Positioning for Professionals: How Professional Knowledge Firms Can Differentiate Their Way to Success

Chapter 3. The Mature Company's Identity Crisis

In mature or "developed" categories where brands have been making steady incremental feature improvements, the category usually reaches a stage that could be considered "excess performance." It's at this point that most of the brands in the category become "commoditized" in the sense that they all deliver the same main category benefits. This makes it difficult to differentiate between brands, and therefore customers become unwilling to pay any kind of premium for one brand over another. Worse, as these brands continue to introduce more incremental improvements, customers are unwilling to pay more for these features, since the brands already "overdeliver."

Economists teach that when the marginal increase in price that a company can derive from product or service improvements reaches zero, then the incremental usefulness of the improvements is also zero. This is the world in which most mature brands—including professional service brands—find themselves; they risk being overpriced by virtue of being underexclusive.

Figure 3.1. Different Value Propositions, Different Cost Structures

The strategic choice you have is to serve either customers with unsatisfied needs in higher tiers of the market, or customers with largely satisfied needs in lower tiers of the market. These are two very different value propositions (which are discussed in detail ...