Price - Performance analysis
The price/performance chart above tells pretty much the whole story so let’s look at it in some detail and then at some of the ways it can be used.
The bad news is that until you have certain information the chart is of no use to you, nobody said it was going to be that easy.
- Who are your main competitors
- What are the major features of their products
- How much do they charge for each relevant product
- What are the main benefits your target market needs and which features provide those benefits
- Prioritize the benefits and associated features from the customers point of view
- This is vital if you are going to be able to plot anything meaningful on the chart
- Remember to use the customer focus, you can’t rank your own key features higher than your competitors just because they are yours.
- With a little thought you can apply this to almost any product or service, you just need to be able to stand back and borrow the customers perspective, better still, if all else fails, ask some customers!
Price
This scale of the chart will run from the cheapest product you have or compete against through to the most expensive. Be as thorough as possible.
Performance
This is about CUSTOMER NEEDS, not features! From the products you are comparing you have the most basic as the base of the performance line and the most feature/benefit rich at the top of the line. This is where that list comes in that you made, the one that rates the benefits according to their value to the customer.
One product may have masses of features but very few of them might provide actual customer benefit, so it isn’t necessarily the most feature rich product that will set the top of the performance bar.
The Safe Zone
Products that fall in this area have a good balance of price and performance, it is likely that the majority of products will be close to this zone. If you want to increase your price then you have to show greater value or performance
The Good Side
In this zone you are offering a high ratio of performance to price, customers are getting a good deal but the company is not charging as much as it could. There are often reasons for this like market penetration but it should not be a long term strategy. Of course, as you approach the upper left hand corner the customer is getting too good a deal and this is rarely sustainable.
The Bad Side
Basically charging more than the product is worth compared to other products on the market. Again this can be a short term strategy to recoup investment costs more quickly but again is not a long term strategy
Here is a filled in example. The size of the product circle indicates how much of the market it gets in terms of volume. Once you start filling this chart in there are other things you can start to learn.
There would seem to be an opportunity for a mid-priced, mid-performance product that would sit in the middle of the safe zone.
Products 2 & 4 are under priced and doing well for it.
This chart would indicate a more mature market where there is an established range of products and we need to look for ways of adding value that will allow us to move into the less populated, higher priced zone; or compete head to head in the lower priced area of the market.
Now check out Product pricing >