As many manufacturers transform themselves from product to solution providers, traditional product marketing managers need to review their approaches and tool kits. Open these days any trade journal and you will see at least one advertisement showing proud owners admiring their newly acquired IoT solutions on an iPhone or iPad. Of course, one can debate if the printed press is an adequate media to advertise any digital solution at all. The real issue, however, is that marketers need to improve their ability to communicate complex value propositions. Practitioners might find the following guidelines helpful to assess where they stand.
1. Solution marketing is more about services than it is about products
As such it is not about the drill, nor the hole. It is about hole-making. More specifically it is about the combined expertise, data, tools, costs, investments, risks and commitments that make the company’s hole-making solution better than anybody else’s. Expressing this differentiation requires IoT marketers to appreciate the unique characteristics of services – known as the 4i:
- Intangibility – Services and solutions can’t easily be shown, touched or tested. This is why TV chefs generally do more talking than cooking. B2B scenarios tend to add further complications, as they require often complex arrangements of resources to be showcased.
- Inconsistency – Given that possible outcome variances have already been standardized by product design and manufacturing, customers purchasing a physical product will face a fairly homogeneous experience. A solution, however, is often co-created with the customer and the knowledge (or emotions) of employees she interacts with can vary significantly. Due to these factors, it is generally difficult for marketeers to clearly anticipate and communicate the expected outcome quality and value. Admittedly, technology increasingly allows for outcomes to be standardized, but human domain expertise continues to be a key driver of both differentiation and inconsistency.
- Inseparability: – Services (and solutions) are generally produced and consumed at the same time. Compared to a product that can easily be evaluated before the actual purchase, services need to be consumed to be appreciated. In the case of a haircut, you don’t know what you will look like until you have gone through the procedure. More complicated outcomes such as surgery might not even be understood unless explained by a domain expert “post-production”. Finally, B2B solutions can have the added complexity that neither the “before” nor the “after” state are easily quantified and compared, e.g. the replacement of a people/paper-based process by an asset/system-based solution could seem like apple and oranges.
- Inventory – The ability to create or deplete inventories provides manufacturers with the flexibility to optimize fixed production resources over a given time period. Services, however, cannot be shelved and an hour of capacity not sold today is an hour lost forever. This perishability creates issues in adjusting demand and supply. Services marketeers have developed innovative pricing models as a result, notably in airlines, hotels and rental businesses. Nevertheless, they seem to work better in short term transactional scenarios and can create a somewhat confused perception of what something is actually worth.
These concepts have been around for some time in traditional services businesses and should be leveraged by manufacturers moving into solutions. Ultimately most solution value messaging needs to carefully consider:
- The ability to provide consistent outcome and interaction quality,
- The complexity/difficulty to brand an inherently inconsistent value proposition,
- The challenge of pricing due to the variability of the company’s costs and the customer’s perceived value, and
- The difficult differentiation of one intangible solution versus other equally intangible solutions by the competition
2. Solutions are commitments to value
Experienced marketeers believe that the 4i positioning challenges can only be addressed by early involvement in the solution design. Nevertheless, by the very nature of their DNA, most product-centric companies tend to overemphasize the physical attributes of their newly developed solutions. After all, superior products have long been at the heart of their differentiation. Solution marketing challenges this mindset by adding the customer perspective to the New Product Introduction (NPI) process and recently many new approaches have emerged in this space. The best ones should measurably decrease launch fiascoes but predicting customer adoption has remained a fairly intuitive field. Few tools exist for solution marketers to pressure-test their positioning. A pragmatic approach to this can be found in Everett M. Roger’s ACCORD model – a somewhat hidden jewel in his work on the Diffusion of Innovation. A carefully crafted solution value message should address the following areas at the core of the customer’s decision-making process:
- Relative Advantage: Whether the innovation is perceived as better than what it is replacing.
- Compatibility: Whether the innovation is perceived as compatible with existing behavior.
- Complexity: Whether the innovation is perceived as difficult to understand and use.
- Observability: Whether the innovation’s benefits are visible and measurable.
- Risk: Whether adopting the innovation is perceived as having risks that the user cannot protect herself from, and
- Divisibility or Trialability: Whether the innovation can be experimented with on a limited basis.
While serving as a pragmatic checklist to evaluate value messaging (and sales force training!) the model also reveals two distinct differences of solutions compared to traditional services:
- An innovative – often technology-based approach to achieve an outcome that is advantageous to an existing – often labor-based service.
- A measurable outcome observability and predictability and therefore an increased ability to share risks on the part of the solution provider, e.g. to commit to the value.
Introducing the ACCORD model to assess an existing solution launch process can be a disheartening exercise. This can be softened by first “analyzing” a third party case. For this purpose, the Michelin Effifuel campaign is an excellent example of a recent and impressive solution introduction.
In most cases, ACCORD acid testing your value messaging will improve the quality of your marketing and sales communication. It can, however, reveal that not just the messaging, but the actual value of your solution is the challenge. To address this, savvy marketeers have two options: Either involving themselves earlier in the solution design process or promoting the solution by showing someone using it on an iPad.
Holger Pietzsch is an accomplished leader in defining and executing servitization strategies in the capital equipment industry. He currently oversees several Marketing functions including the business development of Caterpillar’s IoT technologies and solutions ranging from JV partner and dealer collaboration to international commercialization.
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