Why is positioning important for a product?

A product’s placement is the single biggest effect on a customer’s purchase decision. In the minds of consumers, positioning implies the qualities associated with that model, e.g. “Mercedes is a top-of-the-line vehicle.”

Although different consumer segments do value different things. The characteristics of a product, such as its speed or size, are important for visionaries, but for pragmatists the main proof of the importance of a product is its market position relative to rivals.

As a newcomer without competitors or a market position to boast of, this places you in a quandary.

The good news is that you can always define your competition yourself by giving customers two existing competitors as reference points. For example, imagine you are running the company Silicon Graphics, which has just introduced the first digital film-editing tools.

Firstly, you need to define your intended customers by mentioning an alternative market: a rival that your customers have used for years. That would be an old-fashioned method of cutting and splicing film for Silicon Graphics.

You then differentiate yourself with a product alternative: a competitor that has also harnessed a new, disruptive innovation, similar in some way to yours. For Silicon Graphics, this could be SUN workstations, which are leading edge, but not meant for editing film.  

Before launching your invasion on the target niche, you must choose the distribution channels you will invade through and the pricing strategy you will attack with. This basically means deciding who will sell your products then slapping a price tag on them.

Pragmatists are very picky about which companies they buy from. Hence, when crossing the chasm, the number-one priority is to secure a distribution channel that pragmatist customers are already comfortable with.

Direct sales are typically the best medium for crossing the chasm, as it effectively stimulates demand, operates efficiently and encourages cooperative customer ties. This channel usually involves having a dedicated sales force that operates directly for you and who communicates regularly with big corporate customers to make sales.

Once you have become the market leader in your target niche, you can then transition from direct sales into a channel more capable of fulfilling high-demand volumes. Depending on your product, this could mean selling through retail stores, the internet or even large networks of value-added resellers who bundle your product with, say, software and sell it onward.

The selling of an unknown new product poses a challenging and dangerous job for distributors. So the primary objective of your pricing plan must be to enable them to sell in the chasm. Initially, this means offering them a disproportionate share of the profit margin as a reward, and eventually phasing it out as you gain market lead.

Your second goal in pricing is encouraging the customer to buy. Since the pragmatist group prefers to buy from market leaders, you should price your product as the market leader would.

Most successful chasm crossings happen in business markets because it is extremely difficult to do so with a consumer product.

Businesses typically have the economic and technological capacity to implement goods that are even new, whereas customers do not. While technology enthusiasts still exist in consumer markets, they prefer to quickly move on to “the next big thing.” At the same time, it is unlikely that you will find true visionaries to promote your product and fund your research and development.

Also, unlike businesses, consumers usually lack a truly compelling reason to buy your product; they don’t have critical processes that only you can fix.

Consider , for example, Quicken, an Intuit-produced financial-management program. It faced the following problem: Customers were perfectly satisfied with their financial management using pens, paper and checks. Their systems were not as fractured as they were twisted so they lacked a particularly good reason to purchase.

Eventually, Quicken crossed the chasm by effectively positioning itself as a combination of a savvy financial-management tool and the old-fashioned pen-and-paper method.

After emerging from the chasm, companies often find they have inherited a number of commitments from the pre-chasm organization. These could, for example, involve the returns promised to investors.

To successfully manage these challenges and leave the chasm behind, difficult and profound financial and organizational choices must be made.

First and foremost, sustainability becomes the post-chasm organisation ‘s priority. Generally speaking, the faster it happens the better. Introducing a profitability approach early on helps enterprises prevent a “welfare mindset,” and allows them to be cautious about the clients and projects they undertake.

Second, the post-chasm company goes through profound organizational changes. The few powerful pioneers who fuelled growth in the early markets can become liabilities, as they tend to have little interest in administration and “business as usual.”

What the post-chasm company really needs are settlers, people who diffuse authority and build standardized, well-documented procedures.

In this new world the pioneers find this tedious and alienating and are therefore unable to function effectively. Disputes occur almost invariably, often surrounding the equal distribution of early and mainstream business incentives and revenue bonuses from the very different markets.

As this transition happens, the company runs the risk of losing early-market customers and neglecting the product enhancements demanded by mainstream customers. Thus, two new jobs must be created, both of them temporary:

The target market segment manager must transform every visionary customer relationship into a potential beachhead to enter the rest of that customer’s industry. For example, if the customer is Intel, the industry is semiconductors.

The whole product manager is in charge of managing the ever-growing list of product-enhancement requests and bugs to be fixed, ensuring retention of pragmatist customers.

High-tech innovations must cross the chasm between early and mature markets to achieve success on the mass market. They need to concentrate on identifying a specific target area in which they can completely meet the needs of consumers and become the market leader.

Check out my related post: Are Gig workers driving the new economy?


Interesting reads:

https://www.amazon.sg/Crossing-Chasm-3rd-Disruptive-Mainstream/dp/0062292986

https://www.goodreads.com/book/show/61329.Crossing_the_Chasm

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