Your product market profile
Products in general, and technical products in particular have what I like to
call a product market profile which determines how they are perceived in the
market place relative to other products and marketplace standards.
Products can have one of four basic profiles, Exotic, Specialized, Optimized or
Commoditized. Which profile the product has depends upon where customers
place in it relative to "standards" in the marketplace.
In the graph above, the X axis models increasing market acceptance and the
Y axis models increasing divergence from market standards. At any moment
in time, a product will have one of the four profiles shown. It should
be emphasized that this is just a snap shot in time, markets and the standards
which define the market evolve over time.
The more standardized a product is, the greater the market acceptance.
These are the commodity type products. The less a product diverges from the
market "standard", the more acceptable it is to the market place. At the extreme, when a product is perfectly Commoditized,
there is no product differentiation - all products of the same class are
completely interchangeable. The only purchasing decision the buyer needs
to make is what price are they willing to pay. The market for these products
is typically very large, but price margins are extremely slim. This is strictly
a volume driven market, success usually goes to the most efficient supplier.
Conversely, the more divergent from market standards a product is, the less
the market acceptance. These are the exotic products. At the extreme,
products of this class are so divergent from standards, they are completely
non-interchangeable. Exotic products are definitely geared towards buyers who
are early adopters. They are excited about technology itself. To the buyer,
price is usually not a consideration, but products in this class really
need to push the envelope. The market for these products is typically very
small, but price margins can be high, and with some luck, if the market is
emerging, the product can become a standard in itself. These products need market
evangelization to succeed.
Between the two extremes of exotic versus commoditized, we have specialized and
optimized. The demarcation between these two classes is not a clear bright line.
Optimized products in general will do all that a commoditized product does,
but the optimized product will do all or at least a subset of functions better.
Buyers who purchase these products have the same needs as those who purchase
commoditized products, but want a bit extra performance or panache in the
product itself. These products definitely compete with the commoditized products,
but can command higher price margins because of product differentiation.
Consequently they are a good choice for medium volume companies to compete in
larger commodity type markets.
The specialized product on the other hand is designed to target a specific set
of standard functions as efficiently as possible. These products usually
exist at the edges of the main commodity markets where the standards are
evolving and there is turbulence. Success here requires good market analysis,
a grasp of what is happening "in real time" with the market,
and some skill at predicting where the market is going. The key to success
for this market is to be at the right place at the right time as the market
opens up and demands your new product at a premium price.
Does your product market profile match your market place?
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