Your customers do not merely buy your products or services. They also believe in additional features or a promise you make to fulfil expectations because of your reputation or their individual experiences. If you want to compare how well you compete to what is in the market, you better think of all these. A product may be the least important of all of them.
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Product Onion benchmarking
Not surprisingly, my clients for consultancy or mentees in acceleration programs start with a vision of a better product or service they want to bring to the market. They rarely see complete solutions customers buy into but focus solely on a core product and its features. That is not enough.
When customers choose your solutions over competitors’, they do not judge merely by technology, features, and price. Buyers also consider a brand (their relationship to this brand), extended services (customer support at a minimum, but also how your solution fits other products they already use) and the additional potential the solution brings to their life or business (e.g., meeting industry standards, fulfilling a legal obligation, building up their reputation).
Kotler’s five product levels
Yes, I have adapted the benchmarking model from Kotler’s idea of a product onion. His model is attractive in a conceptual sense, moving me towards splitting customers’ perceptions of a product. Nevertheless, I found it challenging to transfer into practical use.
It led me towards my format, which I am discussing below. You use it quickly and find it far more beneficial to your business than Kotler’s theoretical approach. Nevertheless, I am obliged to give him credit by at least mentioning his categories:
- Core benefit—this is what your product or service is at its basic level when stripped of its features.
- Generic product – these are additional features attached to your core product, both tangible and intangible. It includes design and mystified “quality” (I am going to tackle the “quality” in a separate article because almost all uses of the word are wrong).
- Expected product – is made from extra features and services: warranty, home delivery or scheduled just-in-time delivery to a factory, app for iOS and Android, and the like.
- Augmented product – the brand reputation, awards won, certificates acquired, etc.
- Potential product – future development like updates or possible extensions (add-ons).
It’s nice and tidy for an elementary book, but when I wanted to apply this to any of my projects or my peers’ products, I could not find a good use for it besides a corporate slide in a deck. So here is how I adjusted it for a more pragmatic use.
Benchmarking
Have you heard of benchmarking? In my former job as a product manager, I updated benchmarks monthly. A “benchmark” is the best-in-class solution which all competitors focus on. By definition, a benchmark is a standard everyone compares to, but in practice, the best-seller sets the standard. Standards get old quickly, and you better aim at winners.
In practice, you open a spreadsheet and name rows as specific categories or types of features, and each column is a unique product or offer. Then, you put all-important best sellers (columns) and your product to see how you compare to them (when you have the best seller, you do this to maintain that competitive edge – but this is rarely the case for new brands and startups).
What you choose to put in rows is also essential: the categories for comparison. There are common categories like brand and price, but everything else is highly subjective. This is easy on commodity products and services markets—there are industry standards for comparison, and customers understand these intuitively (e.g., packaging size, warranty length). However, if you are reading this, I assume this is not your case. My readers are young entrepreneurs or intrapreneurs developing new brands in mostly low-developed markets, where standards will only appear in the future.
Categories for benchmarking
As said, categories (rows) are highly subjective. Therefore, you may pick any. I find the product onion useful here. It is far more helpful than merely a feature-based benchmark we used to run for home appliances. Let’s have a look at the categories I recommend:
- Core product: This is the same as Kotler’s, and this category describes what your product is when stripped of all the extra benefits.
- Product features – are all features attached to your product or variant of your product. This category may have several sub-categories because there are many features to compare.
- Business added value – buying goods with features like yours is one thing, but buying goods from your business is another. Do your organisation or processes add value, or are they even barriers to some customers? Are channels you use the same as your customers prefer?
- Brand and distribution – At a glance, a brand is a logo attached to a product. But that logo represents the reputation of the brand to your target group. The more complex the purchase, the more critical the role of salespeople who maintain a relationship with your clients.
- Direct results – ultimately, it does not matter what the product is and which features it has, but the result of its use is critical. So, what will be the outcome of using yours? And can you prove your promise with examples?
Core product
At first glance, the “core product” may seem unnecessary because we will compare it to our competitors. But only some of your competitors are direct. You compete with some of them indirectly. So, I recommend adding both types of competitors to your columns. For example, when you are making a benchmark for taxi services, it is wise to add Uber and Grab, too.
If another competitor’s core product satisfies the same (essential) customer need, they steal customers from your target group. I am going to write an article about direct and indirect competitors soon.
When describing your product, try to avoid production technology. If necessary (e.g., products from recycled materials, blockchain data storage), you may add them to the following category. Here, let’s focus on what your product is. I may imagine that some core products will be “better” than competitors, but if I observed any advantage here, it was at most on the cost side.
Features
Traditionally, we prepared benchmarks based on this category: features bound to our product. Whatever advantage your product has, it shall fit into this category. Please separate the product from your brand and business and describe only those attached to it (e.g., the warranty period is attached to a product, but the 24/7 call centre is not; packaging size is part of a product, but delivery is not).
From talking to my mentees who filled out the product onion benchmark, I know you won’t have much trouble listing your advantages. However, scoring the benefits against a competitor is a struggle — I am writing about it below.
Contrary to Kotler, I would include his Potential and Expected Product here. I do not see a big difference between an individual feature of a product and a promise to keep its updates for the next ten years.
Added value of your business
The product does not sell itself. Your customers do business under specific terms and conditions and do not buy anything without consideration. They want to know payment terms, whether you accept returns, and whether you provide further support. For B2B contracts, things like payment terms or insurance may become a dealbreaker—this is also from my own experience as a buyer.
Another part of that category is your distribution and partnerships. Customers buy through channels – are you well-established there? Or are you willing to sell directly? If you do not have proper access to your target group, you may want to enter a collaboration with a partner who has. When assessing your competitors, make sure you also review their distribution network. Apple or Microsoft also sell through partner resellers at the end of the day. What makes you think you do not need one?
Despite most startups underestimating the importance of these factors compared to competitors, this category is relatively easy to address. Tackling your T&C and complex partner agreements is more manageable than facing technological disadvantages.
Direct results
Ultimately, no one is buying from you for the sake of a purchase. Your customers will have unique intentions, and if you dominate this one, all the previous categories may prove worthless. There are two approaches here: a hygiene factor and outperformance.
Some solutions, especially in the B2B world, are required because of some external factors beyond your control. Traditionally, these were regulations, but recently, these are also the result of corporate ESG (CSR policies). Certificates, awards, and minimum requirements all fit here. You must satisfy these needs to a minimum to avoid losing a deal. In addition, some regulations apply to household or car maintenance. Therefore, the above applies to the B2C world, too.
The outperformance part of the category is more tempting. If you genuinely beat your competitors on numbers, you are ahead. If you can deliver a quantified promise, you open an entirely new window of opportunities. As long as you guarantee extraordinary results, your customers may struggle with unsophisticated features, accept uncomfortable T&Cs, or ignore a brand disadvantage.
As Head of Operations of an electric carsharing, I was regularly approached by startups, consulting agencies and software houses. These all bite into my time, and their offer was usually useless. All wanted “my” money, leaving me with the headache of implementing their tools. I decided to only talk to partners who wished to be paid on a performance basis: if you guarantee results, we may share the outcome fifty-fifty. Of all, only one dared, Ubiq (link) from Austria, and we quickly decided to implement their services. Unsurprisingly, no data analysis agency has ever agreed even to consider my terms, which says something about them, too.
Scoring
Once you have your categories, the question remains: which solution is better? You should develop your scoring system. I recommend one of the three:
- Are you outperforming competitors in each of the categories? Simple as it is, often, it will give you enough to work on.
- Relative comparison within a single category: the first, second, third, etc. How do you compare overall?
- The most sophisticated approach is to weigh your score, giving each category a specific factor. Talk to your target group, existing customers, or at least your salespeople to understand which criteria are the most and the least important. What is the point of beating the competition in the least important category?
There are far more sophisticated, far more precise ways of weighting. Unfortunately, these conjoint analyses and the like are relatively expensive, and only a few can spare such amounts at the early phase of the project. However, if you want, please google for these or reach out, and I will recommend something.
What’s next?
Thanks for reading so far. Let me mention the last two things:
First, I prepared a file for you to download (get your link here). Feel free to use it. I am curious about the results. If they were helpful, let me know! Moreover, I would love to read your feedback, especially if you know what to add/explain in more depth.
Second, I dedicated uouee.com to turning marketing theory into practical know-how. If you would like to explore more customer-obsessed content, here are a few ideas to follow and more to come:
- You may be concerned about whom to add to the columns in the product onion benchmark. I have already mentioned direct and indirect competitors; there are substitutes, too. I will explain how to define who is who and emphasise the role of your target group in determining it. Sign up if you want to stay in the loop.
- One of the benefits of a well-described target group is knowing their routines, culture or lifestyle, and decision criteria. These will be especially helpful if you wish to weigh your benchmark score. I am going to dig into this soon, too.
- Whether you know your precise customer already, do not yet quite know them, or still “sell to all”, you may be interested in another article: Who is your customer? (link)
