whole Product” is what a customer buys to solve a problem. It is almost always more than the product itself – for example, when I buy a car, I buy transportation, but I also buy safety, convenience, and status. What’s more, I generally also buy reliability (warranty) and potentially even safety (roadside assistance). If you think about features and attributes that are commonplace in automobiles today, such as roadside assistance, five or ten year warranties, anti-lock brakes and so forth, these are features that drivers ten or fifteen years ago would have never dreamed of. Moore’s point is that as buyers become more aware and more savvy, they demand new features and buy a solution rather than a product. We as marketers have to understand the entire solution they want to purchase, and understand that often the product is a piece – a vital piece – but just a piece of the solution.

As an example, consider the business intelligence platform we discussed earlier. Controllers who wanted more insight into operational data needed a dashboard, but did not want to build it from scratch. They wanted an out of the box solution that could be tweaked to individual needs. So we built a set of solutions on top of our platform to extend the product and help it fit the “whole product” definition of the controllers.

Other capabilities and features must exist for the product to be considered "Whole" - the IT staff also needed some training classes and documentation, so these items must exist as well to complement the software solution. All of these capabilities, plus consulting, maintenance and support agreements and a help desk form the whole product. As marketers, we must identify the “whole product” for each customer segment we plan to address. So once you’ve completed your “drill down” to specific customer segments, you must step back and understand the problem or challenge from the standpoint of the customer. What is their “whole product” definition of their problem? Can you offer a complete solution for their needs – remember, the product or service you offer is almost never a complete solution in the eyes of the customer.

Institutional issues and investments can also get in the way. A great example of significant institutional investments hampering change can be found in our monetary supply. When the $2 bill was introduced, many people thought that it would meet with great acceptance. The big challenge to the bill was not with consumers but with merchants. They had expensive cash registers and counting machines tailored for $1s, $5s, $10s and $20s. There was not even a slot in the cash drawer to hold the $2 dollar bills. Small but significant historical investments can block adoption of a product, so in this case the whole product was not considered from the retailers' point of view.

Thursday, December 23, 2004


Drilling Down and getting the big picture

Recently we talked about getting the marketing strategy right. That is, stopping to think through the segmentation and differentiation of a product or service before rushing in to do the “marketing” things – emails, direct mail, advertising and all the other tactical bits of marketing.
I wanted to spend a little more time on both of these ideas before we examine marketing from a more operational and tactical perspective. What is segmentation and what can it do for us in marketing? Why should we spend time trying to segment our customers? What are the potential pit-falls along the way?

Segmentation is simply trying to break the entire potential market into smaller, more discrete units. This can be done in a variety of ways, but the method that is usually recommended is to approach the market from a needs perspective. That is – who needs the product the most? The wrong answer at this stage of the game is “everyone”.

I recently did some consulting for a business intelligence software firm. They have a great product. Their product can very quickly assimilate data from a number of different data sources and present the data on a website or a user’s PC in an easy to understand dashboard format. The power and flexibility of the product is amazing. The blessing and the curse of that product and others like it is understanding who NEEDS the product – everyone we spoke to about the product WANTED it. The challenge was moving beyond the recognition that lots of decision makers want better insight to their enterprise data. While many of those decision makers wanted more insight, many were not prepared to purchase a new application to fix a problem. In other words, while they had problems or challenges, the pain was not enough to cause them to fix the problem. So, like any good strategic marketer, we began to segment the market by industry vertical and by functional buyer, to attempt to find people with significant business challenges who would benefit from better insight and analysis of their enterprise data.

First, we eliminated firms in industries that were not spending money on information technology. Then we removed firms that we felt were not as likely to implement a business intelligence solution. Then we evaluated the remaining verticals to prioritize those firms we felt would be the most likely adopters of business intelligence. We rank ordered these firms by their dependence on information to run and manage their business. We also placed greater weight on information and service based businesses – where information was the lifeblood of the business. Once we’d finished evaluating the industries and verticals and choosing three or four verticals as primary targets, we turned our attention to the buyers. We wanted to know who in the organization was most impacted by a lack of access to information in the system. If we could reach only one person, who would be the most likely to respond to our message of improved information access and analysis? We decided that person would be the controller – who is often the information manager and report director for many facets of the business, especially financials. Our secondary target was the VP of Sales, whom we felt needed more information about margin, profit, sales activities and other information.

From the universe of firms operating in the United States, we pared our targets down to three well-defined verticals. From the entire management structure in those firms, we identified two main targets for our message. This segmentation helped us identify our key messages, the features and benefits we’d need to communicate to be most effective, and the marketing channels we should use to reach these decision makers. The business intelligence product we were offering would work for any firm in any industry, and could provide analysis and reporting for any decision maker in any of those firms, but to attempt to reach all the market was to reach none of the market with any kind of a message. We attempted to reach those industries that valued what we did, and to communicate with executives in those chosen industries we felt were most likely to want and need our products. This segmentation led us to package our offerings and target our marketing more effectively.

The drill down is complete – we’ve done our segmentation. We’ve identified the key needs within the verticals or industries or geographies we’ve chosen to target. What’s next? Probably the most counter-intuitive step – getting the big picture.

Tuesday, December 21, 2004


Which came first – the segmentation or the differentiation?

One can argue that differentiation and segmentation are two sides of the same coin. That is, segmentation can be driven by the differentiation of the product and its features and benefits, or that differentiation is a result of the segment one targets. First, let’s define our terms.

Webster’s has several definitions but the one I like the best is: “Constitute a difference that distinguishes”. Another definition in the same list “To express the distinguishing quality of”. Marketers use the concept of differentiation to separate the features, benefits and characteristics of their product against another product or solution that the customer may be familiar with. What becomes important in this exercise is to create distinctions with a difference.

A marketer needs to identify and distinguish key features, benefits, characteristics or other attributes of his product or service that are different from another on the market, and explain why the difference is important to the customer. In this manner, it also helps to know what the customer considers to be important. If I manufacture tires and compete with the larger tire manufacturers and the only difference between my tires and the competitions tires is the fact that mine are red, whereas the competitors only make black tires, then I am placing a big bet on the hopes (or knowledge) that consumers value red tires highly. Of course in this case I face another problem with differentiation – barriers to entry. Large tire manufacturers can probably quickly copy a color advantage, so if this is a differentiation it probably won’t exist as a distinction for long.

There are at least four things that matter in differentiation, based on the above discussion and the definition:
- there must be a difference that can be identified clearly
- that difference must be sustainable
- the differentiation points that competitors have already established
- there must be something to differentiate against

Let’s start with the last one first. Ries and Trout in their book “Marketing Warfare” (read it if you haven’t) discuss the way customers distinguish and remember products and services. Generally speaking, when we as consumers evaluate a product or service, we compare a new product with a known product to determine if we consider that new product “better”. To differentiate a product, a marketer must differentiate against something – a competing product, another solution to the problem, a concept or idea. Differentiation does not exist in a vacuum, except possibly in Monty Python skits where one can simply claim a product is “better”. What a marketer chooses as his differentiation comparison says a lot about what the product. For example, if I market tires and I claim mine are longer lasting than a major competitor, I am not necessarily claiming to be less expensive or more stylish. Those differentiation points may already be held by another competitor. My differentiation points must support the concepts and ideas I am trying to communicate about my product.

In the same example, if I market my tires as the safest on the highway, but my key differentiation is that my tires come in many different colors, I am not reinforcing my best competitive point unless I can prove my tires are safer than other manufacturers’ tires. Often, the differentiation points I can use are limited by the claims and marketing of my competitors. Generally speaking, there is almost always a firm that has claimed the lowest cost mantle in any market, and a product that has differentiated itself as the “status” symbol for a market. In automobiles for example, Hyundai owns the low cost differentiator, while BMW or Mercedes own the “status” differentiator. In fact, one can place differentiator labels on a number of automobile brands – “safety” for Volvo or “reliable” for Honda and Toyota. In fact, this is probably one of the biggest weaknesses of US automobile marketing – what do the major labels stand for? Ford was trying to differentiate on quality (Quality is Job One) for a while, but that has gone by the wayside. I can’t think of a label or differentiation point for the US car companies. Luckily their products – Ford Explorer or Chevy Corvette can be differentiated.

Monday, December 20, 2004

Getting the big picture

OK, so let’s say we’ve done the strategy bit. We picked a customer segment (or two or three) as our primary targets, understood their needs and differentiated our products. Now what?

Now we in marketing do what most people think of when they think of marketing. We build and execute tactical marketing programs to fulfill our strategic objectives. We look at our targeted customer segments and decide the best ways to alert them to our products, their features and benefits. We determine the best way to communicate our differentiation and value to those customers. Which marketing techniques should be used – trade shows, direct mail, telemarketing, advertising, etc? Which messages and persona? When most people think about marketing, this is what they would identify as what marketing “does”.

Marketing executes campaigns to build awareness, establish and build a brand, and drive leads. And frankly, this is what most marketers are really good at. Most marketers can tell you with infinite precision how many direct mail pieces will be read and what the response rate will be. They can tell you how many leads to expect from a booth at a tradeshow. They can tell you the number of impressions from website traffic. All of these are important, because traditionally marketing has not been held as accountable for its expenditures as other functions – but they focus on the pennies and miss the dollars. If the strategy isn’t right – if the differentiation and segmentation weren’t done correctly – all the precision in tactical campaigns won’t help much. As marketing budgets shrink and marketers are held to greater accountability – let’s not lose sight of the importance of doing nothing but thinking. Getting the big ideas right first will save time, money and energy down the line and result in better messaging, improved targeting and increased sales.

We started this series of posts with the question – What is Marketing? Marketing is strategy and requires each of us to think through the big topics before rushing off to execute the tactical campaigns. Next time someone asks you as a marketer to build a piece of collateral, stop and consider the differentiation, positioning and overall strategy before moving ahead.

Thursday, December 16, 2004

Two Things Marketers can do

I had a great marketing professor in graduate school who was a very successful businessman who taught only one course – a marketing course for those interested in marketing technology products. He used to say that marketing was very simple – in fact there were only two real requirements for a marketer: differentiating the product or service from the competition and segmenting the customer base. He felt very strongly that if you can segment your customer base and speak directly to those customers who care about your product or service and if you could clearly differentiate your products against your competition, the battle was won. Note that these concepts – differentiation and segmentation – are very strategic in nature.

Often there is a sense that marketing should be “doing” something, rather than taking a careful consideration of the problem at hand. Too often, segmentation and differentiation are not fully considered. Let’s look at what happens if one or the other is not completely thought through. Consider a product that is very differentiated from its competitors. It has unique capabilities and features. However, the developer of this product has done little or no segmentation of the prospect base. Which customers will want this new product? Which will care about the differentiators? Which customers like the new product but cannot switch due to technological barriers? How should we reach the prospects that might care about the technological advance?

As we all know, good technology does not guarantee a winning product. The market has to know, and more importantly has to care, about the features and benefits for the product to be successful. A good example of differentiation without segmentation is the “3G” market in Europe. Several years ago, most wireless firms in Europe spent billions to establish the licenses and infrastructure to offer 3G (third generation) services on a cell phone. Wireless firms advertised the ability to watch movies on the phone and use the phone as an electronic wallet. The phones and services were rolled out – but few were purchased. Why? Because few people cared about the advertised services. Now let’s consider segmentation without differentiation. If I carefully evaluate the general market and identify unique customer groups within a prospect base, I can find differences in their wants and needs. However, if I do not successfully differentiate my product or service to those customer groups, they will not understand it and will not buy it.

In many cases, I can sell the same product or service to many different unique customer segments by changing the messaging and possibly the packaging of the product, while the base product remains virtually the same. However I have to differentiate my product for each of these customer groups before they will notice it or buy it. A great example of segmentation without differentiation is a retail bank. Most banks know how many services you use as a customer (do you have a deposit account, do you have a checking account, do you use the ATM, do you visit online, etc) and they know your value as a customer. In many cases they know your marital status, job status, income levels and fluctuations. Yet virtually all customers receive the same services and offerings from retail banks. Banks have not capitalized or differentiated themselves by offering services and features to easily defined marketing segments.

Tuesday, December 14, 2004

What's Marketing?

What is marketing? MarketingProfs has an answer.

First things first. Let’s get the definitions straight right from the beginning so we all know what we mean when we say marketing. There is always a bit of confusion about the difference between sales and marketing, and for that matter exactly what marketing is and does anyway. A simple answer I’ve used before is this: marketing is everything that happens before the phone rings, and sales is everything that happens after the phone rings.

Now, this is a very simplistic definition, but it helps break down the areas of responsibility. Marketing has three major areas of responsibility in my opinion:
- Defining the product or service and how it differentiates itself in the market (differentiation)
- Defining the target set of prospects or customers (segmentation)
- Determining the best way to communicate the benefits of the solution to those that need it (communication and channels)

These are the things that have to happen to make a sales person’s phone ring. Sales then owns the responsibility to help a customer understand the differences between various solutions and why our solution is better than a competitors.

Three major areas of responsibility

Above I’ve identified three major areas of responsibility – or maybe four if you’d like to break out communication and channels as separate. Let’s do a quick review of the history of marketing to see how that aligns with other noted experts in the field. Several earlier thinkers and writers defined the four “P”s (note that since marketers are fairly simple minded everything becomes a mnemonic). The traditional four “P”s according to Kotler and others are:

- Product – what am I trying to market and sell
- Price – what price should I communicate (since that also communicates value)
- Promotion – what should I say and communicate to my audience
- Place – what channels should I use to communicate these messages

Later, many other marketers felt this four P model was too product centric and not customer centric. So the four Ps became – you guessed it – four Cs. Here are several variations of the four C model:

- Customer Needs – not product driven – what does the customer want or need?
- Communication – what interaction do I have with a customer? This is not one way
- Cost – what does my product cost the customer? Not just to buy, but also to own long term
- Convenience – can I make it easy to buy and own the product or service

Another four “C” model:

- Capabilities – what capabilities does my product or service offer
- Customers – what do my customers and prospects need
- Competitors – what products, services and messages do my competitors offer
- Conditions – what are the conditions of the market

As marketing matures as a discipline, we can see the evolution of thought from a product centric viewpoint to a customer centric viewpoint – and even to a market centric viewpoint.

Friday, October 29, 2004

What is marketing and what should its role be in high technology firms? This blog is a discussion about marketing in services, software and hardware firms in the high tech sector, reviewing what we've learned in over 20 years of marketing.

We chose the title carefully - and well, I hope. It is time to move beyond the product centric "push" model of marketing to a better understanding of marketing products and services in an environment where customers are more savvy and more discerning.

I hope you'll interact with me in this discussion. Let me know what you agree with, disagree with or any other ideas you may have.

For our first topic, we'll be looking at what marketing is. One hint - it is not sales, and it is not just tactical.