In Managing Up, we give product managers and their teams actionable guidance on how to build, test, and release programs that will delight users and stand the test of time. From development to execution, our industry experts and seasoned pros can help you work smarter not harder.
Marketers are constantly communicating to consumers the advantages of their brand’s products—whether faster, cleaner, stronger, or cheaper. Having your product or service stand out in the consumer’s mind is the goal of a product differentiation strategy. If your products are not interchangeable commodities, such as sugar or soybeans, emphasizing the unique qualities of what you’re selling should result in less competition and more “stickiness” with your customers. This is where product teams come in: creating value for customers with unique selling points (USPs) that aid in product differentiation.
Horizontal vs. vertical product differentiation
One of the earliest product differentiation definitions came from the American economist Edward Chamberlain, who noted in his 1933 work, The Theory of Monopolistic Competition, that certain product features are more important than others to some consumers. Later, author and academic Michael Porter stated in the July 1980 issue of the Financial Analysts Journal that when a product is not a commodity, product differentiation “creates layers of insulation against competitive warfare because buyers have preferences and loyalties to particular sellers.” In other words, having a differentiation strategy makes business sense.
There are two ways that you can differentiate your products: horizontally—i.e., within the product line—and vertically, against external competitors.
Horizontal product differentiation is when a product stands out based on subjective characteristics. For example, there is no implicit benefit to having a blue Ford Mustang rather than a red one. The choice is purely subjective and often contained within the brand’s product line.
But while the color of the vehicle is subject to consumer preference, there are objective differences that a car company can highlight to set their vehicles apart from the competition. This is known as vertical product differentiation.
In a 1986 article for the American Economic Review, economist John Sutton noted that, with respect to vertical product differentiation, “if two, distinct products are offered at the same price, then all consumers prefer the same one (the higher-quality product).” However, the reality is that improved quality often results in an increased cost to the consumer. And the willingness of a subset of customers to pay for an objective increase in quality is what drives a company to vertically differentiate their products. So for sports cars, vertical product differentiation examples would include:
- Increasing horsepower
- Decreasing time from 0 to 60 mph
- Reducing carbon dioxide emissions
- Implementing environmentally sound manufacturing practices
- Manufacturing the vehicle in a specific location (e.g. “Made in America”)
In nearly all sectors, different attributes can sway different subsets of consumers. For example, one consumer may put the greatest weight on the environmental footprint of their vehicle (both in terms of emissions and manufacturing processes), while another individual may just have a “need for speed.” The key for product managers and product marketers is to target the unique qualities that consumers are willing to pay a premium for and emphasize those differentiators in the marketplace. That’s where an embedded analytics solution can help.
Embedded analytics: Driving product differentiation
For software businesses, analytics is often the differentiator between your application and the competition’s. The software-as-a-service (SaaS) market has exploded with the advent of cloud computing and the market has become crowded. Having embedded analytics built into your platform is one way to stand out.
Case in point with global supply-chain giant CTSI-Global. Their small analytics team helps provide insights to their clients and empowers end-users to build customized dashboards. Certainly, CTSI-Global would subscribe to the belief that every company is becoming a data company, and Sisense has been key in that transformation.
“The almost boundless agility of Sisense, combined with an efficient process framework, let us deliver and organically scale a market-differentiating product,” said Todd Winton, Development Manager at CTSI-Global in a recent case study.
For another example, look at Erea Consulting, a company that has solved legacy inefficiencies in retail data sharing between suppliers and retailers by delivering real-time insights. The information has improved suppliers’ resource allocation and promotional efforts, helping their products to fly off the shelves. Retailers can sell back data insights to suppliers, and thanks to Erea’s implementation of Sisense, some retailers have quadrupled their revenue from data.
Learning and growing with embedded analytics
Analytics aren’t just a way for Product Teams to set their apps apart from the competition in a crowded market, they’re also a key way builders can learn about their target audiences and users.
When browsing a brand’s website or using an app, prospects and current users always leave a digital breadcrumb trail that can yield valuable insights. Historically, the data in that trail would have to be pulled from a database and recorded in a spreadsheet to derive actionable insights. Not only was this time consuming, it was also prone to error, often leaving product teams without a single source of truth. But a data and analytics platform, such as Sisense, allows product managers to make data-driven decisions without having to wrangle the data themselves because all the information is in a unified view.
Those product-level decisions can relate to anything from color to product bundles that encourage a shopper to make the purchase. BraunAbility, the market leader in wheelchair accessible vehicles and commercial lifts, is one company that has used embedded analytics to better understand customer preferences and to ultimately increase profit margins across the board. Reports that once took weeks for analysts to derive are now available on demand, helping the company with horizontal product differentiation that’s driving results.
Setting your product apart with embedded analytics, easily
Maybe you’re a technology company looking to stand out from the competition by delivering actionable insights from your customer’s data. Soon, product managers will be confronted by the age-old decision: build versus buy. But, the decision should be an easy one.
Attempting to develop a homegrown embedded analytics solution within your technology may not be your best move, since this means taking your development resources away from their core duties building your product. Instead of building your own embedded analytics, partnering with a provider like Sisense can help you save time and resources and see ROI faster. Then engineers and product leaders at Sisense live and breathe business intelligence and have developed a high-quality, embedded analytics solution that’s been included in the 2020 Gartner Magic Quadrant for analytics and business intelligence platforms.
Teaming up with a partner like Sisense makes adding embedded analytics to your product super-simple. The Sisense end-to-end BI platform empowers your builders — those with natural curiosity, a penchant for asking deep questions, and a passion for serving up deep insights to users — to create analytic apps that deliver highly interactive user experiences and powerful data. Watch the demo now and find out why Gartner has labeled Sisense as a visionary in its Magic Quadrant for analytics and business intelligence platforms.
Eitan Sofer is a seasoned Sisenser, having spent the last 13 years building and shaping our core analytics product, focusing on user experience and platform engineering. Today, he runs the Embedded Analytics product line which powers thousands of customers and businesses, making them insights-driven. Eitan is also an avid music fan and surfer.