Leaders' Blog

Moving to a Service Business Model - Pricing Considerations

Geoff Anderson back for another installment for the Technology Marketing Center.  Today I will be talking about the internal struggle and strife in a transition from a point sale of a product to a pure or hybrid service offering.   As a Product Manager, pricing is critical.  For a new product offering, getting it right is the difference between success, and failure.  But with a product that has a long history, a deep set of competitors (and historical deal data to refer to) thus the error bars are much lower.

But what happens when you move from a point sale of a physical product, to a service, either a subscription, or pay as you go model? Things get tricker, and beyond identifying a price and business model, there is momentum within your organization that is wrapped up in the revenue that the outright sale generated. Getting the message across about the difference in value, and how that relates to the business can be an uphill slog.

Let's take a classic B2B application, traditionally esconced within the IT organization. In the past, this meant server software, licensed, with an annual maintenance charge. Here, you get people upgrading when hardware needs refreshing (4-5 years), and that is a good opportunity to sell them more product. But it also is a window of opportunity for a "forklift" replacement, and the competitors' all know this.

When you can move to a service, the business model changes. Instead of a big dollop of revenue every 4-5 years, and a drought between then (not really many reasons to keep in touch until next upgrade window), you forego the up front revenue (or charge a small-ish startup fee). You then collect a periodic payment based on usage/users connected/or number of transactions. This revenue stream is typically designed to replace the up front revenue in 9-15 months of service charges. Then, all the revenue is incremental. As a bonus, you get two intangibles. First, you are interacting with your customers frequently. You are billing them, and can provide opportunities to add services/capacity/users. Second, you make it much more difficult for a competitor to poach your customer. All good, right?

But, the transition can be fraught with landmines. Sales typically likes to close a deal, get their commission, then move on to the next deal. This is great in a classical business model, but breaks down in a service model. Furthermore, senior management also can take some convincing. Regardless of how often they claim to "get" the new business model, you can be expected to have multiple sessions explaining the revenue model, the crossover point, and this new concept, "Lifetime Customer Value". Still, it is worth all this effort. If you fail to adapt, someone else will swoop in, and you will see your revenue plummet.

Summary:

It is hard enough to make the transition to a service model from a traditional point sale model. Many groups will be lobbying to maintain the status quo, or at least to protect their dollars. But, armed with pricing analyses, business models, and strong definition of "Lifetime Customer Value", the marketeer can overcome these objections.

Disruptive Technologies

Geoff Anderson back for the Technology Marketing Center after a much longer than anticipated hiatus.  Last time I was here, I talked about how a disruption in service can lead to opportunities, as well as how over reliance on a particular technology can leave you vulnerable, regardless of how reliable it is.  Today I will talk about disruptive technologies.

As readers of Geoff Moore’s “Crossing the Chasm” we are all familiar with the diffusion of new technologies.  It describes an adoption curve, and process that a technology offering will “likely” follow in the market.  Naturally, there are exceptions, and today we will discuss some of these.  If we look back a decade or more, and recall the world of telephony, that was the dawning of the age of Voice over IP or VoIP.  Lead by Cisco Systems, it was a classic example of a disruptive technology.  Until then, there were two distinct networks in the typical enterprise, a data network, and a phone network.  This meant duplication of wiring, of staffing (as telephony departments were traditionally not part of IT), and connections to the outside world.  The original disruption was to replace the inside the walls telephone wiring with a system that provided the same service over your existing data network.  The foundation for this was well understood, and Cisco, as the premier supplier to companies of their networking gear, had all the pieces in play to deliver on this convergence. 

Clearly, it was a successful play, and today, overwhelmingly organizations are buying and deploying VoIP systems.  Today the trend is once again in the replacement of traditional telephony, but outside the building.  A technology called “SIP Trunking” is replacing the traditional Time Division Multiplexing (TDM) connections to the outside world with essentially an ethernet connection.  Many reasons for this, but primarily to reduce the toll and termination charges of a phone call and replace it with a metered bandwidth connection.  This is playing out rapidly, and causing the carriers (the ILECs and RBOC’s in the US) to adjust their business model and product offering.

Another disruptive technology is also playing out in the computing space.  If you think about the number of pad devices being sold, and the tectonic shift away from full feature computers, it is a remarkable evolution.  In the first 9 months of 2010, Apple sold (not just shipped) 15.2M iPad’s.  While we don’t have numbers for 2011 yet, the introduction of the second iteration is clearly on a similar trajectory, and combined with the smattering of Android based devices, it is clear that the netbook and low to mid range laptop market is bearing the brunt of this climb.  Apple hit a trifecta in their initial release.  It was a compelling package (size/weight/performance), coupled with a strong ecosystem to support it with applications (at launch a ridiculous number of optimized applications were available), and provided the features that a large fraction of consumers use computers for (email, web browsing, media consumption).  While they didn’t invent the space, once again, they released a product that crossed the chasm, and did it in an enormous gesture. 

All legacy markets are ripe for disruptions.  However, as should be obvious, disruptions are difficult to plan for in advance.  Sometimes they are well executed flanking maneuvers, sometimes they are completely unexpected entries, and yet other times, they are technologies that shouldn’t be disruptive to the market (i.e. the existing players should have seen it coming).  However they arrive, they provide opportunities for the leaders, and fast followers, and bewilderment for the entrenched players who are left behind.  Until next time, happy marketing!

Disruption of Service - A tale of Unintended Consequences

Geoff Anderson back for another round for the Technology Marketing Center.

I have been planning a piece on disruptive technologies, and the wrinkles that they leave to be ironed out, when the unplanned outage (read:failure) at an Amazon EC2 regional datacenter happened yesterday (April 21, 2011).

In case you weren’t aware of it, at the AWS datacenter in North Virginia, a failure cascaded into a major issue.  The public face of this is that several large, heavily used social media sites have completely deployed their solutions based on the Amazon EC2 solution, including the Twitter utility “HootSuite”, the news aggregator “Reddit”, and the location based service Foursquare.  While none of these outages are life threatening, they are but the most publically visible users of the EC2 service. 

The Cloud is here to stay

As I have written in the past on the trend to move infrastructure and compute power to the cloud, virtually every CIO and senior decision maker in a corporation are examining the benefits and pitfalls of these transitions.  On one hand, Microsoft and Google are aggressively vying to get the messaging (email and Unified Communications) and productivity applications moved to their cloud.  On the other side, Salesforce.com  has been very successful selling their CRM solution as a cloud based solution, also there are literally dozens of industry targeted solutions from Real Estate office management software, to high end ERP solutions that are available in the “cloud”.  Beyond these B2B solutions, there is also an invisible and increasing reliance on the major web services to provide infrastructure to everyday faces on the web. 

However, one of the risks of moving from infrastructure that you control to essentially subletting your usage on one of the many providers, is that you inherit their risk of downtime.  Looking at the Amazon EC2 SLA, you are guaranteed 99.95% uptime (known in the vernacular as 3 9’s of reliability.  As a comparison, the phone company is committed to 5 9’s, or better than 99.999 uptime.) Naturally, Amazon has outstanding services, and remarkably reliable, redundant facilities, and automatic failover capability to reduce the risk of down time.  Outages like this are rare.  But rare, doesn’t equal impossible. Just as they are rare when you own the infrastructure on premise.  However, once it leaves your control, you also lose your ability to influence the crisis response.  Also, Amazon does provide options (at a higher cost, naturally) to reduce the impact of a regional downtime. 

Companies considering the decision between an on premise, versus a SaaS solution need to account for the SLA commitment on uptime, and the reduced performance of the whole system.  Where the actual hosting was done will become part of the calculus, as well as scrutinizing the SLA’s, and possibly negotiating higher financial penalties in the event of down time.

The Tie in

As a product marketer, and a product manager, I  am constantly looking at the whole product, and all the components that surround the core offering. As many (most?) startups today are foregoing the building their own datacenter and hardware, instead contracting out to the cloud providers, not only does this reduce the needed capital (or allowing capital to be spent on more product development – Yay!), but the available options, instant scaling, and custom configuration ability make selecting a solution like Amazon’s EC2 solution quite attractive.  One must remember that under the surface of such a decision lies one of the core whole product tenets, providing a reliable product to your customers.  Selecting the proper solution, negotiating the right SLA and penalties clauses, and being honest about the likelihood of a failure, and what that failure means to your customer is important.  It is easy from a marketing perspective to highlight the value of a “service” versus a discrete deployment, but it is important to communicate the

Conclusions

The reliance on the cloud, and the *aaS offerings is here to stay.  It is up to us to ensure that our plans for their use in our products take into account the risks, as well as the benefits that they offer.  We owe it to our customers, our management, and our staff. 

That said, highly visible events like the AWS failure will inevitably drive the decision makers to pause and think about the implication of not “owning” the infrastructure.  It will probably not stop the transition, but it is going to alter the conversation around the SLA and commercial terms.

Don’t worry, my next post will be on the unintended consequences  of the adoption of Disruptive Technologies.  Until then, Happy Marketing!

Value versus Features, the Product Conundrum

Geoff Anderson signing in for a new Technology Marketing Center post.  This time I am going to delve into a topic that was brought front and center lately in a session I was presenting to our sales team, principally what sells products.  As you know from the course on Strategic Marketing of Technology Products, when we talk about the "Whole Product", we often use terms like the ante, and how the features we either offer today or have in the pipeline drive differentiation and keep the competition guessing and off balance.  In particular, I recall the tale of the packaged chicken, and how the leader was always able to add to the whole product to keep ahead of the march of the competition.

This is well and good, and from a product management perspective, it is very helpful to define a backlog of features and functionality that the development and engineering team can execute on.  However, is this feature list how you want to portray the product to the market?  If you start down this path, it will become expected that each major iteration of your product will have X number of new features (widgets etc).  And if you deliver anything less than that, there will be disappointment that you have done less than in the past.

Turning this around, think about when you buy a product personally.  Do you buy based on a feature list?  Sure, for a tech product, you probably scan the tech specs or the data sheet, but is that really what tilts you to buying the product?  Or, do you buy a product to fill a specific need, and use the tech data to ensure that it will solve the problem at hand?  While there are certainly some shoppers who are the former, the VAST majority are in the latter crowd.  Thus we don't sell products so much as selling solutions to a problem.

Seems pretty straightforward, right?

Then why is it that when you are training your sales team on the new product(direct, indirect, distributor etc), they invariably focus solely upon the number of features you display, and will universally grumble how we used to have longer lists (i.e more new features).  We as marketers need to adopt, forcefully if need be, to expressing the value to the customer of what we are delivering.  In this circumstance, the presentation I was delivering to sales regarding the release broke the new features into 5 key, features, each of which had a clear proposition of value to the customer, and tied to the differentiation of the product.  Naturally, there were dozens of smaller items, or checklist type features, but for my 1 hour slot, I wanted to focus on the key reasons we will be successful.

Unfortunately, sales still needs to be educated on the difference between value and features.  The good thing is that customers get this.  If we get this (and if you are reading this, you likely do), we can together bring our sales channel into the fold.

In summary, features don't sell products, value does.  Value to the customers is what helps them solve problems.  Emphasize the value in your offering, and keep a pipeline of value differentiators in your development pipeline, and you will have a roadmap for success, even if internally you maintain it as merely a list of features.

Validation - Voice of the Customer

Geoff Anderson back for another Leaders' Blog session for the Technology Marketing Center, and I am honored to have the first post of 2011. As I have commented in the past, I get my ideas from a variety of Muses.  This post came from an exchange on Twitter.  I follow several people, and a few hashtags, and the idea for this post came from people I follow as part of the #prodmgmt community.  A tweet came across lamenting senior management team members who use a Henry Ford quote to question the value of the Voice of the Customer (VoC) exercises.  Since it didn't identify the quote, several of my peers jumped in, guessing things like "Any color - so long as it is black" as the quote.  Naturally the original poster was referring to the quote: "If I'd asked my customers what they wanted, they'd have said a faster horse."

Not that I am gloating about knowing the intent of the original reference, but I have been in the position of defending validation exercises from senior executives who share this opinion of VoC.  I suspect that this attitude of dismissal of the value also exists as startups.  Unfortunately, as marketers, I suspect that we have done this to ourselves.  Raise your hand if:

• You have ever done a validation effort that you consciously or unconsciously biased the discussion guide to validate your personal beliefs
• Your questions have not been truly open ended - 
• You have cheated out and gone to a packaged survey to avoid the travel (and expense) of a full VoC (or was unable to secure the funding from management)
• You have cherry picked VoC targets that you know to be friendly/in your camp

Has anyone not raised their hand?  I know that I have done some quick and dirty validations and voice of the customer work that had shortcuts.  However, I was aware of the biases and made sure to account for this in my reporting.  Unfortunately once you get in this rut, it becomes orders of magnitude more difficult to secure buy in from senior management.  

I firmly believe that if your VoC efforts result in conclusions like the Henry Ford quote above, you have failed to ask the right questions. Perhaps if Ford had followed up the question with the series of "why" questions we learned about in the MTP course, he would have gotten to the downsides of horse based travel (i.e. Distance per day, how to feed the horse en route, the fact that there are some places that you can't get a horse to go, the limits to what a single or train of horses can pull, ...), and thus learned what the unmet need was.  I find that in a detailed Voice of the Customer or Validation exercise that the true value is the tangential directions that the discussions go down, and the structured debriefing process after the interview.   

Another path to increasing the value to, and buy in from, senior executives is to include them in the process.  At the front end, keep them in the loop when developing the discussion guide.  Run through the practice sessions (you do practice before hitting the road, right?) with them.  Have them be the "sponsor" and kick off the VoC sessions when you are live with customers.  Keep them as an observer during the session (and make sure that they are in "listen ONLY" mode during the visit).  I have never had an executive feel that this was not useful to them, and worth their time (caveat - I usually call upon Directors or group VP's for this role, not the CxO level.  YMMV)

While I can't guarantee that this will lead to success, it will add some sunlight to a crucial marketing process that some executives will naturally doubt its efficacy.  Usually all it takes to make a convert for life is for a successful VoC that uncovers a product concept, or an unmet need to be exploited.

Do you have any real world experiences to share?  If so, be sure post to the comments below.

Until next time, Happy Marketing!

 

Strategic Marketing of Cloud Computing

Geoff Anderson from the Technology Marketing Center  back for another installment.  Being in the tech world, it is impossible to function without hearing about this "cloud" and how all your computing and services are going to go there.   Perhaps. Perhaps not, but it is undeniable that there is a lot of buzz around the cloud and *aaS  business models.  I am not sure where it all started, but it is clearly gathering momentum and gaining adherents to the discipline.  You can't open a technology mag (IT focused in particular) without reading about the coming cloud transition.

Somewhere around 2000 or so, a tectonic shift began in the computing world. Beginning in the late 1990's, the amount of raw computing horsepower in servers outpaced the applications hosted on them, so "Virtualization" became the first shoe to drop in the path to the nascent "cloud".   Virtualization technology allowed creating many virtual servers that shared the hardware resources of a big powerful server, making it "host" many smaller, single purpose servers (also called VM's or VIrtual Machines). Thus began the race to bigger hosts, and more VM's You started hearing about Web 2.0, and increasingly, more and more applications were being hosted on the web.  

A benefit of this evolution was the ability to pool resources and serve up applications via the WWW. An early pioneer was Salesforce.com.  Their business model was rather simple.  They built a very powerful CRM (customer relationship management) system, and sold subscriptions to this service to companies.  It was a win-win for the companies.  Salesforce had a great product, that they continually evolve and improve, and the customers didn't have to buy licenses and hardware to run the application themselves, not to mention the headache of maintaining and supporting the infrastructure.  They "rented" seats, and Salesforce was responsible for security, data integrity, and support for access and reporting.  Saying that customers responded enthusiastically would be downplaying the amazing success that Salesforce has achieved.  

However, if you look at the Salesforce phenomenon through the lens of the Strategic Marketing of Technology Products Course, it is clear that the founder of Salesforce, Marc Benioff saw an un-addressed segment of the market, and crafted a solution to fill that gap.  He saw that small to medium sized businesses couldn't afford the infrastructure for an in-house CRM solution, and his vision was to sell them the solution in packages that made sense.  Add to that the vision to create large, multi-tenanted platforms available to anyone with a connection to the internet, and a web browser, and you get a powerful scalable, flexible, yet affordable solution.  On Salesforce's side, they get committed customers, a monthly (predictable) revenue stream, and a business model that allows them to expand their offerings, yet retain their core values.

The interesting phenomenon, is their expansion into customer service monitoring, and offering an API and framework for custom deployed solutions based on their cloud infrastructure (similar to the Azure offering from Microsoft, or Amazon's EC2 products).  This market adjacency naturally followed on from their early successes, and extend their offerings.

The next few blog postings I do will focus on various aspects of marketing in the cloud, so to speak. I will cover Augmented Products in the cloud, Segmentation and Differentiation, and evolution of the enterprise software industry, with the big bets placed on off premise hosting of core infrastructure.  Naturally, I will be tying these back to specific concepts and lessons from the MTP class.

Until the next installment, Happy Marketing! 

The Chasm: Diffusion of Technology

Geoff Anderson returning for another installment.  In the past few postings, we have talked about Whole Product, Positioning, and what happens if you ignore the Whole Product concept. All these topics are covered in detail in the Marketing Technology Products course.Today I will talk about the chasm and diffusion of technology (if you are a physics geek, the Diffusion Equation is a variant of the heat equation, and probably the easiest PDE to solve.  Diffusion of Technology is very similar).

Assuming that all of you out there have read Geoffrey Moore's "Crossing the Chasm", you will recall that if you break the diffusion of a technology into a bell shaped curve of adoption, there is a distinct abyss that must be overcome to break through to mainstream adoption of a technology. Today we will talk about two technologies, and their attempts to cross the chasm.

Tablet Computing - Stuck in Early Adopter

Tablet computing has been in the news since the late 1990's.  There were many early pioneers (Grid computing in particular), but adoption has been remarkably low.  The total number of laptops sold per year number close to 100M units*, but the number of tablet PC's is in the few hundred thousands, unit wise.  More puzzling is that the people who buy and use tablet PC's are true evangelists, who love the technology and gush about how useful it is.  Microsoft does significant development around the integration of tablet features into their operating systems.

Yet with all that effort, the total volume of tablet PC sales remains tiny compared to the overall market for portable computers, let alone the overall computer market.  Why is this?  Well, in the parlance of the innovator's dilemma, the Tablet PC has not been disruptive enough to cross the chasm.  It's benefits have not been enough to drive commercial success (or reaching the "early majority").  While you can make a good business targeting early adopters, if you don't get to that early majority, your growth will run out of steam.

When I first started gathering information for this post, the Apple tablet was thick in the rumor mills.  However, I think Apple punted, and made a fancy media player/larger iPod touch, with some computer like attributes. Perhaps the failure to cross the adoption gap was that the technology was too close to the Laptop.  Time will tell if Apple, arguably the trend setter in technology and "cool" can bridge this gap.  Their product is a marginal computer, but it offers a form factor that hasn't been addressed by the PC makers.  I would bet that the iPad does a decent business, but I look to its successor as getting the early majority market.

Digital Cameras - A Disruptive Technology

If we think of disruptive technologies that have crossed the chasm, one that just leaps off the paper is digital photography.  From the early 1990's when digital sensors started to become available in consumer grade cameras, many believed that its resolution would never rival film, and even arguably the leader in photographic technology, Kodak, dismissed the importance of the technology (the irony is that Kodak invented the CCD sensor in the 1970's and failed to grasp the commercial aspects).  Today, it is getting to be impossible to find a film camera. Hasselblad's (the Ferrari of medium format) can be had on eBay for less than $500, and Kodak has discontinued production of Kodachrome slide film, the reference standard for more than 7 decades.

Electronic Books - Crossing the Chasm

One last technology to look at for this installment is the e-reader market.  Defined to be portable electronic books, they typically combine an eye friendly eInk display, with a set of hardware that allows a friendly book-like interface (caveat:  I am a Sony Reader fan) for users to interact with content.  There is a paradigm shift underway, similar to how music distribution evolved in the 90's through today, but around book publishing.  The infrastructure around the creation and publishing of books has a rich and long history, but as in the music publishing world, that infrastructure is under pressure from the new market dynamics.  Why ship dead trees around the world, when it costs relatively 0 to send bytes.  

While the portable readers have been available since the early 2000's, two products initiated the transition to commercial success.  The first being Sony with their PRS reader, released in 2006.  This was the first commercial offering by an accepted company.  Sony evolved the product line down the whole product path by adding the book store, and increasing the features/functionality at regular intervals.

The other event in the electronic book or e-reader market was the introduction of the Kindle from Amazon.  This combined the reader with a wireless internet connection (driven by cellular networks) so that customers can browse and buy books any time, anywhere from their reader.  Released in late 2007 (in time for the Christmas buying season), Amazon made a huge splash (and have really put a dent into the book publisher's bread and butter).  Today in the second generation, they also have larger format readers (marketed at university students for text books), and they have spread distribution throughout the world via a GSM based Whispernet.

At this time, it appears that the uptake of the e-readers is in the process of spanning the chasm. Both Amazon and Sony, now joined by Barnes & Noble's Nook are marketing readers to consumers, and uptake is growing.  The press around the new distribution model, and the impact that the iPad from Apple has really begun to rock the publishing world. 

Summary

As marketing professionals, all of us can point to technologies that have disrupted the status quo, and rapidly changed market dynamics.  Nobody wants to be the last buggy whip maker.  However, we can also cite failures to cross the chasm.  Learning from these case studies will help us all cross into the mainstream.  As always, until next time, happy Marketeering!

*source - IDC

"Trouble in Nagoya", or Toyota Learns a Whole Product Lesson

Geoff Anderson typing back at you.  This month's installment was going to be on customer satisfaction and how support plays a vital, if often undervalued (by the organization) role in it.  Imagine my chagrin when the Toyota safety recall landed in my lap.  While I will not delve into the big questions, and ethics of how Toyota handled this, I will look at how if they had heeded the principals from the MTP course, they would have come out of this with much less egg on their face.

One aspect of whole product that I see often missed is the customer support angle.  Us in the technology realm are often so enamored by the coolness of our technology, that we can't fathom that there are people who wouldn't immediately see the value and instantly start using our cool products.

If we look at Toyota, we see that they have gone to "drive by wire" (Google it, it is pretty slick technology) across the board, as it allows greatly increased functionality of their engine management processors.

However, what went wrong is that the design of the physical pedals used mechanical parts that if the tolerances stacked wrong, you get stickyness, and thus out of control acceleration.  At the time that I write this, there appears to be no evidence that there are software or firmware issues, but that it is purely mechanical.

Anyone who has worked with complex mechanical systems would know that errors like this happen, and until you start getting significant volume, you may never see the issue.  Some claim that Toyota cut corners in their quest to be #1.  I call shenanigans on that.  As Toyota has transitioned from a niche player to a dominant player, they have done much to improve quality and production technology.  Read any of the number of business books on their operational excellence, and quality policies.

But, Lordy, read the common press and their vilification of Toyota, warning people to not drive them.  Toyota seems to have had their head buried in the sand, and tried to downplay the issue.  It is true that they had not fully cooperated with the NHTSA, and that their central bureaucracy in Japan stonewalled, delayed and in general was secretive and less than open on the issues that are being reported.  

How should Toyota have handled this?  First, there should have been more autonomy in their North American organization.  The reports (from respected news outlets such as "The Economist") indicate that the NA organization was little more than a message runner back to the mothership.  Granting autonomy, and with it authority to their NA operations would have reduced any perceived "blocking" by the NHTSA.  Centralized control of a large multinational corporation clearly is not an effective management structure.

Second, Toyota should have been tracking the issues reported internally, by using some of their outstanding statistical analysis expertise to determine that this was much more prevalent than they wanted to admit to.  This would lead to:

Third, confront the issue head on.  Their silence, and early attempts to trivialize this issue has come back to haunt them.  It is understandable to want to not deal with such a confrontation, but the damage to their reputation will cost them dearly for a very long time.

At this point, you may not be seeing the connection to the Whole Product, but it gets right at the core.  Toyota (still) has a strong brand.  Their product offering is centered around the automobiles that they offer.  But as part of that is their reputation for quality, reliability, and value.  While this episode will impair their reputation, if they manage the recovery well, they have a good chance to put this behind them, and increase their loyal fan base.  At the very least, they will never forget the chaos that millions of disappointed customers can cause.

Intel did this with the Pentium fdiv problem.  They stonewalled, the denied culpability, they claimed that it wouldn't be a huge problem for the users, and finally they did the right thing.  Today, their brand is stronger than ever.  

Toyota is finally doing the right thing, owning up to their responsibility, and making customers whole.  In the future Business Schools will use this event as a case study, and show how Toyota came back stronger than ever.

Until the next post, happy marketing!

Competition, Differentiation, and Fighting Brands

Geoff Anderson here, and welcome to my slice of marketing and how it applies in everyday actions. Over the next several months I will share many observations, and how you can apply the lessons I learned from the Marketing Technology Products class.  I will dive into many of the terms from the vocabulary list with recognizable examples from the real world.  I will focus primarily on the B2B space, but will at times veer in to some B2C examples.

Fortunately the list of topics is quite long and I will have many great examples to explore and discuss.  I hope you find these sessions informative.  I am going to give away some trade secrets here, so, please pay attention.  I am often asked where I find the grist for postings, and in general, it comes from having a wide range of reading materials.  Up front, I would like to share some of my common sources. First, I read an online edition of the NY Times everyday.  The business section and the Technology section often provide jewels or ideas to pursue.  A second source, and one that might seem not directly relevant is The Economist.  Its sections on industry, finance and technology weekly covers some relative topics, and usually provides an excellent analysis that is mostly free of spin.  I used to occasionally   Lastly, I use good old fashioned Google Alerts.  These have a pretty low signal to noise ratio, but some really obscure references will just pop up.  And as with any good marketing person, I am always looking for new sources and topics of interest.

With that preamble out of the way, I would like to finally get to the heart of the topic in the title of this post.  In this difficult business environment, you are probably seeing an increasing amount of pricing pressure on your products, and not the good kind of pressure where you can raise your prices.  This provides a conundrum for many of us marketeers.  We spend a good fraction of our time building brand equity, and strength in the brand around our product.  It is a key component of the whole product concept.  So do you take the fight on against a competitor who is engaging you in a price war? Is it worth damaging your brand and equity with a battle? (assuming that by applying the MTP concepts, you are a leader in your market, the envy of the rest of the field)   You start a spiral to the bottom and bring yourself down to the level of the competition.

How to respond?  Ignoring the threat could mean loss of market position, or even bankruptcy.  Lowering your prices often has a long term negative effect on the profitability.  One means for responding is to create a fighting brand.  A "presumably" lower quality entry to take on the competitor, allowing you to keep your premier product positioned properly, yet take the fight to the competition.  This allows you to engage in aggressive pricing while protecting your premier status.

I will leave you to ponder examples of this in the B2B world (don't worry, I will have a second post where we analyze this strategy in detail, and in particular the pitfalls), but look at GM and their Saturn brand.  If you are a subscriber to the Harvard Business Review, you will be able to find an interesting article on this.

Next time, I will finish this post and provide some guidance on how to effectively pursue a fighting brand response.  Until then, happy marketing!