Selecting Points of Parity and Differentiation

Points of parity for a product are those characteristics of a company’s product that are not unique but are rather on par with competing products. Points of differentiation are those areas on which a company’s product outperforms competing products. The company needs to decide which product features and benefits it wants to match with competing products and those it wants to differentiate from competing products. It is simply not feasible or advisable for a company to differentiate its product on all aspects.

Though points of differentiation provide a company with its competitive edge over the competition, choosing points of parity carefully is also important. Customers should be able to relate the company’s product with a certain product category, so they can understand at a broad level the type of need that the product satisfies. Therefore, some basic characteristics of the product must be similar to other products in its category. If the product fails to meet the basic characteristics that customers expect from all products in the product category, then customers may not consider it for purchase, irrespective of how well the product is differentiated on other characteristics.

In product categories where there are many differentiation options (such as in the software industry), it makes sense to focus on creating sustainable differentiators rather than on blunting the competition’s points of differentiation. Thus, efforts could be better utilized in creating profound points of differentiation. Additionally, differentiation is not always accomplished through product characteristics. It can be created by offering better services or unique packaging, or by implementing more efficient processes that provide a cost advantage.

Let’s try to understand this better with a few examples…

In the past, the ability of major retailers to provide options for customers to purchase products online would have been a point of differentiation. However, as online shopping grows in popularity and more companies develop their e-commerce capabilities to match consumer demand, the ability to facilitate online shopping has become a point of parity among major retailers.

Similarly, Until recent years, free internet connectivity through Wi-Fi was a point of differentiation for some coffee shops; however, as increasingly more consumers have come to expect this service, the ability to be freely connected is quickly becoming a point of parity in the industry.

A company may choose to match a competing product on a point of differentiation, effectively softening that product’s edge. Thus, if the company achieves parity on all the basic characteristics and blunts the competition’s competitive advantage by targeting its point of differentiation, then even a relatively minor point of differentiation can provide the company with a competitive advantage.

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What is a Growth Hacker?

Here at SMstudy, we’ve always been amazed with how Sales and Marketing has evolved over time and never has this growth been more prominent than in the past couple of decades. Technological innovation has been the main driver for these changes and the job of the typical Marketing individual has also changed a lot as they continue to follow the technological adoption cycle. Earlier the marketing individuals used to focus on TV, Radio and Newspapers to reach out to their audience. This was till the internet arrived and changed Marketing forever.

The internet brought with it new ways of marketing with Search Engine Marketing, Paid Adwords, Search Engine Optimization becoming the buzzwords to reach out to audiences. The modern day Marketing professional had to track customers interactions online and understand how to best optimize them. They started analyzing huge chunks of data to understand where customers were spending time on their site, where they were dropping off, what they were buying etc. to provide more focused advertising to them.

The amalgamation of technology and marketing has let to a new phrase “growth hacker” coined by Sean Ellis in 2010. A growth hacker is a personn who understands technology, marketing, data and product to find a strategy and create scalable growth models for an organization. Growth hacking’s goals are based on marketing but driven by helping improve product experience and hence a Growth hacker understands technology as well as marketing enabling him to implement any change he/she wants.

A Growth Hacker can create online Google adwords, Facebook, Twitter campaigns, can make high quality landing pages that are going to have awesome CPC, and can also manage targeted email campaigns like a normal Marketing professional. However, at the same time, the Growth Hacker is equally adept at having conversations with the technology team, develop web pages, design mobile and web user experiences etc.

We will follow this blog up with another entry on how Growth Hacking has helped companies achieve viral growth. A typical Growth Hacker will base each and every decision of his on a simple question ”What will be the impact on growth?”

Example of Growth Hacking:

Paypal’s friend referral: As a new payment mechanism primarily fighting with large banks, PayPal’s big challenge initially was to get new customers to adopt their product and get them started on using it. Traditional advertising was too expensive and also there was no assurance that people who they reach out to, would use them. Initially, the PayPal team thought of doing business development deals with big banks but that didn’t work out and they understood that they needed a direct to customer approach that would provide a organic, viral growth.

So they started a referral campaign wherein any customer of theirs would get $10 for each friend they refer that joins up and these new customers, upon joining get a $10 amount too. Although this cost PayPal a $20 customer acquisition cost, they were able to witness a 7 to 10% daily growth and acquired 100 million users in a very short span of time. Not only did they acquire these new users, but because the new users already had $10 in their PayPal account, they would end up using PayPal to use the amount.

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The New Wave in Digital Marketing

For roughly a decade technology has been facilitating the brushstrokes to paint an ever clearer picture of consumer behavior. Over time, analytics has helped solve the mysteries of the where, the when and the how often as it pertains to clicks, views or anything else online for that matter. In the process, the human behind the consumer data has been neglected.  The time has come to treat them like real people again.

The next new wave in marketing (there’ve been two so far according to reliable sources) will be marked by a return to the personal touch. There exists an emerging opinion that a continuation down the path of the science of analytics will not yield the desired results. And if anything, at some point it becomes a liability and deterrent to constructing strong enduring relationships with customers. The kind built on trust, respect and understanding. Or so believes Jahia, a leading User Experience Platform for Digital Transformation.

They state: “Building 1:1 customer relationships means relating in the most appropriate way for each customer. It is vital to find the right balance in communicating just enough – too much and they are annoyed, too little and they feel forgotten (or forget you).”

As I mentioned recently in the article “How Information Finds You: Hyper-relevant Content Marketing,” there is a refinement process occurring in digital marketing that emphasizes the use of high-quality content and a marketing strategy that employs the smartest possible implementation based on what is known about the viewer/consumer. This is the future of digital marketing due to several factors, including the phenomena of “peak content”. A more nuanced marketing approach that acknowledges the human being on the other side of the conversation is where everyone should be headed.

Again from Jahia: “The right relationship is not the same for every brand or every customer. It depends on both the product or service you offer and each customer’s individual preferences. The core of that relationship is giving the customer the feeling that they have as much control over the relationship as you do. That includes giving them transparency into what data you keep about them and how you use it — this is the beginning of trust.”

In addition, for the sake of a company’s longevity, to manage and use consumer data responsibly will set any marketer ahead of the curve; soon enough federal regulation will catch up and kinder practices will be required by law. By setting up a marketing system that respects privacy AND manages to market in an informed, logical manner is a vanguard move.

Jahia notes: “Very soon, this privacy and usage standard will not be simply the voluntary action of ethical companies. Emerging legal regulations will make it mandatory as it catches up with the digital revolution. This has already begun to be legislated in European courts. The courts determined that there is a ‘right to be forgotten’. This is just the beginning of the what is to come in the next few years. The courts are recognizing that individual’s privacy rights need to be respected, even on the internet. No enterprise can afford to be behind in this area.”

Creative ways to cultivate real relationships with customers will be the mandate for marketers and sales professionals in the coming months and years. Systematizing that cultivation with a hyper-relevant content strategy is only a portion of what the future will require; the rest will rely on the sales and marketing teams’ skill, intuition and ability to empathize with consumers.

In 2016, the big data boom will settle into the tasteful, refined use of the data to provide value and relevance to the public. Now that we have a clear picture, what marketers do with it matters.

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How Low Can You Go? How High Can You Get?

Continually rising prices at the gas pump since the mid-1970s has had us all asking, “How high can these get?!” As 2015 slipped into 2016, with oil by the barrel in free fall, we found ourselves asking, “How low can this go?”

The roller coaster of oil pricing per barrel and sticker surprise at the gas pump has a lot of people wondering, “How in the world do they set those prices?”

Companies set their prices according to their own pricing strategy, which “properly prices products or services so that the company can sustain profitability while maintaining or growing its market share,” according to SMstudy’s Marketing Strategy, book one in the SMstudy® Guide series. Even though it sometimes seems as though companies are grabbing for quick profits and letting the future take care of itself, sustained profitability and growth in market share are part of every sane strategy.

Coming up with that sane strategy isn’t as easy as a few fat cats sitting around in a smoky room saying, “Well, what do we want to charge for this?” That question is likely to be followed with another, “What CAN we get for this?” And now our fat cats are talking strategy. The SMstudy® Guide says, “In order to develop a comprehensive Pricing Strategy, a company must specifically evaluate and understand the trends and dynamics in many areas such as the following:

  • the features and pricing of competitive products in the market
  • the company’s desired positioning, mapped against that of the competition to identify pricing of similarly positioned products
  • the consumer mindset to understand the demand and spending capability for each product
  • the cost, projected unit sales, and targeted profitability levels of each product
  • the innovativeness of each product
  • the capability of the production and operations teams to create high-quality products at reasonable costs
  • the knowledge of the current and desired market shares for each product.”

The SMstudy® Guide details nine inputs and fourteen tools companies can use to understand these trends and dynamics to design a successful pricing strategy. One input is the company’s own positioning statement. This statement is important because “how a company markets a product impacts who buys it and how much consumers are willing to pay to purchase it.” The positioning statement identifies who the company wants to sell to and how much it would like those customers to pay. “A company that caters to a wealthier market segment with relatively high disposable incomes, aims to create a premier positioning for the product focusing on the quality of the goods or services, brand messaging, and packaging.” This market position allows for premium pricing, too.  It is no wonder that there are at least three grades of gasoline at every pump.

Another input is “opportunities and threats.” As the SMstudy® Guide points out, “Identifying and analyzing opportunities and threats help the company consider the external factors that may influence the costs involved in manufacturing a product or service and subsequently impact its pricing.” This is why refinery fires, hostile take overs of oil fields, and sudden growth from emerging markets all over the world affect the price of gasoline at the station on the corner.

So, how in the world do they set those prices? By following a rather elaborate pricing strategy.

For more help understanding pricing and marketing strategies, visit SMstudy.com

The information in this article comes from chapter four of SMstudy’s Marketing Strategy, book one in the SMstudy® Guide series of six books that also include Marketing Research, Digital Marketing, Corporate Sales, Retail Sales and Branding and Advertising.

Big Data and Analytics : Fundamentally changing the marketing landscape

Big data and analytics become an integral part of marketing since the inception of internet in the late 1990’s and the introduction of smart phone and other internet enabled smart devices in recent times. Big data usually refers to the data sets with sizes beyond the scope of commonly used software tools to collect, clean, manage and process data within an acceptable time frame. With the rapid advancement in technology and increasing use of smart phones and other internet enabled devices, organizations today face overwhelming volume of data through multiple channels and devices. The main roadblocks while using big data are:

  • Capture high volume of data from multiple sources and consolidate the data
  • Data cleaning (i.e. removing redundant or unnecessary data – internal data, data generated due to testing, deletion/ blocking of cookies)
  • Data storage
  • Data sharing/ transfer
  • Data visualization
  • Data analysis

Now the important question is why should organizations use big data and analytics. The answer lies in decision making. Organizations cannot afford to make any decision just by guess or gut feeling. The use of predictive analytics and certain other advanced statistical methods to extract value from data leads to more confident decision making which in turn results is greater operational efficiency, cost reduction and reduced risk.

Big data enables marketers to increase the size and range of information sources while speeding up reporting, enabling real-time forecasting and more informed and accurate decision-making.

marketers benefit from a large volume targeting options when it comes to online advertising. The growth of cookies and information-rich social media, means that the data is there to go beyond simple demographic, geographic, psychographic and time-based targeting options.

Big data analytics helps optimizing campaigns and improve results in a scalable, real-time manner.

Big data transformed the last-click conversion attribution model to the multifaceted attribution model which takes into account all touch points across consumer purchase life-cycle. It was complicated earlier to capture these different, interrelated factors and their relative weights. But big data makes it easy to track, analyze and evaluate activities to see what is actually driving customers to engage.

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