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Excerpt from the Positioning Section of The Product Marketing Handbook for Software

Fundamentals of Software Product Positioning

Would you buy something if you didn't know what it was you were buying? And can you market a product without knowing who would want to buy it? Of course not. Yet you'd be surprised at how many software publishers develop and market products without a clear understanding of their software's position in the market place.

Positioning is the foundation of all marketing activities. Until you define your product, its target market, and the reasons why the market would want to buy it, you cannot begin to market it. This is why every marketing group’s first critical responsibility is to position the product. And this positioning must be clear and logical, both to your company and the market place. A company that does not understand or believe in its own product positioning cannot successfully sell its products to the market place.

Product positioning requires that you answer these fundamental questions:

• What category or type of product am I selling?
• What class of product am I selling? (In the retail market, usually low- or high-end. In the markets for higher end and enterprise software, a middle ground may exist.)
• What are the significant features and benefits of the product with respect to the target audience's expectations? Other products in this category?  In other words, what is the "value proposition" of your software and services and how will it assist your customers to overcome problems and meet their goals and objectives?

After answering these positioning questions, you can successfully:

• Build a product that meets the competitive specifications of the market in which it is competing.
• Target the audience which wants to buy and use your product.
• Price the product realistically and competitively.

Focus on the channel partners able to provide you with maximum product push through the distribution system.

Key Elements of Positioning

Product Category

To categorize a product is to clearly explain to the market what type of product it is, what it does, and who is likely to use it. This is the most crucial task in the product positioning process. Software, by nature, is always an abstraction and can be difficult for a buyer to visualize and understand.

Encapsulation

The ultimate goal of the categorization process is encapsulation. Conceptually, a properly encapsulated product consists of a series of carefully structured ideas and concepts that are self-supporting, internally logical, and capable of being communicated to potential buyers with a minimum of confusion. The ultimate goal of the encapsulation process is to create a marketing identity for the product that automatically triggers these concepts, ideas, and associations in the buyers’ minds without having them to “think” about it.

Conceptualization

The cornerstone of successful encapsulation is conceptualization. In the case of software, which is an abstract product to begin with, the best way to achieve conceptualization is to connect the product to the real and the physical.

Sometimes, this process presents little challenge. For example, few people have trouble envisioning a word processor as a typewriter in a computer (though one day, few people will know what a typewriter is) or a software database as the equivalent of an electronic file cabinet.

Other products, however, are more challenging. A classic example is Lotus Notes. If you're in the industry, you've certainly heard about it. Take a minute and think about what you know about this product. What, exactly, does it do? Does any particular image or symbol spring to mind when you think about it? Unless you use it, probably not. If you're like most people, several phrases may spring to mind like groupware, replication, documents, and workflow management. But you are probably unable to connect the product to any coherent image or concept. The Lotus Notes' documentation, rather pathetically, highlighted this problem best:

What Is Notes Anyway?

People have been asking that question since the beginning of time (or at least since Notes first came onto the market). It has been hard for people to define Notes because you can use it to do so many things.

(from the Notes 4.0 Beginner’s Guide)

As you can imagine, the Lotus sales force had a great deal of trouble explaining why someone should buy Notes when the company that publishes it can’t explain what it is.
Many marketing newcomers make the mistake of claiming that their product is new and revolutionary. This is not the benefit you may assume it to be. A new and unique product has no existing “marketing frame of reference,” and requires the publisher to educate the market by:

• Describing the product features that make it unique.
• Deciding where to advertise the product.
• Educating the reviewing and reporting press about the product.
• Deciding what type of distribution system, if any, is appropriate for the product.
• Convincing the appropriate elements of the distribution system to take a chance on a new product.

Shelters and Umbrellas

There are several things a company can do to build a clear visual image around a hard-to-conceptualize product. The first is to consider initially positioning the product around a “shelter” or an “umbrella.”

A “shelter” is a product or concept that is already clearly established in the mind of the buyer. This positioning tactic works best when the product is clearly related to the shelter. For example, as Web technology is integrated into existing applications, products are increasingly described as “Web-enabled” word processors, spreadsheets, databases, etc. It is not necessary to spend much time conceptualizing these products —time and the market have already done it. To return to Notes for a minute, the growth of the Web finally allowed Lotus to position Notes as a Web-based application with collaborative abilities. But, even with this leg up, Notes still has a nebulous identity in the market.

An “umbrella” is a related concept that provides an initial mental reference point. An example of this idea in action is when Xerox introduced a new product for managing faxes. Instead of proclaiming it as a new product in a new category, Xerox positioned it as an extension of existing fax technology.

It may not always be feasible, or desirable, to use a shelter or an umbrella to help position a product. In some cases, a product may simply not fit an existing category, or there may be marketing baggage associated with that category you don’t wish to carry.

Visualization

The key to successful conceptualization is visualization, accomplished by creating a visual identity for the product, combining the visual identity with favorable images and ideas, and then extending the result to appropriate surroundings and circumstances.

Visual Identity

Developing a strong visual identity for a product requires finding a clear and widely understood object or process that can be equated with the product. Sometimes, this is easy—there is a natural mental connection between a typewriter and a word processor, and it is easy to explain the benefits of the latter as opposed to the former. One simply has to hold up a bottle of Wite•Out to make the point.

At other times the job is harder. Again, consider Notes. There are many concepts and images that might match the product’s capabilities. Notes could be thought of as “staffware,” a group of people in a box who pop out and start to manage a business. You might reach for a sports metaphor and picture Notes as a referee managing the rough and tumble of your office. You might try a science fiction theme, and present Notes as an efficient android or robot that manages data. Or you could think of Notes as an electronic post office, the choice Microsoft made when it initially positioned Exchange, its Notes’ competitor....

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